How much does an HYP cost?

[IanTHughes]

One of the reasons that I decided to go the HYP route for building a retirement pot was to avoid the, sometimes excessive, charges levied by the Fund Management industry. By excessive I mean when compared with the extra value or income that a Fund Manager would achieve. I was further interested in HYP as being a strategy that avoided unnecessary trading. Trading is expensive and the retail investor is often guilty of overtrading to the extent that returns are materially damaged, or at least that is what most experts tell us.

For a couple of examples, I have been monitoring the ongoing costs that would be involved in following the virtual HYP’s that I am running.

HYP in Drawdown: viewtopic.php?p=297566#p297566

Charges           | From      | To        | Stamp Duty | Commission | Custody*| Total     | Dividends  | % of Income
Portfolio History | 11-May-19 | 27-May-20 |  1,288.02  |    211.95  |  60.00  | 1,559.97  | 15,676.57  |       9.95%
Last 12 Months    | 28-May-19 | 27-May-20 |     95.36  |     22.90  |  60.00  |   178.26  | 14,036.33  |       1.27%

* Although virtual portfolios, I have assumed a Custody Charge of £5 per month

So, for an HYP with an initial investment of over £250,000, where only one instance of enforced trading was undertaken, 1.27% of the last 12 months income has been paid in various costs.

Now, an initial investment of £250,000 is a substantial sum, so I got to wondering how much the charges would be for a smaller portfolio, say £100,000.

Charges           | From      | To        | Stamp Duty | Commission | Custody | Total   | Dividends | % of Income
Portfolio History | 11-May-19 | 27-May-20 |    505.29  |    211.95  |  60.00  | 777.24  | 6,149.97  |      12.64%
Last 12 Months    | 28-May-19 | 27-May-20 |     37.41  |     22.90  |  60.00  | 120.31  | 5,506.50  |       2.18%

The Custody and Commission charges are assumed to be the same. Stamp Duty has been reduced in line with the reduced initial investment.

Now we can see that, for an HYP with an initial investment of £100,000, where only one instance of enforced trading was undertaken, 2.18% of the last 12 months income has been paid in various costs.

HYP in Building Phase: viewtopic.php?p=299931#p299931

Charges           | From      | To        | Stamp Duty | Commission | Custody | Total     | Dividend   | % of Income
Portfolio History | 11-May-19 | 27-May-20 |  1,363.88  |    219.45  |  60.00  | 1,643.33  | 16,284.95  |      10.09%
Last 12 Months    | 28-May-19 | 27-May-20 |    171.22  |     30.40  |  60.00  |   261.62  | 14,644.71  |       1.79%

* Although virtual portfolios, I have assumed a Custody Charge of £5 per month

So, for an HYP with an initial investment of over £250,000, other than the reinvestment of dividends, only one instance of enforced trading was undertaken, 1.79% of the last 12 months income has been paid in various costs.

Once again, an initial investment of £250,000 is a substantial sum, so for £100,000

Charges           | From      | To        | Stamp Duty | Commission | Custody | Total   | Dividend  | % of Income
Portfolio History | 11-May-19 | 27-May-20 |    535.05  |    219.45  |  60.00  | 814.50  | 6,388.64  |      12.75%
Last 12 Months    | 28-May-19 | 27-May-20 |     68.93  |     30.40  |  60.00  | 159.33  | 5,895.76  |       2.70%

The Custody and Commission charges are assumed to be the same. Stamp Duty has been reduced in line with the reduced initial investment.

Now we can see that, for an HYP with an initial investment of £100,000, where, other than the reinvestment of dividends, only one instance of enforced trading was undertaken, 2.70% of the last 12 months income has been paid in various costs.

Do other HYPers, whether in drawdown or still building, have any data to offer this study? I am not looking for portfolio values but simply the cost of an HYP as a percentage of income received together with an indication as to how much trading is undertaken.

Please, I am not looking for a debate as to whether trading/re-balancing an HYP is beneficial or otherwise. I am simply looking for information as to how much such trading costs an HYP, measured as a percentage of the income received


Ian

[dealtn]

Not an attack on HYP!

Why would you want this expressed as % of income, not say initial Capital?

The reason it looks so perverse to me is that the yield, and therefore Income/Capital will vary quite a bit across different portfolios. In asking for other people's experiences then it will be hard to make conclusions about costs wouldn't it?

[moorfield]

Do other HYPers, whether in drawdown or still building, have any data to offer this study? I am not looking for portfolio values but simply the cost of an HYP as a percentage of income received together with an indication as to how much trading is undertaken.

Please, I am not looking for a debate as to whether trading/re-balancing an HYP is beneficial or otherwise. I am simply looking for information as to how much such trading costs an HYP, measured as a percentage of the income received

Costs/Income is costs (custody, dealing, stamp duty) as a percentage of cashflow income.


(viewtopic.php?p=275020#p275020)

I have the full table somewhere going back to 2009, will dig it out for you when time permits (might be a few days).

[moorfield]

Here's the full history Ian. You've done me a favour asking this, thanks, this was the last table I hadn't migrated onto my Google Sheets.



I usually buy @£1.50, sell @£9.95, and pay £100 custody charge annually.

Hope this is useful for you.

[Arborbridge]

Hope this helps:-




Charges include all dealing charges and SIPP or ISA management charges.
Column titles are a bit odd! but they are the "Total charges as a percentage of end year capital", and "Total charges expressed as a percentage of total income received for the year." Trades are both ways: i.e. number of buys and sells.

Arb.

[tjh290633]

I think that this is what you are looking for:

.        .         Percent     Portfolio   Value    Value at    Percent  
Tax Yr    Trades   Brokerage   Fees        Total            .   Income   
FY08-09       48      0.489%      0.080%   0.569%   05-Apr-09       6.29%
FY09-10       27      0.245%      0.060%   0.305%   05-Apr-10      10.11%
FY10-11       27      0.241%      0.052%   0.294%   05-Apr-11       8.09%
FY11-12       12      0.093%      0.050%   0.143%   05-Apr-12       3.45%
FY12-13       12      0.058%      0.042%   0.100%   05-Apr-13       2.30%
FY13-14       19      0.124%      0.029%   0.152%   05-Apr-14       3.55%
FY14-15       12      0.042%      0.033%   0.075%   05-Apr-15       1.80%
FY15-16       25      0.119%      0.034%   0.152%   05-Apr-16       3.79%
FY16-17       24      0.121%      0.020%   0.141%   05-Apr-17       3.44%
FY17-18       20      0.070%      0.009%   0.078%   05-Apr-18       1.38%
FY18-19       15      0.033%      0.008%   0.041%   05-Apr-19       0.77%
FY19-20       31      0.079%      0.010%   0.089%   05-Apr-19       1.25%
                                                                         
Average       23      0.149%      0.038%   0.186%                  4.088%
Max           48      0.489%      0.080%   0.569%                 10.105%
Min           12      0.033%      0.008%   0.041%                  0.771%

That is since PEP and ISA were amalgamated. You have figures as percentage of value and of income.

TJH