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ReallyVeryFoolish wrote:And........ That's it. Done. Finished. Retired. RVF's supposed quality income companies are a complete train wreck now the footsie is back under 6000. I am very grateful to be in the fortunate position of having a robust enough plan that I can still retire. Plan C is now in action with one day per week being invoiced for monthly whether the client chooses to make use of my support or not over the next few months. I expect I will be called upon to give guidance and advice. But if the phone stays silent and the inbox remains empty. So much the better. The Plan C income will not be drawn, it will be used to fix the very big hole in my "income" portfolio.
RVF.
Well done, freedom from the drudge of M-F 9-5 work has been my aim for a decade or so and back in January it was within a year I predicted.
I have no alternative employment plans so I'll keep working, keep investing, keep checking the numbers and perhaps this time next year...
ReallyVeryFoolish wrote:
So - The learning value here? I think it's basically the 6P's.
For those unfamiliar with the 6P's - It's "Perfect Planning Prevents Pi55 Poor Performance".
Have a plan, refine it according to events, but stick to it. And you'll be fine.
Great to hear that things are going well RVF, and I also think it's great to hear of someone's personal experiences in this area where 'human capital', rather than more often focussed-upon 'financial capital', has provided an alternative option for you that still meant that the majority of your primary goals were achieved.
I think the option to either continue or re-start a lower level of paid employment is sometimes neglected in our forward-looking plans, and yet as you've shown, it can often be a really useful benefit if circumstances require a gap to be filled and some semblance of the original plans maintained...
That is a heartening post RVF and I wish you well as things settle down in your retirement. I think what you have shown is that a plan, almost any plan, is better than no plan. In that respect, that is a positive for the much maligned HYP.
That is true of course. My comments re the HYP were meant to convey that at least you have a plan even if not a very good one but it would be better than threshing around jumping from one 'bright' idea to another. Any plan at least gives a base for action and can be modified if it is not working. That is really what I was getting at.
ReallyVeryFoolish wrote:One month into retirement and it is turning into a full time job. I think once my back log list of domestic chores is through, I will have much more leisure time to rekindle latent interests and catch up with friends I haven't seen, in some cases, for several decades. What a boon Facebook has been in this respect. Several people now in a similar position to myself have been in touch and I hope in 2021 to have a very full social calendar. I also hope that live music concerts begin again since that's another latent interest neglected the last couple of decades or so. But, onto the damaged goods ISA/SIPP portfolio. The capital loss on the UK "income" stocks I bought is awful and with the FTSE100 well below 1999 levels, add on the absence of dividends, it is very painful to behold and showing no signs of recovery whatsoever. Post retirement, I find myself in a fairly fortunate position and I was able to subscribe to my 20/21 ISA in full from a much larger than expected final salary payment. The money went half and half into LWDB and HFEL within the ISA. My good fortune extends to my Plan C. I have just invoiced for the first month of part time technical support of my previous employer. That's working well for both parties and has had minimal disruption to my lifestyle so far. I have no idea how long this arrangement will run for. But the payment for the first month of part time work is destined for my SIPP and is very likely to find it's way into HFEL shares too. If the Plan C runs for 6 or 7 more months, the damaged goods portfolio will be back to where it was in February 2020 before the COVID tsunami hit. My good fortune (or good strategy depending on viewpoint) means I don't need the Plan C income to live off and I can defer any income drawdown from the damaged goods portfolio for a couple or thee years. In fact if really required, drawdown could be deferred indefinitely, but that would entail some impact to planned lifestyle. So - The learning value here? I think it's basically the 6P's. For those unfamiliar with the 6P's - It's "Perfect Planning Prevents Pi55 Poor Performance". Have a plan, refine it according to events, but stick to it. And you'll be fine.
RVF
My bold.
I seem to recall there are tax implications of working for a former employer. Maybe they are not relevant to retirement (rather than redundancy), but thought I would mention it in case you had not considered it.
tjh290633 wrote:
What I find interesting is the lack of correlation between paying dividends and performance.
Is there a common thread in the market's perception of the sustainability or otherwise of those dividends?
For example, are RDSB and BP are down a similar amount despite the difference in yield, because the loss of value is more due to the perception their future business is compromised?
tjh290633 wrote:
What I find interesting is the lack of correlation between paying dividends and performance.
Is there a common thread in the market's perception of the sustainability or otherwise of those dividends?
For example, are RDSB and BP are down a similar amount despite the difference in yield, because the loss of value is more due to the perception their future business is compromised?
I was looking more at KGF and WMH, neither paying dividends yet flying high.
I think that the oil sector reflects more on the future prospects of those industries, rather than on their profitability.
xeny wrote:
Is there a common thread in the market's perception of the sustainability or otherwise of those dividends?
For example, are RDSB and BP are down a similar amount despite the difference in yield, because the loss of value is more due to the perception their future business is compromised?
I was looking more at KGF and WMH, neither paying dividends yet flying high.
I think that the oil sector reflects more on the future prospects of those industries, rather than on their profitability.
TJH
Well in the case of WMH it had to fall to 10% of its previous share price before doubling and "flying high". Looking at KGF the fall was perhaps to a 1/3 of its previous peak, before "flying high" and doubling.
Dividends could have been anywhere over that journey and I doubt they would have mattered (much).
In my opinion dividends, and yield, are poor indicators of past, and future changes in share prices, particularly over short periods of time.
What I find interesting is the lack of correlation between paying dividends and performance.
TJH
Putting dividends to one side, there must be a significant reduction in capital. You seem unconcerned about this...is that because you've seen it all before. Personally, my HYP portfolio performance has been extremely worrying!
tjh290633 wrote:What I find interesting is the lack of correlation between paying dividends and performance.
I don't. In some cases not paying a dividend will make the company stronger and in any case not everyone thinks like a TLF HYPer. Many, I would hazard a guess, investors look beyond the dividend payments to how the total return will look in a year or two and on that basis , the performance or lack of it from Legal & General for instance is rather worrying. I do not find it interesting but worrying because all looks serene enough and yet the market clearly does not have much confidence in this company.
monabri wrote:Putting dividends to one side, there must be a significant reduction in capital. You seem unconcerned about this...is that because you've seen it all before. Personally, my HYP portfolio performance has been extremely worrying!
If you are drawing income and have no concern about what you leave to anyone who will benefit from your estate I can see why you would not worry about capital. But for those of us that either, are still building a pot to provide an income in the future, or, have an interest in what we leave to those who will inherit from us, capital cannot be ignored. HYP may work for those in the former position, but I think it inappropriate for anyone in either of the other situations. In terms of capital HYP has been a disaster for me and as I will always care about what I leave my kids I can't see it ever being something I would use as a strategy again. It is very much a niche approach IMHO.
Wizard wrote:If you are drawing income and have no concern about what you leave to anyone who will benefit from your estate I can see why you would not worry about capital. But for those of us that either, are still building a pot to provide an income in the future, or, have an interest in what we leave to those who will inherit from us, capital cannot be ignored. HYP may work for those in the former position, but I think it inappropriate for anyone in either of the other situations. In terms of capital HYP has been a disaster for me and as I will always care about what I leave my kids I can't see it ever being something I would use as a strategy again. It is very much a niche approach IMHO.
I am not sure that that is right. I live off the income from my investments and am currently expecting to be down about 15% in my income this year. That does not bother me but I am down about the same or a bit more from 1 January to date (and more like 20% from the peak in February) in terms of capital. That bothers me not because of the reduction in how much I am leaving my heirs, but because it is from that capital that I gain my income. The other way to look at this is that these high yields are high for a reason or at least that is the way it usually works. The reason is of course because the market perceives a risk to the current dividend or that the share is likely to be going nowhere. Anyway, this is not a HYP Board, thankfully, but I simply think that capital does matter and is fundamentally the point of investing. HYP has it the wrong way round, or at least halfway towards that. Total return is what really matters to me and an all out growth strategy is better than an all out income strategy such as HYP aspires to be.
tjh290633 wrote:
What I find interesting is the lack of correlation between paying dividends and performance.
TJH
Putting dividends to one side, there must be a significant reduction in capital. You seem unconcerned about this...is that because you've seen it all before. Personally, my HYP portfolio performance has been extremely worrying!
Indeed I have seen it all before, several times. The market will recover, but there may be casualties along the way.
Wizard wrote:If you are drawing income and have no concern about what you leave to anyone who will benefit from your estate I can see why you would not worry about capital. But for those of us that either, are still building a pot to provide an income in the future, or, have an interest in what we leave to those who will inherit from us, capital cannot be ignored. HYP may work for those in the former position, but I think it inappropriate for anyone in either of the other situations. In terms of capital HYP has been a disaster for me and as I will always care about what I leave my kids I can't see it ever being something I would use as a strategy again. It is very much a niche approach IMHO.
I am not sure that that is right. I live off the income from my investments and am currently expecting to be down about 15% in my income this year. That does not bother me but I am down about the same or a bit more from 1 January to date (and more like 20% from the peak in February) in terms of capital. That bothers me not because of the reduction in how much I am leaving my heirs, but because it is from that capital that I gain my income. The other way to look at this is that these high yields are high for a reason or at least that is the way it usually works. The reason is of course because the market perceives a risk to the current dividend or that the share is likely to be going nowhere. Anyway, this is not a HYP Board, thankfully, but I simply think that capital does matter and is fundamentally the point of investing. HYP has it the wrong way round, or at least halfway towards that. Total return is what really matters to me and an all out growth strategy is better than an all out income strategy such as HYP aspires to be.
Dod
You're right, I was being too generous in trying to find a scenario where capital is not important. Any strategy that consigns capital to nothing but a footnote that says it may tag along for the ride with income is questionable.
ReallyVeryFoolish wrote:You cannot generate income when your capital has gone. Simple.
The moral hazard with Companies with high levels of distribution is that accounting rules don't prevent a Company distributing itself out of existence. It follows then that a higher quoted running yield should be treated with caution, as it may have a high capital content. What looks like yield is just the original stake money being returned. Whilst some investors might find an 8% running yield which contained an implicit return of capital attractive, it doesn't make the share superior to one with a 4% return for investors with no need of capital return.
tjh290633 wrote:
Indeed I have seen it all before, several times. The market will recover, but there may be casualties along the way.
TJH
And I am feeling very nervous about the coming casualties. I go back as far as 1974. I fear the very significant capital appreciation and income that followed 1974 for the following quarter century isn't going to happen the way it did then. Why? I am more convinced than ever that the UK economy with it's severe shortage of primary wealth generation (making expensive stuff that people want to buy out of cheap basic commodities) and lack of 21st century new economy facing corporations means the UK is now a sunset economy in terminal, managed decline.
RVF
It has been mentioned here and elsewhere that one of the issues in the banking industry / financial markets is that each new generation of traders follow the mantra that “...this time it is different...” and then go on to repeat the mistakes of the past. But is it not equally dangerous to sit there saying that “...this time it is no different...” and just assuming events may repeat themselves? Nobody can be sure of the future.
I agree with the negative assessment of the UK, currently IMHO things don’t look great. Any investor that, for no particularly good reason, limits themselves to the pool of UK listed companies is IMHO taking a very big gamble.
ReallyVeryFoolish wrote: It seemed sensible to move about half my growth/TR portfolio into typical UK income stocks ahead of retirement.
Why? (Genuine non provocative question)
Was it just an easier way to receive a higher running income or some other motive? I might be the outlier here but I wouldn't see changing "strategy" as sensible. Wondering what your motivation was, and maybe what others think.
dealtn wrote:
Why? (Genuine non provocative question)
Was it just an easier way to receive a higher running income or some other motive? I might be the outlier here but I wouldn't see changing "strategy" as sensible. Wondering what your motivation was, and maybe what others think.
Basically yes, as you suggested, and without apportioning any blame at all here, pressure from spouse for income generating investments. So about half of a very small selection (mostly three actually) of growth/TR investments was swapped for income generating stocks. You are quite right, it was a stupid thing in hindsight to do. We all have 20:20 hindsight. It's basically lost me around £100k in capital this year. Ouch.
RVF
Thank you (blunt and honest but all the more worthy a response as a result).
