Re: Why High Yield?
Posted: February 13th, 2020, 11:03 am
I'll take a stab at this.
IMO
Growth vs yield is a false argument. It's trivial to convert capital into income or vice versa. So people who argue that they "need" the income are approaching this from the wrong angle.
The issue is picking shares.
It's relatively easy to pick High yield shares. Last years high yielders will probably also be this years high yielders. Dividends change little, and even share prices aren't too drastic at this end of the market. Not saying prices don't fluctuate, but they fluctuate quite slowly.
By comparison, picking growth shares is hard. Particularly amongst the FTSE350. There is little evidence that last years top growth share will grow well this year. Indeed, such evidence as exists suggests any correlation may be negative. As unsustained localised price "bubbles" can give a false impression of growth. Even "real" growth in earnings, sales or NAV can be lumpy and unpredictable. Professional fund managers who focus on growth or impetus usually fare badly. if the pros can't do it, what chance does an amateur have?
Somebody said "simplicity", but trackers are even simpler. But if you want to pick individual shares rather than a tracker, then HYP is the "easy" option.
Gryff
IMO
Growth vs yield is a false argument. It's trivial to convert capital into income or vice versa. So people who argue that they "need" the income are approaching this from the wrong angle.
The issue is picking shares.
It's relatively easy to pick High yield shares. Last years high yielders will probably also be this years high yielders. Dividends change little, and even share prices aren't too drastic at this end of the market. Not saying prices don't fluctuate, but they fluctuate quite slowly.
By comparison, picking growth shares is hard. Particularly amongst the FTSE350. There is little evidence that last years top growth share will grow well this year. Indeed, such evidence as exists suggests any correlation may be negative. As unsustained localised price "bubbles" can give a false impression of growth. Even "real" growth in earnings, sales or NAV can be lumpy and unpredictable. Professional fund managers who focus on growth or impetus usually fare badly. if the pros can't do it, what chance does an amateur have?
Somebody said "simplicity", but trackers are even simpler. But if you want to pick individual shares rather than a tracker, then HYP is the "easy" option.
Gryff