Itsallaguess wrote:PYAD said this on
November 6th 2000 in his '
Retirement Pays Dividends' article -
Whatever the money available, even very large sums, no more than about 15 shares are necessary to take strip out the excessive risk of too few shares.
Stick to FTSE 100 companies and spread the holdings around sectors.https://web.archive.org/web/20140219210446/http://news.fool.co.uk/news/foolseyeview/2000/fev001106c.htmAs someone who doesn't run a single-share HYP now, I won't attempt to advocate the merits or otherwise of Pyad taking the above position in that 2000 article, but I just wanted to point out that your claim that the 'foreign share' angle has never been influenced by anything that Pyad himself has said is not correct...
Thanks for remembering that bit about the FTSE100! And I'd better clarify what Wizard quoted me as saying, which was:
Gengulphus wrote:Arborbridge wrote:What's the point of a thread discussing why foreign shares are not allowed in a HYP, if you as you are saying, they are allowed? In point of fact you and if know perfectly well, that foreign shares have never ever been allowed in a HYP, ...
I'm afraid I don't know any such thing, unless your "never ever" is somehow only intended to mean "never since 2017". Specifically, the rules we had between 2008 and 2016 about what was allowed in HYPs (or to be precise, in posted discussions about HYPs) were in the TMF HYP Practical board guidance (
2008 version,
2012 version). They don't contain any prohibition of foreign shares - indeed, they don't mention the question of UK vs foreign shares at all, not even indirectly through index membership as the TLF guidance does. And during that time, it was entirely possible to discuss foreign shares on the TMF board - provided one recognised that a lot of the board's posters had objections to foreign shares and didn't allow oneself to be drawn into flamewars about them (the sensible thing to do if one wanted to discuss foreign shares was to tolerate the replies expressing personal objections without posting in response to those replies, and to report the replies telling one off for trying to discuss them, again without posting in response to those replies). In short, foreign shares were allowed in HYPs during that period, though decidedly unpopular - and self-discipline was needed as it is generally is when posting about unpopular subjects. It's only since the TLF guidance came into existence in 2017 that we've had rules saying that foreign shares aren't allowed in HYPs discussed on this board - with the de minimis exception your partial quote comes from.
The clarification is that the "to be precise" remark near the start of that is important: it's all about what was allowed to be posted about HYPs on the TMF and TLF boards, rather than about what people are allowed to invest in (neither TMF nor TLF have any authority to rule on the latter, and they probably wouldn't want to even if they did). The situation before the TMF board split in 2008 and the publication of the split boards' guidance (*) was that there was just one TMF board about high-yield strategies, named "High Yield Portfolio", and it didn't have any specific board guidance: basically, the board title alone was all the guidance posters had (most TMF boards were like that, just like most TLF boards are today). That guidance provided by the board title was
not interpreted as "only portfolios strictly in compliance with TMFPyad's pronouncements", either by the board users or by the TMF moderators (who incidentally didn't include pyad - he was a staff member at the time, as indicated by his username then, but not a moderator). A good thing too, because his pronouncements did exhibit some inconsistencies - for instance, Itsallaguess's link says "
Stick to FTSE 100 companies" but a week later, in
https://web.archive.org/web/20140528041 ... 01113c.htm, he said "
To obtain a little more choice, I went marginally outside the FTSE 100 index and set £1.5b as my minimum capitalisation filter.". Another example is that in
https://web.archive.org/web/20140220112 ... 011123.htm (**), he said "
On underweighting, I advise to readers to avoid some sectors. Construction, engineering shares, shares in rapidly advancing technological industries such as telecoms and computers, airlines spring to mind ...", but under five years later, he selects BT for HYP1, in
https://web.archive.org/web/20170213040 ... sort=whole - and it's not a case of telecoms having ceased to be a rapidly advancing technological industry in that time.
So basically, a somewhat-expanded version of what I was saying was that as far as restrictions on what can be posted about HYPs on the appropriate boards are concerned:
* Before the TMF board split in June 2008, the only one was that posts had to fit the board name "High Yield Portfolio" (in the TMF moderators' opinion).
* From June 2008 to when the TMF boards were closed in late 2016, the TMF HYP Practical guidance applied to the TMF HYP Practical board and did not contain any restriction on foreign shares;
* From the creation of TLF in early November 2016 to the
original TLF HYP Practical guidance being posted in late November 2017, I'm uncertain whether one should reckon that there was no restriction about foreign shares on the TMF HYP Practical board because it had no guidance at all, or because it was operating with the 'inherited' TMF guidance which contained no such restriction, but it hardly matters!
* Since that posting of the original TLF HYP Practical guidance, the restriction on foreign shares required by its restriction that HYP shares should be in the FTSE350 has been in effect, either because that guidance was in effect or because a newer version with the same restriction was in effect.
As far as restrictions about what can be in a HYP (as opposed to
posted about HYPs) are concerned, I didn't say anything about that in the quote. But my view is that that's up to the individual HYPer - I don't really see how it can be otherwise! If they want to use a more restrictive definition than the board guidance uses, IMHO they should be clear about that being a personal preference or recommendation and
not a rule they can try to impose on others - it's fine to say "I never sell a HYP share voluntarily" or "I recommend never selling voluntarily", but not "You're not allowed to sell voluntarily" or "If you sell voluntarily, you're not a real HYPer" (the latter both because it's a personal comment and because it is tantamount to trying to impose a non-existent rule on the person addressed). If they want to use a less restrictive definition than the board guidance uses, IMHO they need to keep quiet about it on the HYP Practical board. Whether they do that by using the "
When reporting on a HYP portfolio, there may be times when it is impractical to exclude overseas shares, Investment Trusts, or preference shares. In such circumstances, these shares can be included within a published portfolio if they make up no more than circa 5%. They must NOT be discussed on this board." exception allowed by the guidance, by only posting about the HYP part of their portfolio on HYP Practical, or by avoiding posting on HYP Practical at all depends on the size of the difference and their own preferences.
I might add that the question of what's allowed in a HYP was one of the issues that contributed to the TMF board split in 2008. That issue was that the TMF moderators only had the board name "High Yield Portfolio" to go by when trying to adjudicate whether posts were on-topic or not, between hugely varying views on the issue that ranged all the way from "only portfolios that adhere strictly to TMFPyad's pronouncements are HYPs" (with some differences of opinion about
which TMFPyad pronouncements that meant to complicate things...) to "
any investment post can be related to HYPs and so is on-topic". And none of the TMF moderators were actually HYPers themselves, which meant that they basically had an impossible job adjudicating what was on-topic on the "High Yield Portfolio" board before it was split. That was basically the reason why the TMF HYP Practical guidance was written with a number of reasonably objective tests in its section 6, that the TMF moderators could use to help them rule on whether posts were actually about HYPs.
Anyway, I have wondered why the guidance about being a FTSE350 constituent was ever brought in, given the non-existence of any sort of UK-only requirement in previous guidance. My best guess has been that it was a "three birds with one stone" change, combining (a) a somewhat-crude-but-good-enough lower limit on market cap that adjusts automatically to the general level of the market; (b) when used together with a check on a share's yield, an easy objective test for moderators to make to determine whether a share is on-topic; (c) outlawing a type of thread that quite frequently led to heated discussions in practice. I saw two variants of that quite a bit in practice: the first when someone proposed a foreign share, someone else objected saying "foreign shares not allowed!" and the proposer then engaged in an argument about whether they are on-topic rather than reporting the objector for trying to impose a non-existent rule; the second when someone proposed a foreign share, others replied saying "foreign share - not for me" and the proposer then launched a diatribe about how a good share wasn't being given a fair chance rather than just accepting that foreign shares aren't for everyone and restricting their responses to those who replied more positively.
One other bit of context is that I made that guess shortly after the guidance about being a FTSE350 constituent was brought in, in late 2017 and only about a year after the TMF boards were closed. The relevance of that is that I don't remember whether I'd frequently seen that sort of heated discussion arise on TMF, on TLF, or on both. And I should emphasise that it really is a guess - I have no actual knowledge of or even hints about the reasoning that went into introducing the FTSE350-constituents-only bit of guidance, just guesses about what might have made some sort of sense to those who introduced it.
(*) For completeness and in case anyone is interested, the TMF "High Yield - Share Strategies" guidance is
here. And if anyone is wondering why it's post number 52212 on that board, whereas the 2008 TMF HYP Practical guidance was post number 2 on its board, the reason was that "High Yield - Share Strategies" was a renaming of the original "High Yield Portfolio" board, while "High Yield - HYP Practical" was a newly-created board at the time. It was done that way to ensure that discussions that were ongoing on "High Yield Portfolio" at the time remained on-topic, rather than suddenly becoming off-topic as the HYP Practical restrictions came into effect.
(**) I also find that link interesting because of the following:
Number one is market capitalisation. I advocate that investors stick with big caps only. Say FTSE350 but preferably FTSE100. Alternatively set an actual limit such as £1bn. The reason for this rule is security. I believe that in general big caps are going to be more secure than smaller ones both in dividend payments and in a lesser likelihood of the company going bust.
The point that strikes me is that although he mentions the FTSE100 and FTSE350 indices in it, they're illustrative market-capitalisation limits, and a number such as £1bn is suggested as an alternative. So there is an option there that doesn't restrict one to UK shares - and there's no rule saying "UK shares only", "No foreign shares", "No overseas shares" or anything similar despite the article being entitled "High Yield Selection Rules". Of course, that may have been because it was an HYP-basics article addressed to a UK audience, so he might have been presuming that foreign shares wouldn't occur to them in the first place - but it certainly doesn't indicate that he thought sticking to UK shares was a
vital part of the strategy.
Gengulphus