Gengulphus wrote:Ah, I see. You're contrasting the behaviour of an IT, which is a portfolio in an opaque wrapper, with that of a single-share holding in a HYP.
Yes, that's exactly what I was doing, and it was entirely intentional, as pointed out in my statement following the original links -
[i]I'm a big fan of both income IT's in general, and also the principal of rotating low-yielding stocks into higher-yielding alternatives.
Yes, and there's a good reason why I didn't quote that bit: I wasn't addressing that point. Rather, I was addressing the point I've emboldened in the bit I did quote:
Looking at the 10-year chart for City of London, it's had little of note with regards to catastrophic price issues
over that period, and even after the good increase in share price over the past 10 years, it still yields around 4.1% today -https://i.imgur.com/8HYo1Z4.png
and that you've repeated since when you said:
Itsallaguess wrote:I wasn't suggesting that it hadn't had any issues at all, but rather that there was nothing catastrophic.
Assuming that one doesn't count a 1/3rd drop as "catastrophic" (*), that point is true enough in ITs at a whole-portfolio level, but the same is true of HYPs, and indeed many other strategies involving investing in shares, whether as a self-managed portfolio of individual shares or as a managed underlying portfolio of an IT or other 'fund'. Or it's false enough at the single-share level for HYPs, but the same is the case for ITs - the catastrophes are just better hidden from the investor.
In short, I disagreed with the idea that greater immunity to catastrophic price falls is relevant to whether ITs are superior investments, because I see no reason to believe they are more immune to such falls. That doesn't mean I disagree with any other points you made, such the 'easy instant diversification' one.
Nor indeed does it mean that there aren't relevant points to be made about 'catastrophes'. For instance, what I say points one out: there is
a significant difference about seeing
them, as opposed to one about avoiding
them. Unlike the avoidance risk, though, where I expect investors to generally agree that avoiding them is preferable, I'm pretty certain that investors will differ quite a bit about whether seeing those 'catastrophes' that do occur or not seeing them is preferable...
(*) Which I don't, at least in the absence of "forced sales" - I do
regard the possibility as potentially catastrophic if e.g. the portfolio is to be used to fund the end-of-term repayment of the capital sum of a large interest-only mortgage and good alternatives for repaying it aren't available. And other investors' views of what is "catastrophic" may well differ from mine. But what regarding a fall by 1/3rd as "catastrophic" basically indicates is that shares are too risky for the investor and/or their investment aim (straightforward, ordinary shares, that is - there are various types of investment that are technically shares, but have rather different risk/reward characteristics).
Indeed, even somewhat larger falls than 1/3rd have to be regarded as non-catastrophic for shares not to be pretty risky, as pointed out e.g. by the fact that the FTSE 100 index fell by somewhat over 50% between the end of 1999 and early 2003, and by nearly as much between late 2007 and early 2009.