Lootman wrote:Gengulphus wrote:One of the biggest contributors to my investment success was my decision about 18 years ago to extract somewhat less than half of my investments from the tech boom and move it into something very different, which after a bit of trying some possibilities out to see what suited me best I decided was to be largely HYP. What happened subsequently to the somewhat more than half that I left in zero-yield (at the time) tech boom shares is not pretty - no complete failures, but I only eventually extracted about 15% of what it had been worth at the time I extracted the somewhat-less-than-half part...
My takeaway from that anecdote is that you were taking a very high degree of risk being mostly invested in just one sector. ...
And mine is that you're 'inferring' things that aren't there in what I've posted. More than just one sector was involved in the tech boom.
And my actual
investment in the shares concerned was quite modest - about 5-10% of my investable wealth at the time I made it. But yes, I rode a charging bull for a while before (partially) jumping off when I saw signs of it slowing down. I did indeed take a risk, but only of the bull very suddenly collapsing - which while possible, in the prevailing mood at the time was basically only going to happen on totally unexpected, very bad company news (which is of course a possibility for any share investment). The much more likely way for the bubble to deflate was by that mood changing as the realisation slowly dawned on investors that the long-term dreams they had weren't going to happen for the vast majority of the companies involved, and even for the ones that it was going to happen to, was going to involve long years of (at best) no tangible returns and (more likely) continued investment of substantial amounts of extra capital...
So basically, the risk I took was one that was very high in terms of the severity of its consequences if it happened, but the chances of it happening were pretty low, at least in the short term. And at least for the most severe consequences and with regard to the gains I took off the table, that's relevant because I only stayed in for a few months - something like 80% of all the gains happened in the September 1999 - March 2000 period, I did a first partial dismount from the charging bull at the end of November 1999 and a second in March 2000.
Lootman wrote:... It is not ipso facto an argument for income investing.
I never said it was. And without wanting to start up the so-called "bickering" about
my earlier refutation of a statement of yours again, I also never said that was an argument for income investing either, and indeed said explicitly in it that I was not making it as a point in favour of high-yield shares.
Basically, I've seen no arguments either in favour of or against investing in high-yield shares (the specific form of income investing most relevant to this board) that convince me either that investing in them is generally better across the board, or that not investing in them is generally better across the board. I have at times in the past been nearly convinced that investing in them was generally better - around 2005 or a bit after, the evidence of the total-return versions of the FTSE 350 High Yield and Low Yield indices did suggest it quite strongly - but another 13 years or so of data have weakened that suggestion down to near non-existence rather than confirming it. So as things stand my general attitude towards arguments either for or against investing in high-yield shares
in general is to look for the holes in them - and I usually find them...
But what I'm generally more interested in is arguments for or against investing in high-yield shares
in specific investor circumstances. The point of my "anecdote" that makes it relevant to this board and thread is that high-yield shares were appropriate for me at the time that I used them, and using them has contributed very significantly to my investment success.
I should add that I'm not saying that they are any better than the alternatives you mention in parts of your reply I haven't quoted, such as ETFs and "big name" stocks. My choice to go for a HYP rather than them was partly driven by availability (ETFs were still in their infancy then, and I don't think I even encountered the term until some years later!) and partly by my own preferences; the availability reasons have vanished but my preferences remain (currently, at least - that's something that might well change in the next decade or two as I get older...).
Lootman wrote:... High yield is synonymous with higher risk in at least some circles. ...
No, definitely not "synonymous with" - "an example of" is reasonable, but if they were synonymous, shares of early stage start-up companies would have to either be high-yield or not be high-risk! ;
-)
But more seriously, investing in shares at all, even via ETFs or other funds, is an example of higher risk in at least some circles. And in both cases, that's an argument for checking that the investor is OK with the level of risk, but not
ipso facto for not investing in the way concerned.
Gengulphus