HYP1 is 22 - thread discussing income and capital diversification

[1nvest]

Did I imagine it, or was there not a thread proposing to discuss the creation of a "HTP 2023"? There were a few contributors, then the thread vanished without even leaving a moderator message to explain the disappearance.

Start one periodically, and as much of mid/longer term outcomes are determined by earlier period outcomes, delete those that don't start off with a good initial up-run, and leave those that do. Overall perception when you look back at remaining posts is that of great success stories in having followed a particular style

I've had posts deleted for outlining comparable alternatives, just vanish.

Gives the distinct perception of TLF being predominately a shop window for HYP.

[MDW1954]

Moderator Message:
There was indeed such a thread. Following moderation, the thread was reassigned to HYSS, where it broke fewer guidelines. The OP then requested that his original post be deleted. So the rest made no sense, as it was discussing a post that no longer existed. So it was deleted.

As an aside, this thread is drifting way off topic.... anyone care to bring it back on topic?

MDW1954

[tjh290633]

Did I imagine it, or was there not a thread proposing to discuss the creation of a "HTP 2023"? There were a few contributors, then the thread vanished without even leaving a moderator message to explain the disappearance.

It is, of course, open to anybody to open HYP2023. There are always enough candidate shares. The question is, should it have just 15 shares, bought at the same time, should it be assumed that all dividends are withdrawn, and should it be compared with an annuity bought at the same time. If so what type of annuity? Flat or index-linked, single or joint lives?.

The question has been asked, how did HYP1 compare with an annuity taken out at the same time? I was able to provide some data, but from a couple of years earlier. Bearing in mind that the vital difference is that the capital value of the annuity is Zero, once it has been bought, while that of HYP1 has increased, and that the dividend income has increased faster than RPI, the answer to that question is not in doubt.

If one were to set up such a portfolio, then I submit that some additional rules need to be introduced, particularly about the limits to imbalance and how to deal with the proceeds of a takeover, or returns of capital.

It needs someone with a rather longer life expectancy than myself to take on such a task.

TJH

[NotSure]

Bearing in mind that the vital difference is that the capital value of the annuity is Zero, once it has been bought

Capital is of little, if any, importance, AIUI?


I would be fascinated to see a (statistically speaking) better look at HYP, even in it's original form - no 'tinker'. It would be good to know if HYP1 is an outlier. Maybe equal cap, let it roll, somehow beats the odds? If there were a handy data base of all the necessary numbers, a back test would be quicker though.

[tjh290633]

Bearing in mind that the vital difference is that the capital value of the annuity is Zero, once it has been bought

Capital is of little, if any, importance, AIUI?


I would be fascinated to see a (statistically speaking) better look at HYP, even in it's original form - no 'tinker'. It would be good to know if HYP1 is an outlier. Maybe equal cap, let it roll, somehow beats the odds? If there were a handy data base of all the necessary numbers, a back test would be quicker though.

Fluctuations in capital value are inevitable, but the objective is that gradually increasing income. As long as the income does what is required, the capital value matters less. After all, with an annuity you have disposed of your capital.

The problem with back testing is the action which had to be taken, like when Gallagher was taken over. Without rules of some sort, it becomes virtually impossible. What do you do if a company stops paying dividends, or demerges?

We all have our views of how these should be handled, but little agreement.

TJH

[dealtn]

Bearing in mind that the vital difference is that the capital value of the annuity is Zero, once it has been bought

Capital is of little, if any, importance, AIUI?


I would be fascinated to see a (statistically speaking) better look at HYP, even in it's original form - no 'tinker'. It would be good to know if HYP1 is an outlier. Maybe equal cap, let it roll, somehow beats the odds? If there were a handy data base of all the necessary numbers, a back test would be quicker though.

The data is there. Performing a backtest on a 15 share combination of the FTSE100 constituents from 22 years ago isn't difficult computer processing wise. Nor would selecting the subset of those potential portfolios that qualified as a "HYP" at inception.

But, being honest, who would care to do so? The HYP supporter universe is a small one, and only exists in this site. I suggest with a successful HYP1 to evidence as an alternative to that approach, how would they be incentivised to do so? It's opponents have nothing to prove or really care about in "proving" its a statistical outlier.

(I suspect, but don't know, that even HYP1 isn't a strict no-tinker portfolio).

[Alaric]

If one were to set up such a portfolio, then I submit that some additional rules need to be introduced, particularly about the limits to imbalance and how to deal with the proceeds of a takeover, or returns of capital.

If the comparison is for retirement income as an annuity supplement or replacement, the simplest approach to takeovers and returns of capital is to treat them as windfall events. In other words, the proceeds are removed from the portfolio as if they are dividends.

An approach to imbalances is to periodically start a new one. In other words notionally sell the entire portfolio as it stands and reinvest as if there's a new lump sum equal to the portfolio value. Perhaps 30 spreads and commissions and 15 Stamp Duty charges is too high a price, so a rule needing less trading may be required.

[Lootman]

Capital is of little, if any, importance, AIUI?

I know there are people who say that. I am less sure that anyone behaves as if they really believe that.

[Alaric]

. I am less sure that anyone behaves as if they really believe that (unimportance of capital).

One of the more controversial issues about the notion of HYP is the idea that shares should be selected by reference to their dividend yield, ignoring any risks to capital which might be driving one share to have a higher dividend yield than another in a similar business sector.

[Bubblesofearth]

The data is there.

Where?

BoE

[dealtn]

The data is there.

Where?

BoE

The constituents of the FTSE100 will be known on the start date. Unlike, many alternatives, this is a small and finite list.

The return, be that dividend income, or total return, are easily accessible from multiple sites. Nothing is hidden. You would need to set aside time to work out 100 returns. Then an easy computing task to calculate the finite possible portfolios.

As said, I can't see who would be motivated enough to actually do it though. (To be clear I'm not).

[BullDog]

Capital is of little, if any, importance, AIUI?

I know there are people who say that. I am less sure that anyone behaves as if they really believe that.

Only an idiot believes it. Because without the capital, where is the income coming from?

[tjh290633]

Because without the capital, where is the income coming from?

Yiou have the wrong end of the stick. Capital value varies much more than dividend income. variations in capital value can be ignored if they have no impact on dividends. Unless you lose all your capital by following the latest fad and the companies go bust, you do not lose your capital.

Follow the income.

TJH

[BullDog]

Because without the capital, where is the income coming from?

Yiou have the wrong end of the stick. Capital value varies much more than dividend income. variations in capital value can be ignored if they have no impact on dividends. Unless you lose all your capital by following the latest fad and the companies go bust, you do not lose your capital.

Follow the income.

TJH

You misunderstand me. Without successful accumulation of capital in the first instance then there is no resulting income.

[dealtn]

Because without the capital, where is the income coming from?

Yiou have the wrong end of the stick. Capital value varies much more than dividend income. variations in capital value can be ignored if they have no impact on dividends. Unless you lose all your capital by following the latest fad and the companies go bust, you do not lose your capital.

Follow the income.

TJH

That's a very big "if". Availability, and value of, capital, has a large bearing on both the availability and the amount of dividends.

[Bubblesofearth]

The return, be that dividend income, or total return, are easily accessible from multiple sites.

For example?

BoE

[tjh290633]

Yiou have the wrong end of the stick. Capital value varies much more than dividend income. variations in capital value can be ignored if they have no impact on dividends. Unless you lose all your capital by following the latest fad and the companies go bust, you do not lose your capital.

Follow the income.

TJH

You misunderstand me. Without successful accumulation of capital in the first instance then there is no resulting income.

You need capital in the first place. Having accumulated it, you then decide either to invest for income or buy an annuity.

Accumulation can be done in many ways. In the past, an endowment policy might have been used. You could have had a savings plan with various securities. Today you might use a SIPP to accumulate the cash. This subject is not about accumulating wealth, it is how to derive income from it.

TJH

[dealtn]

The return, be that dividend income, or total return, are easily accessible from multiple sites.

For example?

BoE

There will be literally dozens of sources. The first port of call the company website itself. You will find all the dividends readily. Multiple broker websites will have the same plus share price history. Multiple news providers do the same, as do investor forums such as advfn. That's just the free ones. If you are prepared to pay its even quicker.

If you want the information it's at your fingertips in minutes.

[1nvest]

Because without the capital, where is the income coming from?

Yiou have the wrong end of the stick. Capital value varies much more than dividend income.

Data : Barclays Equity Gilt Study
Standard deviations of changes in yearly capital (price) and dividend values

21% vs 18%

Not what I'd call 'much' more.

Fundamentally a tendency for when stock prices dive deeply, dividend values have also seen substantial reductions.

[1nvest]

Accumulation can be done in many ways. In the past, an endowment policy might have been used. You could have had a savings plan with various securities. Today you might use a SIPP to accumulate the cash. This subject is not about accumulating wealth, it is how to derive income from it.

Never had any problems with deriving a income out of wealth myself

If you're comparing two choices of income provision then its fair to take the same amount of income equally from both and the one with a higher residual wealth was the better. But even that is somewhat futile as what works well for one approach over one period is inclined to have other approaches over other periods. Comparisons are N=1, not broadly indicative. For N=n measures I've seen limiting to a relatively small sub-set of stocks has not improved rewards, just increased risk (and more so if a few of the stocks rise to become relatively highly weighted).