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How many shares in a HYP?

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tjh290633
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Re: How many shares in a HYP?

#218690

Postby tjh290633 » May 1st, 2019, 11:58 am

Stephen, in your original HYP market forces were allowed full play, which led to severe imbalance, compounded by the reinvestment of the proceeds of two takeovers into a single share each time, using the entire proceeds from the takeover. This was surely a fundamental mistake. It should have been reinvested into two or more shares at the then average value of the remaining shares.
pyad wrote:
Arborbridge wrote:
Thanks for the clarification, I hadn't noticed that point. It does beg the same question as with capital weightings of individual shares: if balance is important at the beginning why isn't it important to maintain that balance? Or if the balance can be allowed to wander over time, why is it important in the beginning? The portfolio does not "know" what time it is: year 1 or year 10.

Arb.


The only logical construction approach at the start is equal sectors because the HYPer has no idea which sectors will develop over eternity to produce the better or worse income streams. So no sector should be preferred.

After that as you probably know, my advice is to permit what I've termed "Market Trading" to operate. This means no tinkering and instead allowing the market to do what it will with the portfolio by way of price fluctuations and corporate events such as bids, demergers etc. My view is that MT will serve an HYP much better over the long term than most HYPers will achieve by tinkering.

Most HYPers have no skill, none, and more likely negative skill by which I mean that by tinkering, they will actually harm their portfolios rather than enhance them. The problem is, as with a lot small investor approaches and not just HYPers, accepting their ignorance. Quite hard to do for many people. It's like saying you're a bad driver or lousy at sex. A lot of people, but overwhelmingly men in my lengthy experience with private investors, feel they have something to prove and have great difficulty in doing nothing even though that's nearly always the best course in time.

Women in the main don't suffer from this mentality and will frequently prove far better HYPers than blokes, simply because they are far more able to do nothing.

So my advice to most of the men round here is either learn to control your feelings that you have to do something and that something good will flow from that, when mostly it won't, or cut your balls off. A marginally radical approach perhaps but it'll do your HYP a world of good.

This is all first principles HYP 101 stuff which I'm sure I've said before Arb and you've been around a long time but perhaps it was on my own site rather than TMF/TLF.

Sorry, my comments are above. I was interrupted in mid composition by a phone call, and then led astray.

TJH

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Re: How many shares in a HYP?

#218695

Postby Alaric » May 1st, 2019, 12:07 pm

tjh290633 wrote: market forces were allowed full play, which led to severe imbalance


If periodically a new freshly selected model HYP is published, why not just switch from the old one to the new one? CGT might be a constraint unless held in an ISA or SIPP, as would dealing costs.

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Re: How many shares in a HYP?

#218696

Postby Arborbridge » May 1st, 2019, 12:08 pm

Dod101 wrote:
Arborbridge wrote:If one sector became overwhelming large I'd be just as worried as the owner of a HYP might be if one share was seen to be providing an enormous percentage of his/her income. That's a gratuitous acceptance of risk when it could be moderated.


And that gratuitous acceptance of risk is just what pyad advocates. It is illustrated every time he publishes the results of his model HYP.

Dod


That's the point, isn't it? He does not think we (we= amateur investors) can improve the risk by our own actions, for in his experience most people - men in particular - will make matters worse, not better. As Luni put it, we do sometimes feel we have to do something just for the sake of appearing to do something.
Luni and Pyad do have a valid point here, and the mention of female investors has been made before. Interestingly, my Wife's HYP is progressing better than mine. I am her HYP manager, but the truth is that I am more active in altering my own HYP than I am hers - so could this be telling me something?

Anyhow, that's Pyad's theory: that you will not improve the risk by jumping from here to there. It is a perfectly valid point of view and has a great deal of merit for the ordinary investor: you either accept it or you don't. You can either join him in masterly inaction, or go your own way and think you can second guess the market - or reverse out when you decide you've made a mistake and back a new love, only to find that was a mistake too :(

Or like me you can have the best of intentions towards masterly inaction and then fail.

Arb.

tjh290633
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Re: How many shares in a HYP?

#218754

Postby tjh290633 » May 1st, 2019, 4:08 pm

Alaric wrote:
tjh290633 wrote: market forces were allowed full play, which led to severe imbalance


If periodically a new freshly selected model HYP is published, why not just switch from the old one to the new one? CGT might be a constraint unless held in an ISA or SIPP, as would dealing costs.

If we were to do that, we would be perpetually chopping and changing our portfolios, which negates the LTBH principle.

A new model is only relevant to someone buying a new HYP from scratch in one fell swoop. Things are continually changing in the market. Provided that dividends continue to be paid, and increase at an acceptable rate, there is little or no need to make wholesale changes.

TJH

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Re: How many shares in a HYP?

#218768

Postby Lootman » May 1st, 2019, 5:20 pm

Arborbridge wrote:
Dod101 wrote:
Arborbridge wrote:If one sector became overwhelming large I'd be just as worried as the owner of a HYP might be if one share was seen to be providing an enormous percentage of his/her income. That's a gratuitous acceptance of risk when it could be moderated.

And that gratuitous acceptance of risk is just what pyad advocates. It is illustrated every time he publishes the results of his model HYP.

That's the point, isn't it? He does not think we (we= amateur investors) can improve the risk by our own actions, for in his experience most people - men in particular - will make matters worse, not better.

Bear in mind that pyad is also an amateur investor. His bio says that his career was doing tax returns. Perhaps that is why he follows the "efficient market" advice in his approach to tinkering and selling. The odd part, of course, is that he believes that we are all not smart enough to know what and when to sell, but we are all smart enough to know what and when to buy.

Not that professional investors necessarily do any better. I should know since I worked with them for 14 years. But where the pro's have it right, and TJH, Dod and others as well, is that mindlessly ignoring a portfolio for decades leads to a HYP1 type situation where 80% of the income derives from just 6 shares, and the exposure to a single sector can be enormous - the exact opposite of the "equal weight" idea.

Each of the HYP principles taken on its own are reasonable. But sometimes taken together they are inconsistent or even dangerous.

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Re: How many shares in a HYP?

#218773

Postby PinkDalek » May 1st, 2019, 5:45 pm

Lootman wrote:His bio says that his career was doing tax returns.


That's interesting, where's the bio of which you speak?

All I know is that he qualified as a Chartered Accountant, ran his own practice and More recently ... qualified as a Member of the Chartered Institute for Securities & Investment. https://www.stockopedia.com/contributors/stephen-bland/.

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Re: How many shares in a HYP?

#218775

Postby Lootman » May 1st, 2019, 5:54 pm

PinkDalek wrote:
Lootman wrote:His bio says that his career was doing tax returns.
That's interesting, where's the bio of which you speak?

All I know is that he qualified as a Chartered Accountant, ran his own practice and More recently ... qualified as a Member of the Chartered Institute for Securities & Investment. https://www.stockopedia.com/contributors/stephen-bland/.

The bio I was referring to was this one, which indicates that his main career was as an accountant. I do recall in the early TMF days that he attributed his investment ideas to having seen a lot of tax returns. Anyway this is my source:

https://seekingalpha.com/article/842731 ... -investing

Obviously he dabbled in investments as well, like we all do. And of course wrote here and there. My point was more that (I thought that) Arb was drawing a distinction between Bland (pro) and the rest of us (amateurs). In fact we are all amateurs (as far as I know anyway). I used to work in the field but that was over 18 years ago now so I am not going to play that card either.

Interestingly the article I cited also mentions that the HYP writings are sometimes "inconsistent" although it does not elaborate.

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Re: How many shares in a HYP?

#218776

Postby Itsallaguess » May 1st, 2019, 5:55 pm

Lootman wrote:
But where the pro's have it right, and TJH, Dod and others as well, is that mindlessly ignoring a portfolio for decades leads to a HYP1 type situation where 80% of the income derives from just 6 shares, and the exposure to a single sector can be enormous - the exact opposite of the "equal weight" idea.


80% of HYP1 income from just 6 shares only tells part of the story....

Here's the full aggregated-income table from the last November 2018 HYP1 review thread -



https://www.lemonfool.co.uk/viewtopic.php?f=15&t=14752&start=40#p181069

As you can see, 46% of HYP1 income is derived from just two companies, with 60% coming from just three....

Ironic then, to be told we need our knackers chopping off if we're ever going to make good HYP investors, yet at the very same time it seems the holder of HYP1 needs to have the biggest balls of any of us.....

Cheers,

Itsallaguess

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Re: How many shares in a HYP?

#218818

Postby Lootman » May 1st, 2019, 8:34 pm

Itsallaguess wrote:
Lootman wrote:But where the pro's have it right, and TJH, Dod and others as well, is that mindlessly ignoring a portfolio for decades leads to a HYP1 type situation where 80% of the income derives from just 6 shares, and the exposure to a single sector can be enormous - the exact opposite of the "equal weight" idea.

80% of HYP1 income from just 6 shares only tells part of the story....

46% of HYP1 income is derived from just two companies, with 60% coming from just three....

Ironic then, to be told we need our knackers chopping off if we're ever going to make good HYP investors, yet at the very same time it seems the holder of HYP1 needs to have the biggest balls of any of us.....

Topically perhaps, Terry has just posted the latest numbers for his "HYP that predates HYP":

viewtopic.php?f=56&p=218798#p218798

Terry adopts the opposite of HYP1's non-tinkering policy, so it might be interesting to rebase Terry's performance to the inception date of HYP1 and compare the two. One portfolio systematically rebalances by selling part of its biggest winners. The other soldiers on oblivious to anything bar a mandatory corporate action.

Regardless of the comparative returns, I think that most investors would regard Terry's portfolio as bearing less risk.

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Re: How many shares in a HYP?

#218846

Postby IanTHughes » May 1st, 2019, 11:42 pm

My goodness, for a board supposedly dedicated to the practicalities of running the HYP Strategy, there is an awful lot of unmitigated guff posted by those who apparently do not agree with that Strategy. Extraordinary that such a simple investment strategy, that works well for so many people, should trigger such a continuous diatribe of complete uneducated and ill-conceived nonsense.

Unbelievable!!!


Ian

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Re: How many shares in a HYP?

#218847

Postby Lootman » May 1st, 2019, 11:48 pm

IanTHughes wrote:My goodness, for a board supposedly dedicated to the practicalities of running the HYP Strategy, there is an awful lot of unmitigated guff posted by those who apparently do not agree with that Strategy. Extraordinary that such a simple investment strategy, that works well for so many people, should trigger such a continuous diatribe of complete uneducated and ill-conceived nonsense.

I think the point that TJH, Dod, Arb, Itsallaguess and I are making is that any strategy carries risks and weaknesses. And that it is useful to discuss those risks rather than suppress them. Mindless adherence to any strategy can involve exposing oneself to undue loss unless critically assessed. That is an extremely practical matter for such a practical forum!

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Re: How many shares in a HYP?

#218858

Postby Arborbridge » May 2nd, 2019, 7:19 am

Lootman wrote: The odd part, of course, is that he believes that we are all not smart enough to know what and when to sell, but we are all smart enough to know what and when to buy.



It may be that he thinks we aren't smart enough to know how do either :) The result being HYP, which gives those who know very little, a mechanism to follow to buy a portfolio.

Let's always remember for whom HYP was designed, and it certainly wasn't for the "sophisticated" investor - although I'm equally certain Pyad believes those would benefit too ;)
Anyone who can demonstrate they can improve it is welcome to go their own way, and it would be most interesting to see their results - with properly reported unitised income a capital progress to enable comparison with known HYPs, naturally. I do this is one way, by comparing against my IT and OEIC choices (more of which on another board sometime).

Arb.

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Re: How many shares in a HYP?

#219052

Postby Gengulphus » May 2nd, 2019, 7:56 pm

Arborbridge wrote:Maybe someone can put me right here: isn't this idea of "equal sector weighting" a new take on HYP?

Sort of, I think: this thread is the first time I remember seeing the idea explicitly and clearly stated on TLF, though it was implicit in viewtopic.php?f=15&t=16868 some weeks ago, and 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. But of course, the general idea of paying attention to sector weightings as well as / instead of individual share weightings has been around for many years, and equal weightings of either shares or sectors is only really feasible for lump-sum-invested-over-a-short-period HYPs (which I suspect are a minority of them) at the time of their construction - the best that can be done more generally is 'not-too-unequal' weightings.

Gengulphus

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Re: How many shares in a HYP?

#219053

Postby Lootman » May 2nd, 2019, 8:11 pm

Gengulphus wrote: 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:

pyad wrote: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.

and later:

pyad wrote:my own site rather than TMF/TLF.

So you are correct that he claims to have been doing that for the last decade or so (presumably because of what he learned during the 2007-2009 market colllapse). But he also appears to acknowledge that he never mentioned it on TMF or TLF. Which begs the question how any of us were supposed to know about it, meaning in turn that it is "new" to Fools and Lemons.

I also don't know what he means by his "own site". He did not link to it and a Google search does not reveal it either. So unless he or someone else can show us where that site is, it is near impossible to independently corroborate his claims. I always thought, perhaps wrongly, that the only place where there is public discussion of HYP is TMF/TLF. Anyone know differently? It would be great if there was another parallel universe of public HYP users that we don't know about, so we could compare notes.

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Re: How many shares in a HYP?

#219064

Postby PinkDalek » May 2nd, 2019, 8:53 pm

Lootman wrote:I also don't know what he means by his "own site".


Maybe the Dividend Letter which was commenced in March 2008 or thereabouts and quite possibly was subscription only.

Why not reply to his post and ask him?
Last edited by PinkDalek on May 2nd, 2019, 9:00 pm, edited 1 time in total.

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Re: How many shares in a HYP?

#219065

Postby Lootman » May 2nd, 2019, 8:57 pm

PinkDalek wrote:
Lootman wrote:I also don't know what he means by his "own site".

Maybe the Dividend Letter which was commenced in March 2008 or thereabouts and quite possibly was subscription only.

Good point, although then that isn't public or discoverable. And of course it ceased operation some weeks or months ago.

Perhaps there is a Lemon who subscribed to it who can enlighten us as to this parallel discussion forum?

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Re: How many shares in a HYP?

#219068

Postby PinkDalek » May 2nd, 2019, 9:02 pm

I didn't say it was discussion forum.

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Re: How many shares in a HYP?

#219070

Postby Alaric » May 2nd, 2019, 9:07 pm

Gengulphus wrote: But of course, the general idea of paying attention to sector weightings as well as / instead of individual share weightings has been around for many years, and equal weightings of either shares or sectors is only really feasible for lump-sum-invested-over-a-short-period HYPs (which I suspect are a minority of them) at the time of their construction - the best that can be done more generally is 'not-too-unequal' weightings.


If someone was investing a large sum over a short period of time, that's likely in practice to have arisen from a pension commencement lump sum, an inheritance or perhaps a redundancy pay off. How would the plausible alternative of dumping the entire windfall in Income FTSE 100 ETFs have worked out? General reasoning says the dividend income would be lower, but would the improved capital performance compensate? Sector and stock risk is then the market average. The "active" alternative would be a small basket of generalist ITs. Some commentators do have this as a comparative benchmark.

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Re: How many shares in a HYP?

#219075

Postby IanTHughes » May 2nd, 2019, 9:17 pm

Lootman wrote:
Gengulphus wrote: 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:
pyad wrote: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.

and later:
pyad wrote:my own site rather than TMF/TLF.

So you are correct that he claims to have been doing that for the last decade or so (presumably because of what he learned during the 2007-2009 market colllapse). But he also appears to acknowledge that he never mentioned it on TMF or TLF. Which begs the question how any of us were supposed to know about it, meaning in turn that it is "new" to Fools and Lemons.

It was most decidedly not new to me. The article referenced in this post was dated 21 October 2013:

viewtopic.php?f=15&t=17414&p=218486#p218486

Here is the essential rule structure:

Choose at least 15 shares, all or almost all from the FTSE100.
Ensure their sectors are diversified. *
Invest equal amounts in each share.
Pick shares yielding above the index at the time.
Do a little research on each prior to selection to try and ensure that dividends can be maintained for the immediate future.
Never sell and ignore share price fluctuations.
Strategic ignorance.

It is said that rules are made to be broken and that is true to some extent here except in one case – diversification. That is utterly fundamental to the HYP approach and must never be compromised. The reason for this is to lower risk. It’s clear that having a wide range of industries will limit the effect on the portfolio of problems in any one of them. What I’m trying to do here is protect the portfolio income because that is its reason for existence.
* - my bold

Please don't assume that your ignorance of events is shared by others.

Lootman wrote: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 and, as far as I know, I am the only one who has ever read TMF/TLF. Also, for many years pyad published it in a publication called I believe The Dividend Letter. Are you seriously suggesting that that was a part of either TMF of TLF?

I can't imagine what point you are trying to make, but it is hardly helped by your assuming or even making up evidence to support whatever that point is.


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Re: How many shares in a HYP?

#219091

Postby Lootman » May 2nd, 2019, 10:10 pm

IanTHughes wrote: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.

IanTHughes wrote:
Lootman wrote: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?


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