How many shares in a HYP?

[Walrus]

Choose at least 15 shares, all or almost all from the FTSE100.
Ensure their sectors are diversified. *
Invest equal amounts in each share.

That does not say what Gengulphus was asking about i.e. that sectors have to be equal weight, not shares.

I always thought, perhaps wrongly, that the only place where there is public discussion of HYP is TMF/TLF. Anyone know differently?

Whatever made you think that? My family, workmates, fellow pub-goers: we all discuss it frequently

That might just be the funniest thing I have ever read here. So HYP gets discussed in your local as much as football and politics?

It's probably a Greene king

[IanTHughes]

Choose at least 15 shares, all or almost all from the FTSE100.
Ensure their sectors are diversified. *
Invest equal amounts in each share.

That does not say what Gengulphus was asking about i.e. that sectors have to be equal weight, not shares.

So now you are suggesting that pyad's recommending "Equal Weighting by cost" for each holding as well as "Ensure their [the holdings] sectors are diversified" does not mean investing equal amounts into Sectors! Priceless

I always thought, perhaps wrongly, that the only place where there is public discussion of HYP is TMF/TLF. Anyone know differently?

Whatever made you think that? My family, workmates, fellow pub-goers: we all discuss it frequently

That might just be the funniest thing I have ever read here.

Well thank you, I do try to reciprocate and it is good to know that it is appreciated


Ian

[88V8]

Luni constructed his HYPs with a share from each of whichever sectors made his cut at the time.
And if any of us were creating a one-shot HYP we would choose multiple sectors rather than doubling up, unless we were seeking a large number of holdings.
So the principle of giving priority to sector diversity has always been there, I believe, but implicit rather than stated.

V8

[Lootman]

Choose at least 15 shares, all or almost all from the FTSE100.
Ensure their sectors are diversified. *
Invest equal amounts in each share.

That does not say what Gengulphus was asking about i.e. that sectors have to be equal weight, not shares.

So now you are suggesting that pyad's recommending "Equal Weighting by cost" for each holding as well as "Ensure their [the holdings] sectors are diversified" does not mean investing equal amounts into Sectors!

Correct - your citation specifically said "equal weighting by share" and the point Gengulphus was making is that somewhere along the way that changed to "equal weighting by sector". You understand the difference, right?

Whatever made you think that? My family, workmates, fellow pub-goers: we all discuss it frequently

That might just be the funniest thing I have ever read here.

Well thank you . . it is good to know that it is appreciated.

Oh it is. I'd love to stop by this pub where the long winter nights fly by as the regulars regale each other with all-night debates about tinkering and strategic ignorance. What is its name and postcode? Because in all the thousands of pubs and bars I have been to over the last 50 or so years, I can safely say that I have never heard HYP discussed a single time.

But even if that bizzare bar exists outside of your imagination it still does not address the question I posed - what is the URL for a site that discusses HYP other than here?

[fisher]

what is the URL for a site that discusses HYP other than here?

There used to be a private members HYP board that ran for many years as part of the dividend letter. I presume it closed when the dividend letter did.

[Gengulphus]

Then why not simply prefer the higher yielder? Surely picking an additional lower yielding share in the same sector is automatically suggesting you know something about its long term future, or a lack of confidence in your selection criteria?

The principal reason for multiple choice sectors is to reduce company-specific risk. I never said to pick a lower yielder. In fact my advice is that it is only really desirable where the yields are very close so that there is little or no yield sacrifice by holding both shares compared with the higher yielder alone. For example the forecast yields for the common multiple oil choice of BP. and RDSB are 5.73% and 5.83%. Clearly there is no significant income sacrifice by holding both rather than RDSB alone.

If there is an appreciable yield disparity, then the HYPer has to decide whether the degree of yield sacrifice is a sufficient trade-off for gaining the reduced company-specific risk but this situation is less desirable than the above.

Also, it's not always yield sacrifice, since adding the extra share is not always done as part of a single lump sum investment. As a somewhat extreme example, someone whose existing HYP before 2010 contained BP and who received an additional lump sum to invest in the summer of 2010 would have found that both the yield disparity and the reduced company-specific risk strongly favoured RDSB!

Gengulphus

[Gengulphus]

To set the record straight:

what pyad said earlier in the thread about having been doing it that way for some years suggests that it was around longer ago than that.

Here is what he actually said:

utilising equal sectors was all done by me very long ago, about ten years but on my own site, so I was a little surprised by the reaction here which regarded this as new. I'd overlooked the fact that I hadn't written about it here before so for TMF/TLF readers who were unaware of how I constructed HYPs on my site it was indeed new. But it's only a minor shift and a logical one where HYPers hold sectors containing more than one share.

As a matter of fact, the quotes I actually had in mind when I wrote that were both on the first page of this thread:

For a long time now Ian I have been defining diversification in an HYP by the number of sectors rather than by the number of individual shares in order to avoid the confusion sometimes created when people refer to the number of shares without explaining whether or not they are all in different industries.

That, I think, makes it much clearer so I'd refer now to a minimum of 15 sectors rather than 15 shares, in order to cover multi-holding sectors. All the HYPs I've constructed for some years now have had more shares than sectors due to some of the latter having more than one holding.

I'm not suggesting that you or anyone else should have been mindreaders - the pyad quote you give pre-dates my comment, so it was certainly earlier in the thread and I certainly could have seen it before making my comment. But actually, I hadn't, due (I think) to a combination of starting from a copy of the thread that had been loaded quite a long time earlier and the fact that while the phpBB discussion board software tries to warn one about new replies possibly making one reconsider a proposed reply, that warning happens on the first preview or submission one makes after the new replies, and can be very easily overlooked when it happens on a preview (the only visual hint on my system that it's happened is that the vertical scroll bar shows that I'm further down the page than I would normally be). The main point of that is just to say that had I been aware at the time that pyad had said that what he'd written before was on his own site, I would probably have worded my comment somewhat differently, or even not made it at all - I'm doubtful now that it really added anything to the discussion!

Also, from a later post:

Choose at least 15 shares, all or almost all from the FTSE100.
Ensure their sectors are diversified. *
Invest equal amounts in each share.

That does not say what Gengulphus was asking about i.e. that sectors have to be equal weight, not shares.

That isn't quite what I asked about - my questions (on page 2 of this thread) were to clarify what pyad's advice was on that issue, and it was answered authoritatively by the only person able to do so in the very next post. It wasn't about that issue itself - I don't have any questions about that, and have been quite clear in many other threads about my stance on the issue itself for a long time now. It's that what matters for diversification is excessively big shareholdings and sector holdings (*) and they're probably best addressed by some sort of limits on the size on a shareholding and the size of a sector holding. There are quite a lot of options within that general approach - whether one measures holding size by capital value or income, how far one places the limits above the average (or median - it seldom makes much difference once one's HYP contains a good number of holdings), whether one makes the limits 'soft' ones that merely prevent topping-up if exceeded or 'hard' ones that force sales if exceeded (or indeed has both, with the 'hard' limit somewhat above the 'soft' limit), etc. Which to choose is a good question, but I don't have any strong opinions on that beyond that the best choice almost certainly depends on the HYPer's objectives, circumstances and preferences (certainly the ones I've chosen for my main HYP and GDHYP differ in a number of respects, due to my objectives and assumed circumstances for GDHYP differing from my objectives and actual circumstances for my main HYP).

Anyway, the point of my question was to establish exactly what pyad's position was on the issue. Having done that and established that it's equally-weighted sectors plus (where relevant) equal weighting of each shareholding within its sector, at least initially for lump-sum-all-at-once HYP construction, I didn't (and still don't) wish to argue with it. That doesn't mean I agree with it - just that IMHO, any sensible set of rules one sets oneself for a HYP will allow a considerable amount of 'slack' around the weightings it regards as ideal and only take corrective action if the portfolio deviates from it or as a side-effect of actions performed mainly for other reasons - for example, TJH's top-up ranking system, which I'm fairly certain is also HYPTUSS's, is mainly there to help one decide what share to top-up, but because low capital value pushes a share towards the more favoured end of the rankings, it has a tendency to equalise capital weightings (only a tendency, i.e. not saying it does so every time!). I'm pretty certain that pyad's position on the issue would not match my ideal weightings for lump-sum-all-at-once HYP construction, but that it would lie within their 'slack' - so I wouldn't feel any need to take corrective action about diversification if pyad were to hand over a just-constructed HYP bought using his position to me. It seems a bit silly to argue against portfolio weightings I myself would tolerate, and so I have no wish to do so!

I do agree that IanTHughes seems to have somehow overlooked the directly-relevant "Invest equal amounts in each share" part of his quote from something pyad wrote while seeing the might-have-been-relevant-by-implication "Ensure their sectors are diversified." part, and given its date in 2013, it indicates that pyad hasn't been giving consistent advice about that point for as long as he seems to think he has (though having said that, the inconsistent advice could just be the inadvertent result of somewhat careless cut-and-pasting from something he'd written much earlier). But that post of IanTHughes's quoting pyad doesn't quote anyone else, so while it might have been intended as an answer to my questions, if so it was so off-target I didn't recognise it as such! And I suspect it is far more likely to have been intended as a response to pyad, or to you, or just an extra data point relevant to points expressed on the thread - which it is, though not in the way he appears to have thought it was!

(*) Excessively small holdings can be a problem, but it's a potential admin problem rather than a diversification problem. I.e. it's to do with the fact that e.g. a holding that is only providing 0.1% of the HYP's total income produces on average just as much admin work as one which is producing 5% of that income, so time spent on admin is on average 50 times less cost-effectively spent for the former than the latter. It doesn't present a high risk to the portfolio's total income - quite the contrary! And if one does find an excessively small holding to be an admin problem, the solution IMHO is either to top it up reasonably soon (to make it only a short-duration problem) or to tinker it away, which depending on its HYP credentials. (If one uses it, TJH's top-up ranking scheme, which AFAIAA is also HYPTUSS's or very close to it, should place it pretty high in the queue for topping up if its HYP credentials are good.)

Gengulphus