HYP1 is 21

[Dod101]

Who is this John Doe? I thought the HYP was for Doris?

Dod

[MDW1954]

Moderator Message:
No further discussion of index funds, HYP-alternatives, moderation, or anything else that is not HYP-Practical specific and relevant to pyad's original post, please. -- MDW1954

[funduffer]

Doris had just reached 81, and was still enjoying life.

When she retired 21 years ago at age 60, she had taken her state pension, but all she had left after that was a lump sum left by her husband who had recently died. The family financial advisor suggested she bought an annuity to supplement her state pension, which would boost her income, but it didn't look like it would be very much.

Her father had always dabbled in the stock exchange and had told her that she could get good returns and hold onto her capital if she invested there. Her son suggested she read some articles on the matter, and she came across some articles by Stephen Bland, who suggested that she could boost her retirement income by investing in a diversified portfolio of high yielding UK shares. This approach appealed to her. She didn't want the bother of having to frequently check up on her shares or to have to keep contacting her stock broker to buy and sell. She would much rather spend that time with her grandchildren, or down at the bridge club.

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension. All she had to do was just check enough money was going into the holding account now and again, and to maybe take out a bit extra each year to cope with rising prices.

She had had the occasional annoying distraction when a corporate action had taken place and she had had to decide what to do with that share. So she had just followed the original advice to find another high yielding share and move the money into that. There had been a big crisis in 2008 and then a pandemic in 2020 which had alarmed her, but she could see that although the dividends she was receiving had dipped, they seemed to recover again fairly quickly. It was a bit of a worry at the time, but she had always left plenty in the holding account, so she found that by being careful, she could still make ends meet.

Looking back over that 21 years, she felt things had worked out just fine. The income she was receiving was much more than she would have received from the annuity her financial advisor had recommended, and she still had a large capital sum which was now worth more than double what she had invested originally. That would be very useful if she ever had to move into a care home, or if she wanted to leave something for her grandchildren.

Overall she was happy she had followed her father's and Stephen's advice, and not that of her financial advisor.

Long live Doris!

FD

[Alaric]

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension.

Historic articles have never said how much this monthly amount might be and whether dividends in excess of this would just be left to earn next to nothing in a deposit account.

[funduffer]

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension.

Historic articles have never said how much this monthly amount might be and whether dividends in excess of this would just be left to earn next to nothing in a deposit account.

Who cares?

I was trying to illustrate the kind of person HYP was aimed at. In fact, Doris sounds very like my mother, who ran something quite similar to a HYP. When she died last year, she was earning dividends well in excess of her pension, and the capital gain was astronomical. Coincidentally her father, my grandfather died in 2000 and left her money and shares to get started,

FD

[Arborbridge]

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension.

Historic articles have never said how much this monthly amount might be and whether dividends in excess of this would just be left to earn next to nothing in a deposit account.

Who cares?

I was trying to illustrate the kind of person HYP was aimed at. In fact, Doris sounds very like my mother, who ran something quite similar to a HYP. When she died last year, she was earning dividends well in excess of her pension, and the capital gain was astronomical. Coincidentally her father, my grandfather died in 2000 and left her money and shares to get started,

FD

And some people even suggest that Doris did not exist - but if she didn't, she would have had to have been invented

[1nvest]

Doris had just reached 81, and was still enjoying life.

Subjectively. What if at age 60 in 1999 she divorced her husband, no children, their house was sold for £1M and she received £500,000 that she invested in a HYP instead of buying a annuity. Around £22K of income, £12K of which was being spent on paying rent. The remainder £10K was better than had she opted for a annuity that would have left just £8K to live on after paying her rent, but either way as she was relatively frugal she could have got by. Her circumstances as such are that she's not entitled to any pensions the HYP is her lot.

Come 2008 and 2009 the HYP income has fallen in real terms where it barely covers her rent, leaving way too little for expenses/spending. Deep regrets at not having taken the annuity that would have had her far better placed. In desperation she hunts around for loans to no avail, excepting one suggesting that she sells some of her shares which she duly does just to get ends to meet. In real terms the capital value is much the same as at the start and given that the HYP had let her down she considers selling it all to buy a annuity, but the annuity salesman indicates that she'll receive a much lower figure given the financial crisis circumstances, more like 10K instead of the 2000's 20K figure she was originally offered. Approaching 70 she decides to just withdraw it all and deposit into the bank, £500K with £25K/year of spending to see her through to 90.

[MrFoolish]

Overall she was happy she had followed her father's and Stephen's advice, and not that of her financial advisor.

Long live Doris!

Unlike her sister, Mavis, who kept doubling down on Aviva shares.

[csearle]

Let me know which course of action is preferred.

From my perspective I welcome critical discussion of HYP1, HYP, and general High-Yield strategies. As you suggest though such critical discussion is off-topic for HYP-P so, since you ask, I would prefer it if critical discussion of HYP1's performance, especially as compared to other approaches, were carried on the HYP-SS board. C.

[Dod101]

Doris had just reached 81, and was still enjoying life.

When she retired 21 years ago at age 60, she had taken her state pension, but all she had left after that was a lump sum left by her husband who had recently died. The family financial advisor suggested she bought an annuity to supplement her state pension, which would boost her income, but it didn't look like it would be very much.

Her father had always dabbled in the stock exchange and had told her that she could get good returns and hold onto her capital if she invested there. Her son suggested she read some articles on the matter, and she came across some articles by Stephen Bland, who suggested that she could boost her retirement income by investing in a diversified portfolio of high yielding UK shares. This approach appealed to her. She didn't want the bother of having to frequently check up on her shares or to have to keep contacting her stock broker to buy and sell. She would much rather spend that time with her grandchildren, or down at the bridge club.

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension. All she had to do was just check enough money was going into the holding account now and again, and to maybe take out a bit extra each year to cope with rising prices.

She had had the occasional annoying distraction when a corporate action had taken place and she had had to decide what to do with that share. So she had just followed the original advice to find another high yielding share and move the money into that. There had been a big crisis in 2008 and then a pandemic in 2020 which had alarmed her, but she could see that although the dividends she was receiving had dipped, they seemed to recover again fairly quickly. It was a bit of a worry at the time, but she had always left plenty in the holding account, so she found that by being careful, she could still make ends meet.

Looking back over that 21 years, she felt things had worked out just fine. The income she was receiving was much more than she would have received from the annuity her financial advisor had recommended, and she still had a large capital sum which was now worth more than double what she had invested originally. That would be very useful if she ever had to move into a care home, or if she wanted to leave something for her grandchildren.

Overall she was happy she had followed her father's and Stephen's advice, and not that of her financial advisor.

Long live Doris!

FD

Did she just ignore the almost inevitable unbalanced nature of the income she was receiving by te end of these 21 years? Maybe ignorance is bliss.

Dod

[moorfield]

It's easy to forget how much HYP1 has changed over the years actually. I can't remember all the corporate actions that have happened but looking back on the November 2000 scriptures, 9 of the original 15 selections have since changed.


Gallaher (LSE: GLH) Tobacco
Scottish & Newcastle (LSE: SCTN) Brewery
Royal & Sun(LSE: RSA) Insurance
Alliance & Leicester (LSE: AL.) Bank
Britannic (LSE: BRT) Insurance
Bass (LSE: BASS) Hotels
Boots (LSE: BOOT) Retail
Associated British Ports (LSE: ABP) Ports
Blue Circle (LSE: BCI) Cement

[tjh290633]

I very much suspect Terry will give me a slap (shhh! Maybe if I keep the image small enough he might not notice, or be kind enough to let it slip), but using a alternative income production method

and on a regular inflation adjusted uplifted income basis the HYP has served very well.

The point about HYP1 is that it was intended that all the income be remitted, which is how Pyad presents the results.

Using an SWR or any other approach was not the object of the exercise.

Inflation adjustment can hide what is going on. I prefer to use the actual numbers and compare with my chosen inflation index, usually the RPI. You can easily see if you are ahead of inflation or lagging it.

TJH

[pyad]

...BTW, as to the criticism that the income is concentrated in a few companies: yes, that's why some of us have modified the method in practice to add extra safety. However, I can remember a few years ago we were alarmed that 25% of the income came from a single company, and the important point to note is that the three companies now in the spotlight do not include that company. In other words, the income profile varies over time, which is in itself a comfort which proves the method.

Arb.

Thanks Arb. I meant to say this in the article but in the event forgot about it. I have mentioned this point before I think but not for a long time. It's interesting that although the income has become heavily skewed in favour of a few companies, the actual shares concerned change over the years with the fluctuating fortunes of the various industries. A great example is BT Group which back in the seventh and eighth years by some way contributed the largest div in the portfolio. In this latest year it contributed zero. What a contrast! Market Trading has altered the original HYP1 substantially so that some of the early big payers like Gallaher and Alliance & Leicester have disappeared.

As you say changing income concentration is often overlooked, deliberately or through lack of knowledge of the history. It's very likely that it aint going away and will be a permanent feature of this portfolio, though the shares concerned will vary. The reason of course is the no-tinker rule here.

[Bouleversee]

Doris had just reached 81, and was still enjoying life.

When she retired 21 years ago at age 60, she had taken her state pension, but all she had left after that was a lump sum left by her husband who had recently died. The family financial advisor suggested she bought an annuity to supplement her state pension, which would boost her income, but it didn't look like it would be very much.

Her father had always dabbled in the stock exchange and had told her that she could get good returns and hold onto her capital if she invested there. Her son suggested she read some articles on the matter, and she came across some articles by Stephen Bland, who suggested that she could boost her retirement income by investing in a diversified portfolio of high yielding UK shares. This approach appealed to her. She didn't want the bother of having to frequently check up on her shares or to have to keep contacting her stock broker to buy and sell. She would much rather spend that time with her grandchildren, or down at the bridge club.

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension. All she had to do was just check enough money was going into the holding account now and again, and to maybe take out a bit extra each year to cope with rising prices.

She had had the occasional annoying distraction when a corporate action had taken place and she had had to decide what to do with that share. So she had just followed the original advice to find another high yielding share and move the money into that. There had been a big crisis in 2008 and then a pandemic in 2020 which had alarmed her, but she could see that although the dividends she was receiving had dipped, they seemed to recover again fairly quickly. It was a bit of a worry at the time, but she had always left plenty in the holding account, so she found that by being careful, she could still make ends meet.

Looking back over that 21 years, she felt things had worked out just fine. The income she was receiving was much more than she would have received from the annuity her financial advisor had recommended, and she still had a large capital sum which was now worth more than double what she had invested originally. That would be very useful if she ever had to move into a care home, or if she wanted to leave something for her grandchildren.

Overall she was happy she had followed her father's and Stephen's advice, and not that of her financial advisor.

Long live Doris!

FD

Did she just ignore the almost inevitable unbalanced nature of the income she was receiving by te end of these 21 years? Maybe ignorance is bliss.

Dod

I shouldn't think she could give a toss whether the income is balanced over the l5 constituents or not so long as it keeps pace with her requirements. It currently gives her over l5% p.a. in total on her original investment and has doubled her capital without any dividend reinvestment or any intervention on her part or need for complex calculations. I should have thought that was good enough for anyone. I have no idea how it compares with my situation built up in 3 ISAs and their predecessors over many years, with dividends mostly reinvested, without spending a lot of time, which I don't have, to work it all out. The income, added to pension income and residual income from my late husband's fixed rate annuity taken out after the Equitable Life debacle (which was at a high rate on account of his illness but doesn't compare with HYP 1) is much more than my current needs, however, so I don't need to worry about that. IHT is another matter, however!

[Dod101]

Doris had just reached 81, and was still enjoying life.

When she retired 21 years ago at age 60, she had taken her state pension, but all she had left after that was a lump sum left by her husband who had recently died. The family financial advisor suggested she bought an annuity to supplement her state pension, which would boost her income, but it didn't look like it would be very much.

Her father had always dabbled in the stock exchange and had told her that she could get good returns and hold onto her capital if she invested there. Her son suggested she read some articles on the matter, and she came across some articles by Stephen Bland, who suggested that she could boost her retirement income by investing in a diversified portfolio of high yielding UK shares. This approach appealed to her. She didn't want the bother of having to frequently check up on her shares or to have to keep contacting her stock broker to buy and sell. She would much rather spend that time with her grandchildren, or down at the bridge club.

So she followed Stephen's idea and bought 15 very different shares, with high yield, and asked that her broker make sure the dividends were sent to a holding account, and then to pay a monthly amount from this into her current account to supplement her state pension. All she had to do was just check enough money was going into the holding account now and again, and to maybe take out a bit extra each year to cope with rising prices.

She had had the occasional annoying distraction when a corporate action had taken place and she had had to decide what to do with that share. So she had just followed the original advice to find another high yielding share and move the money into that. There had been a big crisis in 2008 and then a pandemic in 2020 which had alarmed her, but she could see that although the dividends she was receiving had dipped, they seemed to recover again fairly quickly. It was a bit of a worry at the time, but she had always left plenty in the holding account, so she found that by being careful, she could still make ends meet.

Looking back over that 21 years, she felt things had worked out just fine. The income she was receiving was much more than she would have received from the annuity her financial advisor had recommended, and she still had a large capital sum which was now worth more than double what she had invested originally. That would be very useful if she ever had to move into a care home, or if she wanted to leave something for her grandchildren.

Overall she was happy she had followed her father's and Stephen's advice, and not that of her financial advisor.

Long live Doris!

FD

Did she just ignore the almost inevitable unbalanced nature of the income she was receiving by te end of these 21 years? Maybe ignorance is bliss.

Dod

I shouldn't think she could give a toss whether the income is balanced over the l5 constituents or not so long as it keeps pace with her requirements. It currently gives her over l5% p.a. in total on her original investment and has doubled her capital without any dividend reinvestment or any intervention on her part or need for complex calculations. I should have thought that was good enough for anyone. I have no idea how it compares with my situation built up in 3 ISAs and their predecessors over many years, with dividends mostly reinvested, without spending a lot of time, which I don't have, to work it all out. The income, added to pension income and residual income from my late husband's fixed rate annuity taken out after the Equitable Life debacle (which was at a high rate on account of his illness but doesn't compare with HYP 1) is much more than my current needs, however, so I don't need to worry about that. IHT is another matter, however!

I guess that ignorance is bliss then. I hope she had some spare funds to cover the huge drop in income for the year 2020 though.

Dod

[Arborbridge]

I guess that ignorance is bliss then. I hope she had some spare funds to cover the huge drop in income for the year 2020 though.

Dod

Being a astute old lady, no doubt she did - as I did too. Latterly her trips to Fortnum's for afternoon tea dwindled in number as the journey was too onerous, especially with Covid about, so I doubt she ever spent all her cash: that became her income reserve, as we might say.

Arb.

[dealtn]

...BTW, as to the criticism that the income is concentrated in a few companies: yes, that's why some of us have modified the method in practice to add extra safety. However, I can remember a few years ago we were alarmed that 25% of the income came from a single company, and the important point to note is that the three companies now in the spotlight do not include that company. In other words, the income profile varies over time, which is in itself a comfort which proves the method.

Arb.

Thanks Arb. I meant to say this in the article but in the event forgot about it. I have mentioned this point before I think but not for a long time. It's interesting that although the income has become heavily skewed in favour of a few companies, the actual shares concerned change over the years with the fluctuating fortunes of the various industries. A great example is BT Group which back in the seventh and eighth years by some way contributed the largest div in the portfolio. In this latest year it contributed zero. What a contrast! Market Trading has altered the original HYP1 substantially so that some of the early big payers like Gallaher and Alliance & Leicester have disappeared.

As you say changing income concentration is often overlooked, deliberately or through lack of knowledge of the history. It's very likely that it aint going away and will be a permanent feature of this portfolio, though the shares concerned will vary. The reason of course is the no-tinker rule here.

Indeed. Perhaps you will concede that had that early concentration in BT (and subsequent concentrations since) been addressed, the level of income, and its concentration would be different. It may indeed be higher and less concentrated as a result, although such action would have required a comfort, or ability, to do that "tinkering".

[Arborbridge]

HYP1 is 21. Pyad has proved that this particular experiment has worked, and worked surprisngly well. Who would have predicted - apart from Pyad - that a relatively naive investor could set up a portfolio, just let it run - apart from the occasional attention due to market trading and dividend accumulation - and come out smiling.

We've witnessed the worst financial crash in a generation, (so people seem to have forgotten that fact - many pundits were near to panic, people were selling out of the stock market and going into housing stock as they were convinced the sky was falling in) plus covid, and HYP1 has just adapted itself and carried on at a respectable rate.

Let us just pause celebrate that achievement, instead of carping and pointing to something else which might have been better had we known it. Amateur investors with little knowledge could have done this, and it was relatively simple to set up and run.

The difference is that pyad actually had the persistence to do this in real time: most investment gurus don't bother. No one expected HYP1 to be the best thing since sliced bread: but it has proved a valuable point - that it works. It produces an income stream which rises with time and that one can keep one's capital increasing too.
Compared with a few percent fixed in a building society, or losing one's capital to an insurance company, or some of the other schemes which amateur investors fall foul of, I'd say that's quite something to admire.

Arb.

PS I am no Pyad sycophant and I have crossed swords with him, but I have to admit that his ideas came across as sound, and arrived just in time for me to avoid what might have been big mistakes with my pension pot. Yes, I might have done better, but thanks to him, I have done reasonably well when others have lost their life savings.

[Bouleversee]

It's easy to forget how much HYP1 has changed over the years actually. I can't remember all the corporate actions that have happened but looking back on the November 2000 scriptures, 9 of the original 15 selections have since changed.


Gallaher (LSE: GLH) Tobacco
Scottish & Newcastle (LSE: SCTN) Brewery
Royal & Sun(LSE: RSA) Insurance
Alliance & Leicester (LSE: AL.) Bank
Britannic (LSE: BRT) Insurance
Bass (LSE: BASS) Hotels
Boots (LSE: BOOT) Retail
Associated British Ports (LSE: ABP) Ports
Blue Circle (LSE: BCI) Cement

Could I just ask how these changes came about and how the replacements were arrived at? If they were all takeovers, I think at least Boots was a cash one, wasn't it, so did Pyad choose this replacement and others? Might have worked out rather differently if Doris had had to manage, which is perhaps what 1invest was driving at. Nobody responded to that post; hard to know where to start,

[Alaric]

Scottish & Newcastle (LSE: SCTN) Brewery
Associated British Ports (LSE: ABP) Ports

Could I just ask how these changes came about and how the replacements were arrived at? If they were all takeovers, I think at least Boots was a cash one, wasn't it

The two above were also takeovers for cash. I cannot help thinking that someone relying on a portfolio as both a store of wealth and source of income might have just treated a takeover as a windfall. Thus they would either just add it to available cash or earmark it for spending on personal capital items, such as a replacement car, home improvements or major maintenance