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Top-up HYP or IUKD?

General discussions about equity high-yield income strategies
Gengulphus
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Re: Top-up HYP or IUKD?

#151124

Postby Gengulphus » July 9th, 2018, 12:43 pm

OhNoNotimAgain wrote:
Gengulphus wrote:My main comment is that an investment in IUKD (or any other 'fund' investment, i.e. anything which is basically a portfolio of other investments) is a fundamentally different strategy from picking your own investments - in one, you get someone (or some computer!) else to decide what you're invested in for you, in the other, you make such decisions yourself.

The simple question is whether you think stock-picking is more powerful than compound interest.

No, that would only be the question if picking what you're invested in and compounding were alternatives to each other, such that one had to choose one or the other. Instead, they work together: one's method of picking investments determines the rates of return that get compounded.

Gengulphus

OhNoNotimAgain
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Re: Top-up HYP or IUKD?

#151157

Postby OhNoNotimAgain » July 9th, 2018, 1:59 pm

Gengulphus wrote:
OhNoNotimAgain wrote:
Gengulphus wrote:My main comment is that an investment in IUKD (or any other 'fund' investment, i.e. anything which is basically a portfolio of other investments) is a fundamentally different strategy from picking your own investments - in one, you get someone (or some computer!) else to decide what you're invested in for you, in the other, you make such decisions yourself.

The simple question is whether you think stock-picking is more powerful than compound interest.

No, that would only be the question if picking what you're invested in and compounding were alternatives to each other, such that one had to choose one or the other. Instead, they work together: one's method of picking investments determines the rates of return that get compounded.

Gengulphus


Compound interest is one of the key factors in determing the return of the market, the beta if your like. By and large passive or rules-based funds investing acrross the majority of the market will give you that return less costs.

The alternative of an active fund that selects only a small cohort of that market relies on those stock-picking abilities to beat the market.

Actually, what I had forgotten is that IUKD only holds 50 stocks so although rules based it suffers the active management problem of only holding a small subset of the market.

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Re: Top-up HYP or IUKD?

#151173

Postby formoverfunction » July 9th, 2018, 2:48 pm

I'm some 10% up on IUKD, and I'm retaining that holding.

Back in February I bought UKDV as I thought it offered a lower over all risk profile than IUKD.

At the time it's yield was OK.

I was hoping for a 12 month total return of between 10-14%. That would be very acceptable. As of today, I'm on course for aound 11%. There's plenty of time left on the clock!

Hargreaves are quoting 4.2% yield.

It's an ETF that I'll buy more of on a strong correction. I usually only buy income focused ETF''s when they look under pressure.

So, at the moment IAPD is something I have my eye on.

Gengulphus
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Re: Top-up HYP or IUKD?

#151250

Postby Gengulphus » July 9th, 2018, 6:45 pm

OhNoNotimAgain wrote:
Gengulphus wrote:
OhNoNotimAgain wrote:The simple question is whether you think stock-picking is more powerful than compound interest.

No, that would only be the question if picking what you're invested in and compounding were alternatives to each other, such that one had to choose one or the other. Instead, they work together: one's method of picking investments determines the rates of return that get compounded.

Compound interest is one of the key factors in determing the return of the market, the beta if your like. ...

Badly phrased - the return of the market in any particular historical year is just a fact about the world, not affected by compounding - but I assume you mean that it is one of the key factors in determining the return a particular investor gets over a period. And I agree - it is one of the key factors. Another is the rates of return achieved by the particular strategies they choose, i.e. their particular choice of stock-picking method.

OhNoNotimAgain wrote:... By and large passive or rules-based funds investing acrross the majority of the market will give you that return less costs.

And investing in passive or rules-based funds that invest across the majority of the market is a stock-picking method! A particularly easy and cheap stock-picking method, but a stock-picking method nevertheless.

My point is that compounding and choosing the right investments to be invested in are two key factors in investing success, and one really wants both of them - and that's not an impossible pipe-dream: it's perfectly possible to have both of them! That makes your question about whether "stock-picking is more powerful than compound interest" a particularly pointless way of thinking about investing.

It seems from the rest of your post that what you're actually trying to talk about is whether investing in passive / rules-based funds or picking individual shares for oneself is the better method of choosing the right investments to be invested in. Had you said "The simple question is whether you think picking individual shares yourself is more powerful than investing in passive or rules-based funds investing across the majority of the market", I would have agreed with you. (Though not with the suggestion that the answer is obvious: it seems pretty obvious to me from the varying historical performances of IUKD and other passive / rules-based funds that there is no answer that applies independently of the choice of such a fund and the choice of individual stock-picking method.)

But for some bizarre reason, you decided to treat compound interest as the alternative to individual stock-picking, and as a result got the sheer nonsense of "The simple question is whether you think stock-picking is more powerful than compound interest".

Gengulphus

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Re: Top-up HYP or IUKD?

#151379

Postby OhNoNotimAgain » July 10th, 2018, 8:51 am

Gengulphus wrote:[
And investing in passive or rules-based funds that invest across the majority of the market is a stock-picking method! A particularly easy and cheap stock-picking method, but a stock-picking method nevertheless.

Gengulphus


If you hold 98% of the index it is pushing the definitions of stock picking to the absolute limit.


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