Advice? Go forth and Diversify! In my opinion, your suggested starting portfolio is not sufficiently diversified. If it were my money, the choice of only 10 separate Business Sectors would worry me. I cannot see any specific share that should be ejected but, with only 15 selections, I believe that each should be from a separate Business Sector.
I should also make the following comments:
FTSE100 or FTSE250Rather than worry about inclusion within a specific Index, you should be looking at the Market Capital. Also, don’t forget that there are a number of companies where, because the London Stock Exchange (LSE) is not their Primary Listing, they will not be part of any LSE Index. For example, Woodside Energy Group (WDS) with a yield of 10.88%, is I believe a solid possibility.
Capital ValuePersonally, I start with companies with a Market Capital ranking no lower than 160. Essentially this includes 60 possible candidates from the FTSE250 Index, on top of all 100 from the FTSE100 Index. The range of Market Capital values of those 160 candidates is from a high of £183,692 Million to a low of £1,886 Million – quite a range. As a further aside, the top 160 Shares comprise over 90% of the Market Capital of the FTSE350 as a whole.
Sustainable DividendOver to you, and there is no magic wand. You must ensure, as best you can, that the dividend appears sustainable. No magic wand but do check out total Earnings, Profits and Cash Flow. Pay particular attention to the amount of money required to pay the interest on any borrowings.
Do not pay any attention to those that claim a High Yield automatically means a High Risk. What a High Yield does mean is that the “Market” believes that a higher dividend reward is required from the share in question. This could be a result of a belief that growth in Market Capital is unlikely, for whatever reason, meaning the dividend will form the bulk of any return. All possible candidates, whether High of Low Yield, should be fully investigated.
Target YieldDo not start with a yield target in mind. Rather you should pick a properly diverse collection of shares, with the highest yields available, where you yourself have determined that the dividend is sustainable. Should you end up with more income than you need, you could axe those holdings that you were most unsure about, whatever the yield, but who is to say that the dividend of any replacements would be more secure?
Holding ValueAfter any purchase you should be able to say that it does not matter what value is attached to your holding, what matters is the dividend that emanates from that holding. Pay no attention to the nonsense spoken about a Capital Value of nil will mean a yield of nil. Such nonsense can be spouted for any investment strategy, whether Income or Value based. Such people do not appear to understand Equity investing, and their advice should be treated with extreme caution.
My Suggested HYPHere is my selection for an HYP comprising 15 separate Business Sectors.
Industry | Sector | EPIC | Name | Rank | Yield | Size | Value (%)
Consumer Goods | Retailers: General | KGF | Kingfisher | 82 | 5.22% | 1.00 | 6.6667
| Retailers: Supermarkets | SBRY | Sainsbury (J) | 68 | 4.91% | 0.50 | 3.3333
| | TSCO | Tesco | 30 | 4.16% | 0.50 | 3.3333
| Tobacco | BATS | British American Tobacco | 10 | 8.53% | 0.50 | 3.3333
| | IMB | Imperial Brands | 33 | 8.22% | 0.50 | 3.3333
Financial | Banks | LLOY | Lloyds Banking | 20 | 5.30% | 0.50 | 3.3333
| | NWG | NatWest Group | 24 | 5.17% | 0.50 | 3.3333
| Financial: Gambling | IGG | IG Group | 135 | 6.39% | 1.00 | 6.6667
| Fund Manager | MNG | M&G | 91 | 9.72% | 0.50 | 3.3333
| | ABDN | Abrdn | 96 | 6.81% | 0.50 | 3.3333
| Insurance: Life | PHNX | Phoenix Holdings | 72 | 9.09% | 0.50 | 3.3333
| | LGEN | Legal & General | 36 | 8.09% | 0.50 | 3.3333
| Investment: Management | INVP | Investec | 121 | 6.61% | 0.50 | 3.3333
| | HL. | Hargreaves Lansdown | 92 | 4.66% | 0.50 | 3.3333
Property | House/Leisure: Builders | TW. | Taylor Wimpey | 94 | 8.25% | 0.50 | 3.3333
| | BDEV | Barratt Developments | 80 | 7.76% | 0.50 | 3.3333
| Real Estate/REIT | BLND | British Land | 109 | 6.52% | 0.50 | 3.3333
| | LAND | Land Securities | 79 | 6.29% | 0.50 | 3.3333
Resources | Mining | GLEN | Glencore Xstrata | 9 | 8.04% | 0.50 | 3.3333
| | RIO | Rio Tinto | 7 | 7.94% | 0.50 | 3.3333
| Oil and Gas | WDS | Woddside Energy Group | n/a* | 10.88% | 0.50 | 3.3333
| | BP. | BP Amoco | 6 | 4.47% | 0.50 | 3.3333
Utilities | Renewable: Infrastructure | TRIG | The Renewables Infra. | 114 | 5.77% | 0.50 | 3.3333
| | UKW | Greencoat UK Wind | 107 | 5.43% | 0.50 | 3.3333
| Utilities: Electric | SSE | SSE | 28 | 5.25% | 1.00 | 6.6667
| Utilities: Water | PNN | Pennon | 153 | 5.38% | 0.50 | 3.3333
| | UU. | United Utilities | 58 | 4.31% | 0.50 | 3.3333
* Woodside Energy Group (WDS) has a Market Capital that would give a Rank of 16, if included within the FTSE100 Index.You will note that there are some Business Sectors where there are two holdings. In this case the size of that Business Sector investment should be split between the two. The value invested into any such “duplicate” share should be half that invested in a share that is the sole candidate from its Business Sector.
Some people have suggested adding Aviva PLV (AV), making three shares within the Life Insurance Business Sector. I have no problem with AV, but if you do go for three Life Insurance shares, the Business Sector investment should be split in three.
Minimum Size for Dividend InvestmentPersonally, I will only invest an amount whereby the Transaction Fee charged by my broker, is no higher than the amount of Stamp Duty, meaning the total of all charges is no more than 1.00%. My Broker is
A J Bell, who offer a monthly Bulk Dealing service for a fee of £1.50. Therefore, my minimum purchase amount is £300.
Initial Investment AmountFemi wrote:Great input so far thanks to you all - could I just check what people feel is the minimum initial investment value in any one share? £2,000 per holding? £3,000 per holding?
If you believe that the share price will rise after your purchase, you should invest as much as possible straight away. On the other hand, if you believe that the share price will fall after your purchase, you should not invest any amount at all, not until you are convinced that the expected fall in share price has occurred, and further price movement will be upward only.
Hope that helps.
Enjoy!
Ian
