MDS1951 HYP-ISH Review 2020

[MDS1951]

First, I hope we have all been successful in avoiding covid-19. The care home where I am a temporarily furloughed volunteer has managed to be a covid-free zone since the start of the pandemic, for which I am very grateful indeed.

Here's how my HYP progressed during 2020. I made no purchases with new money and withdrew £4,500 from dividend income. First, a table.



The value of my portfolio reduced by £13.7k, a fall of 13% and IIRC slightly below the fall in the FTSE 100.

Dividend income reduced by 20.9%; I'm not going to try to adjust for special dividends any more as I want to keep this report simple.

I had a quiet year re purchases and disposals. The only transaction was to spend £3.6k on Royal Dutch Shell B shares out of retained dividends within the ISA part of the portfolio; I thought I'd sit on the RDSB shares held outside the ISA until I had received the dividend and then sell those shares. The idea had been to get the RDSB shares into the ISA. Silly old MDS! I was caught out by the effect covid-19 had on the markets, so I decided to sit tight on these shares and sell the non-ISA ones if they recovered to anything like their pre-covid levels. If I had eschewed this transaction my holdings would have been worth something like £89.2k (a loss of 15% instead of 13%) and cash would have been something like £6.5k. If I ever try that little exercise again I'll do the buying and selling at the same time. Fingers slightly singed.................

The components of my portfolio are set out below; I wouldn't buy some of them today because the yields are too low, either because of dividend cuts or capital appreciation. However, at the time of purchase the yield of each holding was either close to or above the FTSE100 average.

AstraZeneca
Aviva
Billiton
BP
British Land
Compass
Diageo
Glaxo
Legal & General
National Grid
Pennon
Relx
Royal Dutch Shell
RTZ
Sainsbury
Tate
TUI
Unilever
United Utilities
Vodafone
Wood Group

City of London IT
Merchants IT
Murray Income IT
Murray International IT
Schroder Income and Capital IT
Temple Bar IT

The ITs accounted for 24.4% of my portfolio (excluding cash) by value and the shares 75.6%. I decided at the end of 2018 that I was fed up with taking decisions over share purchases and that I would farm the decision-making out to IT managers.

The IRR for the portfolio decreased from 7.9% to 6.3%.

Some time ago I unitised the portfolio on an accumulation basis and in 2020 the dividend income decreased by 17.1% on a unit basis. The price per unit decreased as well and now is £20.53.

I think my experience with my portfolio for 2020 shows the value of having a diversified portfolio in that my eggs are not all in one basket; if I had chosen a different strategy of betting on 2 or 3 shares that I hoped would zoom away in terms of their capital value I'd be awake all night wondering if I'd chosen the right shares. With this strategy I'm confident that my dividend income will not suffer a catastrophic reduction because I think most of the companies are big enough and run competently enough to carry on churning out profits, or recover if they have to reduce or cancel their dividends. I'll never become as rich as Croesus with the HYP strategy, but it makes retirement somewhat more comfortable than keeping the cash in a building society would do.

I have a small IT portfolio and I have posted about its performance in 2020 - here's the link if anybody is interested.

viewtopic.php?f=56&t=27098

Finally, I wish everybody a Happy, Safe and Prosperous New Year - and good luck to us all with our investments and our avoidance of covid-19.

MDS1951