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Whether HYP (as defined in the guidelines) works

General discussions about equity high-yield income strategies
Alaric
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Re: Whether HYP (as defined in the guidelines) works

#222168

Postby Alaric » May 16th, 2019, 4:25 pm

Charlottesquare wrote:Why do you add the current yield to the growth rate, surely the growth rate should be applied as a power over x years to the current yield?



It's a proxy for the total return over one year.

Initial Dividend yield i increasing at g per year. Initial price 100, yield i
In a year's time the dividend is i *( 1+g) making . If in a year's time the yield is still i, the price will have to have increased to 100 * (1+g) . So the anticipated total return is i from dividends and g from price growth.

Itsallaguess
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Re: Whether HYP (as defined in the guidelines) works

#222203

Postby Itsallaguess » May 16th, 2019, 6:32 pm

dealtn wrote:
However I recognise the relative simplicity of a mechanistic investment strategy that is probably better than simply buying an annuity, and for those who adopt it I wish them the best in it meeting their requirements. But I would suggest that anyone confident enough to be selecting shares to grow capital it is foolish to limit yourself to a subset of the investing universe, particularly where the number of shares available isn't a deep pool, and by the nature of having high yields have associated higher risk.

The only reasonable justification I have come across for people doing so in the accumulation phase of such investing, is that by not adopting such a strategy, when the time comes to manage a HYP in the "living off Income" stage it can be more difficult than if the lessons learned etc. weren't discovered earlier.


It's difficult to keep up with the discussions surrounding any potential different strategies, but I think in the main there are two thing not being given enough credit by those looking to criticise the HYP strategy -

1. It's a relatively simple strategy in terms of the *time* having to be spent on it - in one of your earlier posts you've mentioned a quite valid 'rinse and repeat' total-return approach, but that clearly seems to be a 'busier' strategy than HYP, which has investment-inaction at the very heart of the approach. Time matters for many people, and many people might prefer not having to spend too much of it on investment-matters....

2. Your point above regarding the move from an accumulation phase to then taking income is one, I think, that's not given enough credit. I've been very happy to use an income-strategy very similar to HYP during my accumulation phase, and I think it's a great benefit to be able to track how things are going with one eye on the 'income-switch' that will hopefully get thrown at some future point in time. Knowing that I will have nursed myself over and through the quite natural investment-bumps inherent with *any* investment strategy is, to me at least, a very worthwhile benefit of taking this approach. Why put myself through more than one set of those bumps if I don't have too, and who's to say how high any other particular bumps might be?

Cheers,

Itsallaguess

tjh290633
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Re: Whether HYP (as defined in the guidelines) works

#222207

Postby tjh290633 » May 16th, 2019, 6:50 pm

tjh290633 wrote:If you have figures for the FTSE100TR you may like to compare my accumulation unit figures with that.

TJH

I have just done a little research.

Date         Acc Unit   FTAS TR    Rebased
21-Apr-87 1.00 574.51 1.00
15-May-19 -26.61 7,274.19 -12.66
IRR 10.77% 8.23%

So my HYP has rather beaten the FTAS TR over 32 years. Obviously not every year, but it is the long term we are concerned with.

TJH

Lootman
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Re: Whether HYP (as defined in the guidelines) works

#222210

Postby Lootman » May 16th, 2019, 7:01 pm

tjh290633 wrote:
tjh290633 wrote:If you have figures for the FTSE100TR you may like to compare my accumulation unit figures with that.

TJH

I have just done a little research.

Date         Acc Unit   FTAS TR    Rebased
21-Apr-87 1.00 574.51 1.00
15-May-19 -26.61 7,274.19 -12.66
IRR 10.77% 8.23%

So my HYP has rather beaten the FTAS TR over 32 years. Obviously not every year, but it is the long term we are concerned with.

Terry, you are probably the one reason I have any time for HYP. You are living proof that it can work, albeit with some tweaks that are an improvement on the base model in my view.

Out of curiosity have you compared your total returns to those of the S&P 500, rebased to sterling? It would be interesting to see if your approach licked the main example of a lower-yielding, higher-growing market.

Charlottesquare
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Re: Whether HYP (as defined in the guidelines) works

#222245

Postby Charlottesquare » May 16th, 2019, 10:03 pm

Alaric wrote:
Charlottesquare wrote:Why do you add the current yield to the growth rate, surely the growth rate should be applied as a power over x years to the current yield?



It's a proxy for the total return over one year.

Initial Dividend yield i increasing at g per year. Initial price 100, yield i
In a year's time the dividend is i *( 1+g) making . If in a year's time the yield is still i, the price will have to have increased to 100 * (1+g) . So the anticipated total return is i from dividends and g from price growth.


I see, total return in effect.

ADrunkenMarcus
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Re: Whether HYP (as defined in the guidelines) works

#222277

Postby ADrunkenMarcus » May 17th, 2019, 8:07 am

tjh290633 wrote:
Date         Acc Unit   FTAS TR    Rebased
21-Apr-87 1.00 574.51 1.00
15-May-19 -26.61 7,274.19 -12.66
IRR 10.77% 8.23%


It is noteworthy that what might seem like a small difference in the annual CAGR actually adds up enormously over an investing career, with the Acc Units more than double the FTAS TR by the period end. This is the difference between c. 8.2% and 10.8% annual returns.

Best wishes

Mark.

pendas
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Re: Whether HYP (as defined in the guidelines) works

#222283

Postby pendas » May 17th, 2019, 8:39 am

TJH is an enthusiastic and experienced investor and we can all learn from him. He doesn't run a HYP portfolio as per the guidelines but rather has run his own method for many years and long before S. Bland codified his. He found the methods similar enough to align himself to the HYP community but I think it would be a mistake for the novice investor to believe they could replicate TJH's success simply by picking 20 or so stocks and leaving them alone.

tjh290633
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Re: Whether HYP (as defined in the guidelines) works

#222306

Postby tjh290633 » May 17th, 2019, 9:31 am

pendas wrote:TJH is an enthusiastic and experienced investor and we can all learn from him. He doesn't run a HYP portfolio as per the guidelines but rather has run his own method for many years and long before S. Bland codified his. He found the methods similar enough to align himself to the HYP community but I think it would be a mistake for the novice investor to believe they could replicate TJH's success simply by picking 20 or so stocks and leaving them alone.

Quite right. An HYP is like a garden, you have to tend it from time to time. It was 10 years before I had to do anything, when Lloyds TSB and Zeneca both rose well above 10% of the portfolio value, it being about 16 or 18 shares at the time. Prudential was also at about the 10% level. I decided that I had to set a limit on holding value and initially set it at10%, later modifying that to twice the median holding value and later still to 1.5 times the median, when there were over 30 holdings and the value had risen considerably.

I later formalised my topping up decision making. Originally I just topped up the lowest value or the highest yielding holding. Then I hit on combining the rankings by value and yield to choose the recipient.

Of my original selections, only BT.A, MKS and LLOY remain as such, although AZN, IMB and NG. are the ancestors of the original picks. Takeover, failure and delisting have all occurred, and there have been disposals of non- or low-yielding shares from time to time. Doing nothing was never an option.

TJH

tjh290633
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Re: Whether HYP (as defined in the guidelines) works

#222309

Postby tjh290633 » May 17th, 2019, 9:35 am

Lootman wrote:
tjh290633 wrote:
tjh290633 wrote:If you have figures for the FTSE100TR you may like to compare my accumulation unit figures with that.

TJH

I have just done a little research.

Date         Acc Unit   FTAS TR    Rebased
21-Apr-87 1.00 574.51 1.00
15-May-19 -26.61 7,274.19 -12.66
IRR 10.77% 8.23%

So my HYP has rather beaten the FTAS TR over 32 years. Obviously not every year, but it is the long term we are concerned with.

Terry, you are probably the one reason I have any time for HYP. You are living proof that it can work, albeit with some tweaks that are an improvement on the base model in my view.

Out of curiosity have you compared your total returns to those of the S&P 500, rebased to sterling? It would be interesting to see if your approach licked the main example of a lower-yielding, higher-growing market.

No, I never have done. Originally I recorded the FT30 (and still do) then the FT100 when it came along. More recently the FT350HY index has been of more interest.

If you have relevant data, please feel free to make the comparison.

TJH

Bubblesofearth
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Re: Whether HYP (as defined in the guidelines) works

#222313

Postby Bubblesofearth » May 17th, 2019, 9:43 am

tjh290633 wrote:Quite right. An HYP is like a garden, you have to tend it from time to time. It was 10 years before I had to do anything, when Lloyds TSB and Zeneca both rose well above 10% of the portfolio value, it being about 16 or 18 shares at the time. Prudential was also at about the 10% level. I decided that I had to set a limit on holding value and initially set it at10%, later modifying that to twice the median holding value and later still to 1.5 times the median, when there were over 30 holdings and the value had risen considerably.

I later formalised my topping up decision making. Originally I just topped up the lowest value or the highest yielding holding. Then I hit on combining the rankings by value and yield to choose the recipient.

Of my original selections, only BT.A, MKS and LLOY remain as such, although AZN, IMB and NG. are the ancestors of the original picks. Takeover, failure and delisting have all occurred, and there have been disposals of non- or low-yielding shares from time to time. Doing nothing was never an option.

TJH


If you had done nothing what would your capital and come situation be now compared to what they are?

BoE

tjh290633
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Re: Whether HYP (as defined in the guidelines) works

#222444

Postby tjh290633 » May 17th, 2019, 12:05 pm

Bubblesofearth wrote:
tjh290633 wrote:Quite right. An HYP is like a garden, you have to tend it from time to time. It was 10 years before I had to do anything, when Lloyds TSB and Zeneca both rose well above 10% of the portfolio value, it being about 16 or 18 shares at the time. Prudential was also at about the 10% level. I decided that I had to set a limit on holding value and initially set it at10%, later modifying that to twice the median holding value and later still to 1.5 times the median, when there were over 30 holdings and the value had risen considerably.

I later formalised my topping up decision making. Originally I just topped up the lowest value or the highest yielding holding. Then I hit on combining the rankings by value and yield to choose the recipient.

Of my original selections, only BT.A, MKS and LLOY remain as such, although AZN, IMB and NG. are the ancestors of the original picks. Takeover, failure and delisting have all occurred, and there have been disposals of non- or low-yielding shares from time to time. Doing nothing was never an option.

TJH


If you had done nothing what would your capital and come situation be now compared to what they are?

BoE

I have no idea. I had to react to take-overs, demergers, companies going belly up, comkpanies ceasing to apy dividends.

My best guess is that I would have much less capital and much less income, but there is no way of determining that. Had I done nothing, I would have a big pile of cash and only a few holdings. Not that big a pile of cash either.

TJH

Charlottesquare
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Re: Whether HYP (as defined in the guidelines) works

#222602

Postby Charlottesquare » May 18th, 2019, 3:35 am

Bubblesofearth wrote:
tjh290633 wrote:Quite right. An HYP is like a garden, you have to tend it from time to time. It was 10 years before I had to do anything, when Lloyds TSB and Zeneca both rose well above 10% of the portfolio value, it being about 16 or 18 shares at the time. Prudential was also at about the 10% level. I decided that I had to set a limit on holding value and initially set it at10%, later modifying that to twice the median holding value and later still to 1.5 times the median, when there were over 30 holdings and the value had risen considerably.

I later formalised my topping up decision making. Originally I just topped up the lowest value or the highest yielding holding. Then I hit on combining the rankings by value and yield to choose the recipient.

Of my original selections, only BT.A, MKS and LLOY remain as such, although AZN, IMB and NG. are the ancestors of the original picks. Takeover, failure and delisting have all occurred, and there have been disposals of non- or low-yielding shares from time to time. Doing nothing was never an option.

TJH


If you had done nothing what would your capital and come situation be now compared to what they are?

BoE


I think that is akin to changing your third move in a game of chess and extrapolating where the remaining pieces would reside on the board after another twenty moves- there are a fantastic number of perms.


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