HYPLite - an old HYP variant

[Gengulphus]

While writing a post on the HYP Practical board, I was reminded of the "HYPLite" strategy, an old variant of HYP with much less diversification than usual. I saw it first nearly 15 years ago in pyad's TMF article introducing it (or at least its name). It's basically the HYP strategy except for a much lower level of diversification, namely 5 shares.

I hasten to say that I am not posting about the "HYPLite" strategy to promote it, more as an object lesson in what can happen to such a strategy! (*) Indeed, I suspect the example HYPLite selected in pyad's TMF article, which contains Lloyds, United Utilities, DSGI (which has become Dixons Carphone), BT and Compass will serve as an object lesson in what can happen - it's not a total disaster, because the Compass holding has risen over fivefold in value since October 21st, 2005 and so is now worth more than the original total investment on its own, but three of the other four have dropped in capital value and the fourth (United Utilities) has only risen quite modestly, so the portfolio has become massively dependent on a single company for its success... That's a capital-only analysis and is based only on a quick look at share price charts - I'll try to do a fuller analysis later in the thread.

In case anyone is wondering why I haven't posted this on HYP Practical, it's because I think it falls well short of the level of diversification normally associated with a HYP being a "diversified portfolio of shares" under HYP Practical's guidance. And similarly, I haven't posted it on High Yield Shares & Strategies because I agree with pyad's assessment in the TMF article that "HYPers looking for income must not follow the Lite route", i.e. that it's not a suitable strategy for those seeking to generate income from shares' "natural yields" - so it doesn't IMHO qualify under that board's recently-clarified guidance.

(*) And also to serve as a 'lightning rod' for follow-up discussion about my mention of it in the course of discussing required levels of diversification in HYPs in the HYP Practical discussion...

Gengulphus

[seagles]

A HYPLite is how I started really. Although I did grow that into a proper HYP when I could. In todays environment maybe it is a good start as I find it very hard to pick anymore than 5 that would qualify, IMO. Good call Geng to put this here and not HYP-P as this would open this topic up to the non-HYP community.

[Alaric]

Good call Geng to put this here and not HYP-P as this would open this topic up to the non-HYP community.

On a wider issue, if not investing for immediate drawdown income and only investing in five shares, why restrict the choice to higher yielding UK equities with large capitalisations?

[dealtn]

While writing a post on the HYP Practical board, I was reminded of the "HYPLite" strategy, an old variant of HYP with much less diversification than usual. I saw it first nearly 15 years ago in pyad's TMF article introducing it (or at least its name). It's basically the HYP strategy except for a much lower level of diversification, namely 5 shares.

It's an interesting article, and one I haven't seen before.

I take issue with the claim "On the capital side though, there is no reason to believe that the Lite will perform any better, or worse, than the full HYP". I don't think it's too controversial in Finance Theory to make the claim that Higher Yield relates to Higher Risk and also (potentially) Higher Return. Indeed (again interestingly) pyad goes on to say towards the end that "It might produce a better total return long term than a full HYP, at the cost of increased risk." Not only is it interesting in that he uses the phrase "total return", but appears to acknowledge the Higher Yield > Higher Risk > Higher Return description, so odd that he sees "no reason" to believe the performance would be any better, or worse. I think the increased "riskiness" gives plenty of reason why it might perform better, or worse (depending on the selections and time frames).

Also one of the (I think accepted) negatives about the HYP method is that whilst diversification at selection is deemed important, maintaining such diversification isn't. If that "risk" raises some eyebrows in the full version I think the issue for a "Lite" one is very much the case (and as demonstrated, and highlighted in this particular selection). Pyad's answer seems to be to ensure that sector diversification is even more important ("The money is being concentrated into only five shares so these really do need to be from completely different sectors.") but extra(?) vigilance with respect to sector diversification to me isn't the same thing as protection from fewer selections since company risk and sector risk are far from the same things.

I'm not a fan of "rules based" strategies, nor "buy and forget", although I concede these are proposed for those who either have little interest, or inclination to involve themselves in following investing or the markets. Whilst I see the merits of HYP, in the context of an annuity alternative, I wouldn't see such a strategy as generally an appropriate one even for a novice, but I certainly wouldn't see the "Lite" alternative (as described in that article) as a good strategy at all.

My reading is that the "Lite" is a 5 share alternative to the "full" 15 version, and not just an option for 1/3 of the portfolio with the other 2/3 invested in an alternative way (or ways). It might have some merit were it proposed on this alternative reading though, depending on what the other 2/3 was.

[Wizard]

While writing a post on the HYP Practical board, I was reminded of the "HYPLite" strategy, an old variant of HYP with much less diversification than usual. I saw it first nearly 15 years ago in pyad's TMF article introducing it (or at least its name). It's basically the HYP strategy except for a much lower level of diversification, namely 5 shares.

Although quite short the article is fascinating in a number of respects.

It puts forward an approach deemed by PYAD as unsuitable for anyone in draw down, rather only suitable for those in the building phase willing to take more risk. I think this makes the references to total return completely understandable. The point being that at some time in the future the pot builder using the HYPLite as a vehicle will want to start drawing an income. At that stage (if not before) they will presumably need to convert the HYPLite in to a "full monty" HYP. To a very limited extent that transition can happen over time. As the investor gets closer to using the income to live off the dividends received can start to be invested in different shares to the original five, but that won't be sufficient to rebalance the portfolio on its on. It therefore seems reasonable that at some point the owner of the HYPLite will need to sell part of each of the five holdings and use the proceeds to expand the portfolio by buyng more shares to change the portfolio into a normal HYP. Clearly capital is not unimportant in an HYPLite as the investment in the HYPLite is not a forever purchase, as least a large percentage of each purchase is expected to be sold.

However, the article only alludes to this and does not tackle it explicitly. Maybe there are further articles on the HYPLite that go in to more detail, if so any links would be really interesting. Given the different focus from a normal HYP, ie a need to focus on total return, and not just income, presumably the selection criteria would not be the same as for an HYP, but there is nothing in the article to give any clues as to what changes there may be, other than the references to the even greater importance of sectoral diversity.

Without more detail on the selection methodology it is unclear to me what makes these five shares an HYPLite, rather than just being five shares with a decent yield. Unless there are other articles giving more details on the approach I feel it reaffirms my personal view that HYP (and the articles about it on TMF) was as much as anything else a marketing / branding exercise.

There is another interesting sentence in the article which to me makes it very relevant to the thread on HYP-P that gave rise to this thread. In the first paragraph it says:

I would normally construct an HYP to contain around 15 shares depending on prevailing market conditions and the availability of suitable selections

Interestingly it does not say at least 15 shares, it says around 15 shares. The clear implication for me is that if there are not 15 suitable candidates PYAD is suggesting a smaller number would be acceptable. This to some extent provides an insight in to which selection criteria PYAD would advocate relaxing in the current situation, namely the number of shares. It seems PYAD is suggesting that if there are not 15 shares that meet the other selection criteria for an HYP, those other criteria should not be relaxed to increase the options for inclusion, but that the HYP should be made up of fewer shares. Sadly, the article does not suggest a minimum level of shares in a normal HYP, it merely tells us that if the number is "severely reduced" the portfolio stops being an HYP and becomes an HYPLite (though personally, given the point about total return above I think suggesting a smooth transition from normal to Lite purely based on the number of shares is dangerous).

[Gengulphus]

I take issue with the claim "On the capital side though, there is no reason to believe that the Lite will perform any better, or worse, than the full HYP". I don't think it's too controversial in Finance Theory to make the claim that Higher Yield relates to Higher Risk and also (potentially) Higher Return. Indeed (again interestingly) pyad goes on to say towards the end that "It might produce a better total return long term than a full HYP, at the cost of increased risk." Not only is it interesting in that he uses the phrase "total return", but appears to acknowledge the Higher Yield > Higher Risk > Higher Return description, so odd that he sees "no reason" to believe the performance would be any better, or worse. I think the increased "riskiness" gives plenty of reason why it might perform better, or worse (depending on the selections and time frames).

Well, the only alternative to performing either better or worse is to perform exactly identically - which I'd suggest is so unlikely that there is every reason to believe that the HYPLite will perform either better or worse than the full HYP. It therefore seems to me that pyad is highly unlikely to have meant that there was no reason to believe that!

The meaning that I think he did intend is "On the capital side though, there is no reason to believe that the Lite will perform any better than the full HYP. There is also no reason to believe that the Lite will perform any worse than the full HYP." I.e. although it's virtually certain that one or other of the two outcomes will happen, there's no reason to believe that either is convincingly more likely than the other. Whether that's true or not, it is at least a reasonable viewpoint. And yes, it's arguably not pedantically what he actually said, but what he actually said is shorter and snappier!

Also one of the (I think accepted) negatives about the HYP method is that whilst diversification at selection is deemed important, maintaining such diversification isn't. ...

Depends what you mean by "the HYP method". If you mean the method used to run HYP1, I basically agree: its policy of not selling voluntarily severely restricts its ability to maintain diversification, and its reinvestment policy for capital proceeds of cash takeovers and other corporate actions up to 2008 wasn't 'diversification-aware' - i.e. it made no real attempt to repair imbalances. It's made a few more 'diversification-aware' reinvestment decisions since 2008, reinvesting capital returns from the big, low-yielding Intercontinental Hotels holding in companies other than Intercontinental Hotels itself, but the absence of cash takeovers and other big capital-returning corporate actions means that they've only had very limited diversification-maintaining effects.

But if you mean the HYP methods people use on the HYP Practical board, that negative is true for some of them (such as HYP1's method) and not true for others - for instance, tjh290633's method, which systematically does 'top-slicing' sales on holdings that grow to more than 150% of the median holding and reinvests the proceeds, a policy which definitely acts to repair imbalances and thus maintain diversification. I think it's a fair assumption that those who use the methods for which it's not true do not accept that negative! And there are enough others besides tjh290633 who use such methods (I'm one of them, incidentally) that IMHO it isn't reasonable to describe it as "accepted" - though it would be fair to describe it as "accepted by some".

Gengulphus

[Wizard]

...

Also one of the (I think accepted) negatives about the HYP method is that whilst diversification at selection is deemed important, maintaining such diversification isn't. ...

Depends what you mean by "the HYP method". If you mean the method used to run HYP1, I basically agree: its policy of not selling voluntarily severely restricts its ability to maintain diversification, and its reinvestment policy for capital proceeds of cash takeovers and other corporate actions up to 2008 wasn't 'diversification-aware' - i.e. it made no real attempt to repair imbalances. It's made a few more 'diversification-aware' reinvestment decisions since 2008, reinvesting capital returns from the big, low-yielding Intercontinental Hotels holding in companies other than Intercontinental Hotels itself, but the absence of cash takeovers and other big capital-returning corporate actions means that they've only had very limited diversification-maintaining effects.

But if you mean the HYP methods people use on the HYP Practical board, that negative is true for some of them (such as HYP1's method) and not true for others - for instance, tjh290633's method, which systematically does 'top-slicing' sales on holdings that grow to more than 150% of the median holding and reinvests the proceeds, a policy which definitely acts to repair imbalances and thus maintain diversification. I think it's a fair assumption that those who use the methods for which it's not true do not accept that negative! And there are enough others besides tjh290633 who use such methods (I'm one of them, incidentally) that IMHO it isn't reasonable to describe it as "accepted" - though it would be fair to describe it as "accepted by some".

Gengulphus

I think it would be fair to slightly change what dealtn wrote to say:

Also one of the (I think accepted) negatives about the PYADic HYP method is that whilst diversification at selection is deemed important, maintaining such diversification isn't.

As you have pointed out many, if not most, of those who discuss their own HYPs on HYP-P carry out rebalancing in one form or another. Be it by trimming of overweight holdings, using top-ups on underweight holdings, full disposal of underperformers where a dividend is reduced with little chance of short term recovery, full disposal of shares where the yield has fallen due to significant capital increases, or any combination of those methods. All of these approaches seem a reponse to that weakness in the original PYADic methodology. But all those approaches designed to address that weakness are still consistent with HYP as articulated in the guidelines for HYP-P, so it is not a weakness of HYP per se.

[dealtn]

I take issue with the claim "On the capital side though, there is no reason to believe that the Lite will perform any better, or worse, than the full HYP". I don't think it's too controversial in Finance Theory to make the claim that Higher Yield relates to Higher Risk and also (potentially) Higher Return. Indeed (again interestingly) pyad goes on to say towards the end that "It might produce a better total return long term than a full HYP, at the cost of increased risk." Not only is it interesting in that he uses the phrase "total return", but appears to acknowledge the Higher Yield > Higher Risk > Higher Return description, so odd that he sees "no reason" to believe the performance would be any better, or worse. I think the increased "riskiness" gives plenty of reason why it might perform better, or worse (depending on the selections and time frames).

Well, the only alternative to performing either better or worse is to perform exactly identically - which I'd suggest is so unlikely that there is every reason to believe that the HYPLite will perform either better or worse than the full HYP. It therefore seems to me that pyad is highly unlikely to have meant that there was no reason to believe that!

The meaning that I think he did intend is "On the capital side though, there is no reason to believe that the Lite will perform any better than the full HYP. There is also no reason to believe that the Lite will perform any worse than the full HYP." I.e. although it's virtually certain that one or other of the two outcomes will happen, there's no reason to believe that either is convincingly more likely than the other. Whether that's true or not, it is at least a reasonable viewpoint. And yes, it's arguably not pedantically what he actually said, but what he actually said is shorter and snappier!

Well, I was basing my point on this "The higher return comes in the form of increased income. By choosing a small number of the very highest yielders in the FTSE100, a yield well above the normal full HYP yield can be obtained."

So pyad is making the claim that this "Lite" version has a higher yield than the normal HYP method (and this is referring to the "original" not current guidelines interpretations), and furthermore this yield is "well above". From this I am making the simple point that Higher Yield is generally accepted to equate to Higher Risk which in turn, at least in Finance Theory, is equated with Higher Return. As such I am saying that a method the author claims to have Higher Risk "should" also be associated with an expected (though by no means guaranteed, but perhaps on average and with accompanying increased volatility) Higher Return. At least some of that Higher Return would be reflected in Capital Return.

If what he is saying, is the slightly less snappy ""On the capital side though, there is no reason to believe that the Lite will perform any better than the full HYP. There is also no reason to believe that the Lite will perform any worse than the full HYP." that is precisely what I am disputing. My claim, which I think is consistent with Finance Theory is that he appears to be simultaneously claiming the "Lite" strategy is "riskier", yet making a claim that the return isn't, or shouldn't be, higher. He should be claiming that the "Lite" as a riskier strategy, is potentially higher return, but perhaps understandably, is reluctant to do so (particularly if the readership is at the less Finance Theory aware end of the spectrum and might have difficulty understanding the nuance of what that measure actually conveys).

There is a least "some reason", namely conventional Finance Theory, not "no reason".

I certainly wasn't making any attempt to make a pedantic point that is was unlikely to be exactly equal to any alternative.

On your "diversification" points I don't disagree and was referring to the HYP1 type of HYP, which some seem at least to still follow and refer to, and I am well aware that in practice many, including those you quote, do have methods for addressing over-concentration, and lack of diversification.

[Gengulphus]

Although quite short the article is fascinating in a number of respects.

It puts forward an approach deemed by PYAD as unsuitable for anyone in draw down, rather only suitable for those in the building phase willing to take more risk. I think this makes the references to total return completely understandable. The point being that at some time in the future the pot builder using the HYPLite as a vehicle will want to start drawing an income. At that stage (if not before) they will presumably need to convert the HYPLite in to a "full monty" HYP. To a very limited extent that transition can happen over time. As the investor gets closer to using the income to live off the dividends received can start to be invested in different shares to the original five, but that won't be sufficient to rebalance the portfolio on its on. It therefore seems reasonable that at some point the owner of the HYPLite will need to sell part of each of the five holdings and use the proceeds to expand the portfolio by buyng more shares to change the portfolio into a normal HYP. Clearly capital is not unimportant in an HYPLite as the investment in the HYPLite is not a forever purchase, as least a large percentage of each purchase is expected to be sold.

I see your point, but don't entirely agree with it. The trouble is that you say that the transition can happen over time, by reinvesting dividends in new shares, but that won't be sufficient on its own to rebalance the portfolio. But it pretty clearly will be sufficient given enough time - the question is how much time is needed. I've done a very rough back-of-the-envelope calculation which suggests 20-25 years would probably be sufficient.

That's a long way in advance of wanting to draw the income to start the transition, of course, but then there's a second issue, namely that reinvesting the dividends almost certainly won't be on its own! The pot builder is highly likely to be investing further savings, and reinvesting the proceeds from takeovers and the various types of returns of capital as and when they occur. Depending on the level of further savings the pot builder can afford, and on how much capital happens to get returned by takeovers and other corporate actions, this could shorten the 'transition period' considerably without requiring sales and reinvestment of their proceeds. At a rather wild 'finger in the air' guess, 10-15 years might do the job - still quite a long time in advance of starting to draw down the income to start shifting strategy, but feasible.

Having said that, I'll repeat that I'm not promoting the HYPLite strategy presented in the article. I'm just saying here that if a pot-builder was comfortable with its risk level, I think it would be feasible to shift it to a full HYP strategy without sales if they started early enough. But I would not be that pot-builder myself!

However, the article only alludes to this and does not tackle it explicitly. Maybe there are further articles on the HYPLite that go in to more detail, if so any links would be really interesting. ...

I don't remember there being any other HYPLite-related articles on TMF, and I'm fairly certain I would have seen them and remembered their existence (though probably not what they said) if there had been. And while there was a fair amount of HYPLite-related posting on TMF, the chances of TMF posts having been archived are very low unless someone made a particular point of archiving them, and even if they were, finding them is a needle-in-a-haystack job... So I'm afraid I cannot help with such links, and I doubt anyone else can either.

If you want to explore pyad's old TMF articles to see what else there is of interest among them, though, https://web.archive.org/web/20160605192 ... 2005vi.htm and https://web.archive.org/web/20080216012 ... &year=2008 are a couple of entry points, for articles published in 1999-2006 and 2006-2008 respectively. No guarantees that you'll find anything else you consider interesting, of course - interest is in the eyes of the beholder!

Gengulphus

[tjh290633]

My recollection is that the intention of the HYP-lite was to follow the usual selection process, but stop at the first 5 shares which qualified. These would by necessity have higher yields that othe candidate shares lower down the yield rankings, and so the resultant 5-share portfolio would have a higher yield than a full 15-share portfolio.

Looking at my own portfolio ranked by yield we find:

Rank   EPIC   Yield 
   1   BP.    10.96%
   2   IMB     9.87%
   3   LGEN    8.11%
   4   BATS    7.82%
   5   RIO     7.39%
   6   BHP     6.59%
   7   VOD     6.10%
   8   SSE     6.02%
   9   NG.     5.38%
  10   ADM     5.09%
  11   GSK     5.06%
  12   UU.     4.83%
  13   BLND    4.45%
  14   TATE    4.37%
  15   RDSB    4.25%

The cumulative mean yield on the first 5 is 8.8%, whereas on the 15 it is 6.4%, so there is over 30% more income potentially available if one limited the choice to those 5 shares. Actually you would have to go down to VOD, because of sector duplication between IMB and BATS, and RIO and BHP. That would probably bring the mean down to about 8.1%, but the effect is still there.

The potential benefit in a portfolio under construction is obvious. Whether you would get a better total return from lower yielding shares, like perhaps PHP, IMI, ULVR, DGE and AZN is arguable.

TJH

[Gengulphus]

I take issue with the claim "On the capital side though, there is no reason to believe that the Lite will perform any better, or worse, than the full HYP". I don't think it's too controversial in Finance Theory to make the claim that Higher Yield relates to Higher Risk and also (potentially) Higher Return. Indeed (again interestingly) pyad goes on to say towards the end that "It might produce a better total return long term than a full HYP, at the cost of increased risk." Not only is it interesting in that he uses the phrase "total return", but appears to acknowledge the Higher Yield > Higher Risk > Higher Return description, so odd that he sees "no reason" to believe the performance would be any better, or worse. I think the increased "riskiness" gives plenty of reason why it might perform better, or worse (depending on the selections and time frames).

Well, the only alternative to performing either better or worse is to perform exactly identically - which I'd suggest is so unlikely that there is every reason to believe that the HYPLite will perform either better or worse than the full HYP. It therefore seems to me that pyad is highly unlikely to have meant that there was no reason to believe that!

The meaning that I think he did intend is "On the capital side though, there is no reason to believe that the Lite will perform any better than the full HYP. There is also no reason to believe that the Lite will perform any worse than the full HYP." I.e. although it's virtually certain that one or other of the two outcomes will happen, there's no reason to believe that either is convincingly more likely than the other. Whether that's true or not, it is at least a reasonable viewpoint. And yes, it's arguably not pedantically what he actually said, but what he actually said is shorter and snappier!

Well, I was basing my point on this "The higher return comes in the form of increased income. By choosing a small number of the very highest yielders in the FTSE100, a yield well above the normal full HYP yield can be obtained."

So pyad is making the claim that this "Lite" version has a higher yield than the normal HYP method (and this is referring to the "original" not current guidelines interpretations), and furthermore this yield is "well above". From this I am making the simple point that Higher Yield is generally accepted to equate to Higher Risk which in turn, at least in Finance Theory, is equated with Higher Return. As such I am saying that a method the author claims to have Higher Risk "should" also be associated with an expected (though by no means guaranteed, but perhaps on average and with accompanying increased volatility) Higher Return. At least some of that Higher Return would be reflected in Capital Return.

I don't see anything in finance theory to support that last assertion. It's perfectly conceivable e.g. that the higher yield strategy has a yield of 6% and a total return rate of 8.5%, implying a capital return rate of 2.5%, while the lower yield strategy has a yield of 5% and a total return rate of 8%, implying a capital return rate of 3%.

But even supposing that the higher total return rate we're presuming (*) to be associated with the higher-yield, higher-risk HYPLite strategy is also associated with a higher capital return rate, there's another problem with your argument:

If what he is saying, is the slightly less snappy ""On the capital side though, there is no reason to believe that the Lite will perform any better than the full HYP. There is also no reason to believe that the Lite will perform any worse than the full HYP." that is precisely what I am disputing. My claim, which I think is consistent with Finance Theory is that he appears to be simultaneously claiming the "Lite" strategy is "riskier", yet making a claim that the return isn't, or shouldn't be, higher. He should be claiming that the "Lite" as a riskier strategy, is potentially higher return, but perhaps understandably, is reluctant to do so (particularly if the readership is at the less Finance Theory aware end of the spectrum and might have difficulty understanding the nuance of what that measure actually conveys).

The additional problem is that you're presuming that strategy A having a higher capital return rate than strategy B is associated with strategy A performing better than strategy B. That needn't be true, because return rates of the two strategies are statistical expectations, whereas one strategy performing better or worse than the other is a binary event, measured statistically by probabilities. As a 'toy' example to illustrate the point, suppose the two strategies have the following probabilities of achieving particular rates of return over the period we look at:

Strategy A: 50% chance each of achieving a +100% return and a -40% return.
Strategy B: 50% chance each of achieving a +25% return and a -20% return.

Strategy A clearly is riskier and has a higher statistically expected return than strategy B, but it will perform better than strategy B if it achieves a return of +100% and worse if it achieves a return of -40%. So there's a 50% chance of it performing better and a 50% chance of it performing worse - or in other words, there's no reason to believe it will perform better, and no reason to believe it will perform worse. There is reason to believe that if it performs better, the extent of its outperformance will be larger than the extent of its underperformance if it performs worse - but that's not the same thing!

I'm giving that sort of 'toy' example because while a more realistic example would be preferable in principle, it would take far too much of my time and make this post far longer. Obviously, real-world investment strategies don't have that sort of simple binary distribution of return outcomes, but similar things can happen with more realistic distributions - and one of the ways they can happen is with underdiversified portfolios of shares with a low probability of outperforming greatly and a high probability of underperforming mildly: the outcome depends a lot on whether the strategy is lucky enough to get its 'fair share' of the big outperformers. The classic example of that happening is with 'venture capital' portfolios of investments in early-stage companies, but the way the example HYPLite in the article has become dominated by Compass does suggest that the HYPLite strategy of only investing in the very highest-yielding large companies may be similar - with the difference that the HYPLite strategy is basically underdiversified by definition, whereas a 'venture capital' strategy has huge numbers of early-stage companies it could invest in and can become pretty well-diversified, but of course needs to weed out the large numbers of complete no-hopers from among them. (Incidentally, I say that the way that the example HYPLite has evolved suggests that the HYPLite strategy may be similar, rather than that it shows that it is similar, because it's only one data point about the HYPLite strategy and so might be a misleading outlier.)

(*) I say "presuming" because as you say, a riskier strategy is only potentially a higher return strategy - whether it actually is one depends basically on whether the extra risks it takes are sensible risks to take.

Gengulphus

[Gengulphus]

I don't remember there being any other HYPLite-related articles on TMF, and I'm fairly certain I would have seen them and remembered their existence (though probably not what they said) if there had been. And while there was a fair amount of HYPLite-related posting on TMF, the chances of TMF posts having been archived are very low unless someone made a particular point of archiving them, and even if they were, finding them is a needle-in-a-haystack job... So I'm afraid I cannot help with such links, and I doubt anyone else can either.

At the time I wrote that, I did remember a challenge on TMF about which of two strategies was better, which developed into a more general year-long strategy competition of 5-share portfolios, and that I'd entered a 5-share "mini-HYP" into, but I didn't think I'd archived anything about that competition when TMF closed its boards. I did however wonder this morning whether there might be something in a collection of rather miscellaneous TMF links I'd archived - basically, my 99 most recced posts on TMF at the time, plus an assortment of posts I'd put into the "My Links" (or similarly named) section of my TMF home page. I've just checked that out, and found that my competition entry was in the latter group - presumably I'd decided I wanted to be able to refer to it quickly in the course of the competition, and then never got around to removing it when the competition was over.

I didn't call it a HYPLite - not surprising, as this happened about 16 months before pyad's HYPLite article was published. And my motivation wasn't what that article describes - I basically just wanted HYP to be given a fair entry within the 5-share limitation of the competition, by making a reasonable attempt at selecting the best five shares at the time. And as I indicated at the end of my later post in the thread, I regarded my entry as a "benchmark" for the competition - more a 'pacesetter' in the race than a serious attempt to win it! I didn't archive any later threads about that competition, so I cannot complete the story properly - from memory, I'm pretty certain my HYP entry didn't win (that would be a very memorable event!), but IIRC it did come reasonably high up in the final rankings.

So possibly not quite a HYPLite as described in pyad's article - I might have made a bit less of a 'stretch' for the highest yields, but its yield was pretty high for the time, so there was some 'stretching' involved. But pretty close to one, I think, and it is a second example of an old portfolio of the HYPLite type that is demonstrably not affected by hindsight bias, to add to the one in pyad's article. A similar chart-based, capital-only assessment of its performance since purchase to the one I did in my OP for the article's HYPLite says that the BATS holding has somewhat more than tripled in value since purchase, the SSE and Tate & Lyle holdings roughly doubled, the United Utilities holding roughly halved and the Lloyds holding reduced to a small fraction of its purchase value. Overall, that makes the portfolio worth somewhere in the rough region of 160% of its purchase cost, which is something like a 3% capital CAGR over the ~16 years since it was constructed. I should stress that both this and the similar exercise in my OP are very crude estimates - to do them properly, one needs to use more precise figures than ones eyeballed off a chart, and one needs to take the effects of corporate actions into account. And of course, yield is an important part of portfolio performances - probably more important than capital for portfolios like these.

Gengulphus

[dealtn]

Gengulphus

Yes you are right if the income returns are sufficiently different then the total Return from the "riskier" strategy could exceed the alternative, but the capital return be lower.

Yes I am talking in terms of statistical expectations, and as such believe that allows for "some" reason, as the alternative "no" reason is overly exclusive.

I suspect though it is only a small point, and given the likely readership not particularly important. I don't know the individual, nor particularly remember the "culture" of the publisher at the time. It wouldn't surprise me if the article's existence owes as much to finding a new way of publishing an income strategy idea as it does to pyad genuinely thinking it was a good idea. I might be wrong though, and like you have no idea or recollection of much discussion around the article and this idea at the time, and no real means to check either (even were one inclined to).

[Eboli]

Just for the record I also seem to recall that around this period - mid 1990s? - there was a very lite version comprising a 2 shares HYP. I remember this because I recall I used it for a couple of years as a way of selecting my single company PEP investment which was limited, I think, to £3K in addition to whatever was the PEP limit. I have no idea now what the selection process was.

Eb.

[Gengulphus]

Just for the record I also seem to recall that around this period - mid 1990s? - there was a very lite version comprising a 2 shares HYP. I remember this because I recall I used it for a couple of years as a way of selecting my single company PEP investment which was limited, I think, to £3K in addition to whatever was the PEP limit. I have no idea now what the selection process was.

Different period - the HYPLite linked to in my OP was chosen in October 2005, the HYPLite (or close-to-HYPLite) I dug up a few posts back was chosen in June 2004. Also, I'm fairly certain that your mention of the "mid 1990s" is not a typo for "mid 2000s", because PEPs were replaced by ISAs in the late 1990s.

Which is not to say that what you remember isn't of interest - it is! - but just that it is from a significantly earlier period.

Gengulphus

[Eboli]

Gengulphus,

For the record I agree with your suggestion that what I was recalling was mid-1990s. But what irritates me is I cannot remember when the HYP Lite (5 share version) was updated on a monthly basis. I suspect that started around 2003.

Eb.

[Gengulphus]

... But what irritates me is I cannot remember when the HYP Lite (5 share version) was updated on a monthly basis. I suspect that started around 2003.

Sorry, can't help on that - I don't remember any version of HYPLite ever being updated on a monthly basis. Not saying it didn't happen - just that wherever it happened was probably somewhere I didn't read at the time, with the possibility that I saw it but have totally forgotten it being IMHO much less likely.

Gengulphus