Arborbridge wrote:
Well, we already do have a example, if I may be so immodest : ArbIT, which contains several ITs dealing with ex-UK shares.
So why do folk bother with HYPs ?
![Twisted Evil :twisted:](./images/smilies/icon_twisted.gif)
Arborbridge wrote:
Well, we already do have a example, if I may be so immodest : ArbIT, which contains several ITs dealing with ex-UK shares.
Well personally I read about the concept on TMF at a time when I had inherited a lump sum. I had invested in a small way via unit trusts previously, but I liked the idea of chosing my own stocks and generating an income stream, as my long term plan was to use the money to finance early retirement. Over a few years I built up a portifolio of the usual suspects. I have continued to do so, but it sits within a larger portifolio with collective holdings.moorfield wrote:
So why do folk bother with HYPs ?
I achieved a higher starting income with my HYP than with my ITs. You mentioned the idea of having an IT bundle might be the inverse of than, but in my experience, ITs usually yield less (at least, the safe-ish ones I chose did) - though I daresay you could pick ITs like HFEL just to prove me wrongmoorfield wrote:Arborbridge wrote:
Well, we already do have a example, if I may be so immodest : ArbIT, which contains several ITs dealing with ex-UK shares.
So why do folk bother with HYPs ?
Yes HFEL in particular does seem to attract a lot of moaning in these parts. Maybe I will select it into my new IT income portfolio after all.Arborbridge wrote: though I daresay you could pick ITs like HFEL just to prove me wrong
You want HFEL? You can have mine, provided you pay me what it costmoorfield wrote:Yes HFEL in particular does seem to attract a lot of moaning in these parts. Maybe I will select it into my new IT income portfolio after all.Arborbridge wrote: though I daresay you could pick ITs like HFEL just to prove me wrong
Mine are only down 1.61% last time I bothered to look, less than 3 months dividends, but I do not want any more.88V8 wrote:You want HFEL? You can have mine, provided you pay me what it costmoorfield wrote: Yes HFEL in particular does seem to attract a lot of moaning in these parts. Maybe I will select it into my new IT income portfolio after all.![]()
V8
I wanted to revisit the above comment, because I've run some portfolio-concentration numbers on a separate non-tinker HYP portfolio, and it's interesting to see that it's displaying the same tendency to verge towards a highly concentrated position in terms of income and capital delivery -dealtn wrote:
I have also no issue with a claim that HYP1 shows it can work (although the fact the income is volatile, can go down, and suffers a large degree of reliance on so few income sources in the portfolio stretches what I might consider to be a reasonable description of "work").
But a sample size of "1" is hardly statistically significant - and begs the question what might be the position were HYP1 to have underperformed.
It's by no means clear that stable income is a main goal of HYP 1 purists, given its track record of jumping all over the place. For stable income from shares you could have a portfolio of Income generating ITs, or emulate their methods by holding back safety margins and reinvesting part of the dividend income as a buffer against cuts.vand wrote: IMO there is no reason to hold a very concentrated portfolio if stable income is your main goal
Indeed. I seem to recall that way back HYP was touted as providing a stable and increasing income, on the basis that dividends are (supposedly) more secure than capital gains. But then we had 2008 and 2020 and the goalposts got moved. I cannot really say it any better than I did on the first page of this long topic:Alaric wrote:It's by no means clear that stable income is a main goal of HYP 1 purists, given its track record of jumping all over the place. For stable income from shares you could have a portfolio of Income generating ITs, or emulate their methods by holding back safety margins and reinvesting part of the dividend income as a buffer against cuts.vand wrote: IMO there is no reason to hold a very concentrated portfolio if stable income is your main goal
The premise can be modified to supply an income reserve even from outset. If you presume a lump sum is kicking the whole thing off, then just invest 95% or 90% of the initial amount, depending on how many years of income reserve is required. It's a lower amount invested in shares so lower returns if the market performs.Lootman wrote:
And given that 2 of those 9 years were in years 3 and 4, any HYP1 income reserve would not have been fully built up at that early point anyway.
Well sure, I mean is there anyone who actually spends 100% of their dividend income anyway? Its only prudent that some of it is set aside for purposes of smoothing and/or growing the capital base.Alaric wrote:It's by no means clear that stable income is a main goal of HYP 1 purists, given its track record of jumping all over the place. For stable income from shares you could have a portfolio of Income generating ITs, or emulate their methods by holding back safety margins and reinvesting part of the dividend income as a buffer against cuts.vand wrote: IMO there is no reason to hold a very concentrated portfolio if stable income is your main goal
The hypothetical investors who put their money into HYP1 were deemed to do so, as is the hypothetical investor who may or may not be setting up a HYP in the near future (see other recent threads). These hypothetical investors are also seemingly uninterested in the longer term capital values of their holdings, there not being any real attempt to filter out those companies sustaining dividends by running down the net assets.vand wrote:I mean is there anyone who actually spends 100% of their dividend income anyway?
Yes, I think you have it about right. What a real investor does is probably different, however. In my case, I've never paid out 100% as it seems a silly thing to do and would suggest I have retied too soon. Actually, anyone who retires needing a high yield is unfortunate in that sense, compared with those with enough capital to achieve a good income by investing in low yields or gilts.Alaric wrote:The hypothetical investors who put their money into HYP1 were deemed to do so, as is the hypothetical investor who may or may not be setting up a HYP in the near future (see other recent threads). These hypothetical investors are also seemingly uninterested in the longer term capital values of their holdings, there not being any real attempt to filter out those companies sustaining dividends by running down the net assets.vand wrote:I mean is there anyone who actually spends 100% of their dividend income anyway?
It has always been known that capital values can rise and fall, without affecting dividend income, but the converse is also true. Consequently the HYP investor pays less attention to the capital value than to the dividend income. The object is to find companies with a record of high and increasing dividends. High takes preference over increasing. A period of level dividends has often been acceptable, AstraZeneca is an example, but the price has risen so far that the yield is unacceptable for a new choice. At just under 2% it is at the level where consideration can be given to disposing of an existing holding, in favour of one with a higher yield. GSK yields 4%, for example, but its dividends are reducing because of the demerger of Haleon.Alaric wrote:The hypothetical investors who put their money into HYP1 were deemed to do so, as is the hypothetical investor who may or may not be setting up a HYP in the near future (see other recent threads). These hypothetical investors are also seemingly uninterested in the longer term capital values of their holdings, there not being any real attempt to filter out those companies sustaining dividends by running down the net assets.vand wrote:I mean is there anyone who actually spends 100% of their dividend income anyway?
That's well and good when the high and increasing dividends are a distribution of high and increasing profits. But what of when the high and increasing dividends are being financed by borrowing and running down the net assets of the Company? That might even be suitable for investors looking for annuity like returns, but provided the success of investments is measured by the conventional method of comparing the total return, high dividend yields can just be a trap or a con by directors.tjh290633 wrote: The object is to find companies with a record of high and increasing dividends. High takes preference over increasing.
Start with a conventional 5% rule if you like. Still had a very high probability of success as the 4% is based on historic worst case outcome, in the median case higher SWR's could have comfortably been achieved.vand wrote:Well sure, I mean is there anyone who actually spends 100% of their dividend income anyway? Its only prudent that some of it is set aside for purposes of smoothing and/or growing the capital base.Alaric wrote: It's by no means clear that stable income is a main goal of HYP 1 purists, given its track record of jumping all over the place. For stable income from shares you could have a portfolio of Income generating ITs, or emulate their methods by holding back safety margins and reinvesting part of the dividend income as a buffer against cuts.
As has been extensively discussed elsewhere, a high yield strategy is far from infallable. When the time comes for me to start drawing from my own HYP I personally plan to spend 70-80% of the income and split the rest between reinvesting and cash buffer purposes. The 4% rule can't easily be cheated just because your starting dividend yield exceed that amount.