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Vodafone topped up

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Tight HYP discussions only please - OT please discuss in strategies
Gengulphus
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Re: Vodafone topped up

#233089

Postby Gengulphus » July 1st, 2019, 10:27 am

Dod101 wrote:There is nothing to say that the HYP candidates need to be UK oriented ...

Well, I'm not certain exactly what you mean by "UK oriented", but there is this board's guidance, which says "For the HYP Practical board we define an HYP as a portfolio comprised exclusively of ordinary shares. If selected, such shares should have a dividend yield above the average for the FTSE100 index and be drawn from the constituents of the FTSE 350 index.". The FTSE 350 index's constituents are required to be shares listed on the London Stock Exchange, which is a UK-resident stockmarket. So at least in that sense of "UK oriented", you're factually wrong: there is something that says HYP candidates need to be "UK oriented"

Dod101 wrote:... or if there is that is a silly rule which needs to be removed.

For what it's worth, I agree that it's rather silly as a general rule about how HYPs should be run. For individual HYPers, though, a "UK only" rule can make sense as a personal rule: it reduces the task of running the HYP in practice in various ways - as some examples (probably not all that there are), personal taxation tends to be simpler if one doesn't have to take foreign taxation systems into account; watching out for company results tends to be simpler if one only has to watch UK regulatory news (*); and company-report-writing requirements and conventions differ between countries, so there's more learning to be done about how to find one's way around an annual report if one has to deal with reports written for shares listed in different countries.

HYPers will differ quite a bit about how important they regard those admin simplifications as being - e.g. on taxation, at one extreme having US shares in their HYP won't make any significant practical difference to someone whose non-HYP investments include US shares anyway, while at the other extreme having foreign shares in their HYP can make the difference between having to submit tax returns and not having to do so. Inbetween, there are positions such as having to submit tax returns anyway, but the tax returns having to give more detail if one has foreign income. And HYPers' opinions about how the returns from their HYPs might be affected by allowing foreign shares as well as UK shares - in theory, allowing more shares to be selected can only increase the possible risk-adjusted returns or leave them unchanged, not decrease them, but in practice there is the question of how much they're increased by and the risk that information overload from the larger selection causes the HYPer to fall further short of the theoretically best portfolio choices than they would have done otherwise. The net result is that both the costs and the perceived benefits of allowing foreign shares in one's HYP will vary greatly between HYPers, so whether an individual HYPer's cost-benefit analysis comes out in favour of or against allowing them is a personal decision that no-one else can make for them - no matter how obvious that someone else considers the decision to be!

For me personally, that analysis led me to conclude that I want a "UK only" rule for my HYP, and so I have one (**). I am however under no illusions that it is a personal rule and there will be plenty of HYPers who make the opposite decision for equally valid personal reasons. So it isn't IMHO very suitable as a general rule for this board from the point of view of trying to be as inclusive of HYPers as reasonably possible. And since I doubt that allowing foreign shares to be discussed would lead to this board being swamped with such discussions (***), I think it is reasonably possible in principle to remove it, or to be precise remove its "UK only" aspect (it does have other aspects as well, most obviously that it rules smallcaps out). So I would be in favour of removing the rule and replacing it with one without the "UK only" aspect - but it's a would-be-nice-if change for me, not something that needs to be done.

Last but not least, I've no idea whether the opinion you state that such rules need to be removed is an exact statement of how you feel, pure hyperbole or something inbetween, but some advice to anyone who really does feel that such a change needs to be made: you'll get nowhere by expressing such opinions here. Such a change can only happen if the site's owners/admins and moderators decide it's a good idea, and if it does happen it will change the scope of this board. That means that what they've said in viewtopic.php?f=21&t=13514 applies, especially "for the avoidance of doubt, no scope discussion is permitted on HYP-Practical. That may only be discussed on the Biscuit Bar". So you need to post such suggestions to the Biscuit Bar, not here, and you'll need to think about their concerns, e.g. about ease of moderation.

(*) Which in practice generally means only RNS - there are other UK regulatory news services companies are allowed to use instead, but very few HYP companies do.

(**) The rule I use usually agrees with this board's "FTSE 350 only" rule, but is not the same as it, and it does differ on the occasional share. It's basically "must be traded on the London Stock Exchange and must not involve me in foreign taxation". The most obvious case where it differs is Royal Dutch Shell's RDSA shares, which are in the FTSE 350 and traded on the London Stock Exchange, but their dividends are subject to Dutch taxation.

(***) I base that doubt on the facts that the TMF HYP Practical guidance did not contain a "UK only" rule and that while foreign shares were discussed on it from time to time, they didn't IMHO ever even come close to swamping it.

Gengulphus

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Re: Vodafone topped up

#233090

Postby IanTHughes » July 1st, 2019, 10:28 am

88V8 wrote:It would never occur to me to buy a share yielding less than the average, which currently is... ahhh, Alaric beat me to it.

Nor would I buy a low yielder just to tick a sector box. Yes, that is what Luni dubbed Sectoral Philately.

Now, I might tolerate an existing constituent drifting down in yield - although I recall selling MKS when it did - and Unilever often crops up as an example of a held share with a miserable yield, but for me and I think most who have frequented this board here and on TMF, as a starting point all shares must be High Yield.
At my age - late 60s - why on earth would I buy a low yielder when I can and do buy Fixed Interest at nigh on 6%. I don't give a fig about TR, it's the income, the income.

Nor do I accept the argument that it is the portfolio as a whole which must be high yield and therefore it can include some low yielders, for me that is a copout. So, another variation in the broadish and disputacious church of the HYP theme.

But indeed this is all drifting away from HYP Practical and certainly away from Vodafone which in a moment of inattention I bought last year but will not be topping up.

So there is someone posting on here that understands the HYP Strategy! Just when I was beginning to think that I was all alone :D


Ian

Gengulphus
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Re: Vodafone topped up

#233100

Postby Gengulphus » July 1st, 2019, 10:54 am

IanTHughes wrote:I was not commenting on the guidelines for this board but rather the HYP Strategy.

You were commenting in a post to this board and therefore in the context of those guidelines. So any comment you make about HYP and HYP strategies here is implicitly about HYP strategies as defined by the guidelines, unless you make it clear to readers that you're talking about something more specific or different.

I'd guess that your use of "the HYP Strategy" (with that exact capitalisation) is meant to pin what you're talking about down to a very specific strategy, most likely the HYP strategy pyad described in his original articles. You're doing this after the fact - the question you asked was "I ask again, what has the FTSE Average yield got to do with HYP?" and not "I ask again, what has the FTSE Average yield got to do with the HYP Strategy?". And in any case, if you really do mean to pin the strategy down in that way, you really ought to make it clear by using a phrase that does so without requiring readers to guess what you mean. E.g. if my guess is correct, "pyad's original HYP strategy" would have done the job.

Gengulphus

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Re: Vodafone topped up

#233134

Postby Bouleversee » July 1st, 2019, 1:02 pm

88V8 wrote:It would never occur to me to buy a share yielding less than the average, which currently is... ahhh, Alaric beat me to it.

Nor would I buy a low yielder just to tick a sector box. Yes, that is what Luni dubbed Sectoral Philately.

Now, I might tolerate an existing constituent drifting down in yield - although I recall selling MKS when it did - and Unilever often crops up as an example of a held share with a miserable yield, but for me and I think most who have frequented this board here and on TMF, as a starting point all shares must be High Yield.
At my age - late 60s - why on earth would I buy a low yielder when I can and do buy Fixed Interest at nigh on 6%. I don't give a fig about TR, it's the income, the income.

Nor do I accept the argument that it is the portfolio as a whole which must be high yield and therefore it can include some low yielders, for me that is a copout. So, another variation in the broadish and disputacious church of the HYP theme.

But indeed this is all drifting away from HYP Practical and certainly away from Vodafone which in a moment of inattention I bought last year but will not be topping up.

V8


There are lots of shares I failed to buy through inattention but I haven't yet got to the stage of making a purchase in a moment of inattention. The imagination boggles.

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Re: Vodafone topped up

#233226

Postby Luniversal » July 1st, 2019, 6:46 pm


It would be interesting to test whether or not the pool of HYP shares has become smaller. I don't have time to look into it at present, but I suspect there is probably still plenty of choice around.

A further point is that retreating to ITs solves nothing, since they are fishing in the same pond (or pool). If our income choices have reduced, so have theirs.


Arb.


Not so sure about 'plenty of choice' these days. I stopped doing continuous checks at the end of 2016, but my impression is that in the absence of any general market drought-- the Dividend Monitor reports continued rises in aggregate UK equity payouts-- rather a lot of individual HYPables have erred, compared with the quinquennium between the end of the global crisis and my packing it in.

Companies with long histories of reliable income are valued appropriately by an efficient market. In a QE era gasping for income, few of any size offer yields compatible with High Yield Portfolio specs. But there is no countervailing consolation that these sturdy payers ever more shall be so.

For illustration, here is a 'dividend aristocrats' HYP which I posted on TMF in Nov. 2015. It is made up of 15 shares whose divis had each grown by 10% pa or more compound (i.e. c. 7% real) ever since 2000. None had ever reduced income in nominal amount between financial years. They were well prized by punters, but were yielding enough for a portfolio average yield of 3.3%: one-tenth below the All-Share.

The idea was to play fast catch-up: the average payout growth was 14.9% pa (which already sounds nostalgic when Imps is regarded as remarkable for committing to 10%). An eternity investor ought to bear the first few years' subpar payout for the sake of the juiciness to come.

SSE (SSE)
Vodafone (VOD)
RPS (RPS)
British American Tobacco (BATS)
Cobham (COB)
MITIE (MTO)
Diageo (DGE)
Spectris (SXS)
WPP (WPP)
Capita (CPI)
Babcock International (BAB)
James Halstead (JHD)
RPC (RPC)
Sage (SGE)
Victrex (VCT)

I wrote then: "Nobody can say whether or when any income portfolio would begin to act up. But if these did, the holder would be entitled to grumble loudly."

Well, grumble away... because less than four years later, half this lot are in the doldrums or worse.

Vodafone and Mitie are cutters, Capita and Cobham are off the list and SSE's payout looks threatened for all those protestations of eternal fidelity and priority for income. Growth has declined to a trickle at BATS and RPS. WPP is on a freeze, maybe with worse to follow. Others are doing okay, but none is exactly bounding away to cover for the defaulters.

London's aristocrats seem to be decaying quite suddenly. And I cannot see why the non-aristocrats would behave differently.

Equity Income investment trusts can and do churn to get rid of duds. HYP-ers may do likewise, but are in principle (however you interpret the criteria) less active than fund managers. We do not draw upon IT's bag of tricks, such as gearing and option-writing. A HYP-er is not titivating the portfolio to achieve a pre-set payout target like a 'dividend hero' IT fund manager.

In short, while one may use a trust's yield as a rough comparator with a HYP's, it is wrong to assume that the former gets there by the same straightforward route, or that there is much to be gleaned from the pros beside their choice of stocks.

Moreover, increasingly 'UK' income trusts are fishing not only Lake Footsie and Major Midcaps Mere but rivulets (smidcaps) and mighty foreign estuaries, which HYP anglers do not frequent.

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Re: Vodafone topped up

#233246

Postby idpickering » July 1st, 2019, 8:18 pm

Excellent post Luniversal. Great to get your ever welcome input.

Ian.

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Re: Vodafone topped up

#233343

Postby MDW1954 » July 2nd, 2019, 11:13 am

idpickering wrote:Excellent post Luniversal. Great to get your ever welcome input.

Ian.


Ditto, Luni. And duly recc'd. My own picks are increasingly FTSE 250, not FTSE 100. Or where they are FTSE 100, the lower reaches.

That said, I have (in real life) recently encouraged newbie HYPers to look at (say) HSBC, RDSB et al. Growth may be moribund, but sustainability is good.

MDW1954

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Re: Vodafone topped up

#233345

Postby Dod101 » July 2nd, 2019, 11:15 am

Most interesting Luniversal. It certainly confirms my feelings on the matter. What stood out for me was 'the average pay out growth was 14.9% pa'. If only. We are not being greedy these days. Most of us are only seeking growth of at least the cost of living increase (however we measure that) and to be spared cuts. I held most of these shares at one time or another but mostly sold as dividend cuts loomed.

So I guess the pool really is getting smaller.

Dod

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Re: Vodafone topped up

#233366

Postby Dod101 » July 2nd, 2019, 12:10 pm

Sorry I was in a bit of a rush and did not check Luni's list too carefully. I only ever held SSE, Vodafone, BAT and Cobham. I still hold BAT and of course it has not cut its dividend. I sold SSE and Vodafone, the former partly on political grounds, and its finances, as much as on the promised dividend cut. I sold |Vodafone in anticipation of the cut. I was caught by Cobham.

A number of the others I would never have contemplated holding.

However, Luni's point is still valid and there seems not much doubt that the universe of good yielding shares has significantly dropped.

Dod

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Re: Vodafone topped up

#233379

Postby idpickering » July 2nd, 2019, 12:55 pm

Dod101 wrote:
So I guess the pool really is getting smaller.

Dod


I agree with that Dod, and I believe it to be so. I hold Vodafone and have mulled dumping it for something else, but I’m struggling to find an alternative that I haven’t already got on board.

Ian.

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Re: Vodafone topped up

#233450

Postby monabri » July 2nd, 2019, 4:57 pm

I'm more sanguine on VOD. Let the new CEO get on with his job - the decision to reduce the dividend was unpleasant but probably the wise thing to do in view of the debt and teh (then) anticipated Liberty Global approval. The future is "data" and VOD are in the running. Dunno about BT though!

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Re: Vodafone topped up

#233458

Postby idpickering » July 2nd, 2019, 5:22 pm

monabri wrote:I'm more sanguine on VOD. Let the new CEO get on with his job - the decision to reduce the dividend was unpleasant but probably the wise thing to do in view of the debt and teh (then) anticipated Liberty Global approval. The future is "data" and VOD are in the running. Dunno about BT though!


Thank you monabri. In keeping with my 'less is more' stance with regards to fiddling with my HYP, it may well end up with me just letting VOD be in my HYP. We'll see. With regards to BT Group, I hold, and might just top up next month, again, we'll see.

Ian.

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Re: Vodafone topped up

#233602

Postby Wizard » July 3rd, 2019, 9:26 am

IanTHughes wrote:
Dod101 wrote:
funduffer wrote:This may mean that you miss buying at the bottom of the market, but HYP is a strategy that balances achieving high income with reducing income risk. As a retirement living strategy, a growing and stable income is a must, so if this means sacrificing some potential capital gain for increased dividend security, then that is what HYP is all about, in my view.


The trouble is that the classic HYP is not simply sacrificing some potential capital gain for increased dividend security, it is often sacrificing any capital gain and quite often incurring a capital loss so I do not see HYP as particularly low risk and it needs care in just the same way that any other investment strategy does.

Where is your evidence for that? My HYP certainly disproves it as does pyad's HYP1, and every HYP that I have seen reported on this board! So, without evidence to back up your assertion, it would appear that you are pulling fake facts out of the air? I wonder, would that be because of your well reported rejection of HYP as a strategy and your need to justify that rejection, irrespective of reality?

Only you can answer that of course.


Ian

My HYP has butchered capital, the income so far is a drop in the ocean compared to the capital destruction. I suspect the reason you rarely see reports on failing HYPs is the investor stops investing in them and stops frequenting this board.

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Re: Vodafone topped up

#233608

Postby Wizard » July 3rd, 2019, 9:37 am

tjh290633 wrote:I am amused by the comments about the HYP religion and dogma. We have guidelines which are not holy writ. You can adapt or improve them as you see fit.

Topping up is not part of the original Gospel according to Pyad. Neither is what to do with a share which has reduced, rebased or cut its dividend. We have had many an Epistle to the followers and nonbelievers alike, concerning events not foreseen at the outset.

My view is simple. If a company cuts its dividend and does not resume in the near future, then I will either sell completely or hold for recovery if in my opinion it will resume paying dividends before long. Sometimes a company having a rights issue has cancelled the dividend which would have been paid at the same time. In my view this is a sensible action and can be ignored.

When we come to companies reducing or rebasing their dividend, if the yield stays at a sensible level, then there is little point in incurring the costs of selling to buy another share with a similar yield. I will continue to hold and, if the criteria are met, will top up such a share. Usually this sort of action is the precursor to a fairly sharp recovery, so it is an opportunity to be grasped. Waiting for 5 years as the price rises and the dividends multiply does not make sense to me. You are losing out on dividend flow and capital appreciation while you wait.

Here endeth the Epistle.

TJH

I have just read the whole of this thread, in part hoping to find an answer to the question of why a share may be barred from buying new but acceptable to top up. The only hints at an answer I have found are:
1. Practically it features in a spreadsheet
2. The selection criteria may be different, but no specifics identified

Have I missed / skimmed over a post giving more on this?

I presume point 2. must be the substantive one, so I guess put a different way, what are the differences jn the criteria for new shares and top ups and why are the different criteria applied?

Is this a common approach or do most people apply the same criteria to both new purchases and top ups?

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Re: Vodafone topped up

#233615

Postby IanTHughes » July 3rd, 2019, 10:05 am

Wizard wrote:
IanTHughes wrote:
Dod101 wrote:The trouble is that the classic HYP is not simply sacrificing some potential capital gain for increased dividend security, it is often sacrificing any capital gain and quite often incurring a capital loss so I do not see HYP as particularly low risk and it needs care in just the same way that any other investment strategy does.

Where is your evidence for that? My HYP certainly disproves it as does pyad's HYP1, and every HYP that I have seen reported on this board! So, without evidence to back up your assertion, it would appear that you are pulling fake facts out of the air? I wonder, would that be because of your well reported rejection of HYP as a strategy and your need to justify that rejection, irrespective of reality?

Only you can answer that of course.

My HYP has butchered capital, the income so far is a drop in the ocean compared to the capital destruction.

Well, apart from the obvious observation that HYP is an Income Strategy and should be measured as such, where exactly is this HYP failure reported?

Wizard wrote: I suspect the reason you rarely see reports on failing HYPs is the investor stops investing in them and stops frequenting this board.

Well, one can hardly take account of evidence that is never presented can one?

As far as I can tell, from the available evidence, HYP does what it says on the tin …. in spades in my view!


Ian

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Re: Vodafone topped up

#233622

Postby idpickering » July 3rd, 2019, 10:35 am

Wizard wrote:
Is this a common approach or do most people apply the same criteria to both new purchases and top ups?


I go through the same routine for all my HYP investing, be it for a likely top up or a new share. It really is that simple, despite my monthly dithering. A screen first, check HYP weighting, identify target and fire!

Ian.

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Re: Vodafone topped up

#233631

Postby Wizard » July 3rd, 2019, 11:19 am

IanTHughes wrote:
Wizard wrote:
IanTHughes wrote:Where is your evidence for that? My HYP certainly disproves it as does pyad's HYP1, and every HYP that I have seen reported on this board! So, without evidence to back up your assertion, it would appear that you are pulling fake facts out of the air? I wonder, would that be because of your well reported rejection of HYP as a strategy and your need to justify that rejection, irrespective of reality?

Only you can answer that of course.

My HYP has butchered capital, the income so far is a drop in the ocean compared to the capital destruction.

Well, apart from the obvious observation that HYP is an Income Strategy and should be measured as such, where exactly is this HYP failure reported?

Wizard wrote: I suspect the reason you rarely see reports on failing HYPs is the investor stops investing in them and stops frequenting this board.

Well, one can hardly take account of evidence that is never presented can one?

As far as I can tell, from the available evidence, HYP does what it says on the tin …. in spades in my view!


Ian

You asked for evidence of the point made by Dod that HYP could result in capital destruction, you said you had not seen that reported. All I am doing is providing at least one data point. Admittedly "a drop in the ocean" was a little unfair on the income contribution, but the overall it was still not enough to fill the capital hole. What is the issue with that? Maybe it is because you are such an HYP fanboy and do not like poor performing HYPs reported on?

Since posting the above I have had a quick look and the position is as follows.

I have purchased 22 shares for my HYP. I sold one and reinvested the proceeds as they started to use the dividend pot for buy backs instead. One share was totally wiped out. Of the 20 left 6 are above water in pure capital terms, 14 are showing a loss. Biggest winner Rio Tinto up c.50%, biggest loser (excluding the wipe out) Royal Mail down c.56%. Total capital loss c.19% of funds invested. Income / capital returned c.12% of funds invested. Net position a loss of c.7% over about 3 years.

If I had not decided to stop reinvesting in the HYP I would be considered to be in the build phase. I consider a loss of c.7% over the three years as a poor way to build a pot to fund a future retirement.

Clearly others have different experiences and as I have said it is more likely that success will be reported here than failure. I think this is broadly for two reasons, people stop visiting the board and / or are too embarrassed to admit fail in the face of others reporting success.

IMHO and based on my personal experience HYP may be fine in a drawdown phase, but it is not fit for purpose when building a pot for retirement ahead of drawing income.

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Re: Vodafone topped up

#233636

Postby idpickering » July 3rd, 2019, 11:44 am

It’s not all roses in HYP land I will agree, but as an investor, I’m aware that shares rise and fall. I have a few weakly performing shares, VOD are down 20%, LLoyd’s down 12%, Aviva down 16%. Those three are my worst performers on the capital gains front in my 30 share HYP. Those three are full holdings and I’m unlikely to top up further, but while I wait for better days with them I’m getting great dividends from them, which is why I bought them in the first place. I can live with that.

Ian.

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Re: Vodafone topped up

#233644

Postby Alaric » July 3rd, 2019, 12:05 pm

Wizard wrote:
IMHO and based on my personal experience HYP may be fine in a drawdown phase, but it is not fit for purpose when building a pot for retirement ahead of drawing income.


I'm unconvinced that it acknowledges that a dividend yield of a% increasing at b% should be a better bet for longer term accumulation than a dividend yield of c% increasing at d% where (a+b) exceeds (c+d) and only concentrates on whether c exceeds a. That has some merit when immediate rather than deferred spendable income is the objective, but not when building for future income. Hence the HYP preference for investing in Vodafone rather than Unilever.

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Re: Vodafone topped up

#233645

Postby IanTHughes » July 3rd, 2019, 12:08 pm

Wizard wrote:
IanTHughes wrote:
Wizard wrote:My HYP has butchered capital, the income so far is a drop in the ocean compared to the capital destruction.

Well, apart from the obvious observation that HYP is an Income Strategy and should be measured as such, where exactly is this HYP failure reported?

Wizard wrote: I suspect the reason you rarely see reports on failing HYPs is the investor stops investing in them and stops frequenting this board.

Well, one can hardly take account of evidence that is never presented can one?

As far as I can tell, from the available evidence, HYP does what it says on the tin …. in spades in my view!

You asked for evidence of the point made by Dod that HYP could result in capital destruction, you said you had not seen that reported. All I am doing is providing at least one data point. Admittedly "a drop in the ocean" was a little unfair on the income contribution, but the overall it was still not enough to fill the capital hole. What is the issue with that? Maybe it is because you are such an HYP fanboy and do not like poor performing HYPs reported on?

Since posting the above I have had a quick look and the position is as follows.

I have purchased 22 shares for my HYP. I sold one and reinvested the proceeds as they started to use the dividend pot for buy backs instead. One share was totally wiped out. Of the 20 left 6 are above water in pure capital terms, 14 are showing a loss. Biggest winner Rio Tinto up c.50%, biggest loser (excluding the wipe out) Royal Mail down c.56%. Total capital loss c.19% of funds invested. Income / capital returned c.12% of funds invested. Net position a loss of c.7% over about 3 years.

Only three years? Only 7%? You are determining the success or failure of the HYP Strategy, a Long Term Buy and Hold strategy, as a failure, because you have lost 7% over only three years? I am sorry but, if you seriously believe that a 7% decline over three years is sufficient evidence with which to measure HYP, or indeed any Equity strategy, then maybe you should stick to Cash and / or Fixed Income investments! From my own HYP, between October 2016 and 31 December 2018, a significant part of your 3 year period, the Accumulation Unit value dropped 7.56%!

My HYP is now over 7 years old but it was only when it passed the 5 year mark that I felt it could be properly assessed with regard to success or failure, Income and Capital.


Ian


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