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"Building the Pot"

General discussions about equity high-yield income strategies
Breelander
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Re: "Building the Pot"

#173273

Postby Breelander » October 12th, 2018, 1:13 pm

Pastcaring wrote:I' ve got no idea what a " Doris " is and no interest at all in finding out.


Pity, you are missing out on a (probably apocryphal) but highly entertaining story...

http://web.archive.org/web/200712211841 ... doris.aspx

StepOne
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Re: "Building the Pot"

#173299

Postby StepOne » October 12th, 2018, 2:58 pm

Gengulphus wrote:
dealtn wrote:... certainly in the past when the original "Doris" articles were written, ...

Are you referring to pyad's two original HYP articles written in November 2000 or about his one and only (AFAIAA) "Doris" article written in December 2006? It makes quite a difference to when and what you're talking about!

First original HYP article
Second original HYP article
"Doris" article

Gengulphus


Interesting that Pyad refers to 15 as a suggested maximum number of holdings. I think most people now treat 15 as the minimum.

I can't read the Doris article - it only shows me a preview, and asks me to log in, or register, to read the full thing. Are other people getting the same thing?

StepOne

Breelander
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Re: "Building the Pot"

#173304

Postby Breelander » October 12th, 2018, 3:07 pm

StepOne wrote:I can't read the Doris article - it only shows me a preview, and asks me to log in, or register, to read the full thing. Are other people getting the same thing?


Yes, some archived copies were made at the time TMF had that 'preview' in place for all their articles.

Here's another one that shows the full article.
https://web.archive.org/web/20100421194 ... doris.aspx

dealtn
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Re: "Building the Pot"

#173339

Postby dealtn » October 12th, 2018, 5:20 pm

Gengulphus wrote:
dealtn wrote:... certainly in the past when the original "Doris" articles were written, ...

Are you referring to pyad's two original HYP articles written in November 2000 or about his one and only (AFAIAA) "Doris" article written in December 2006? It makes quite a difference to when and what you're talking about!

First original HYP article
Second original HYP article
"Doris" article

Gengulphus


Yes that's interesting for sure. I must admit I had blurred the original HYP and the Doris, and had forgotten how much time elapsed between the two. Back in those days my employer wouldn't allow access to Fool (Compliance departments, hey!) so I was an infrequent dial up lurker from home.

Reading the three now it is interesting to see how little emphasis was placed on the construction of the portfolio(s), and Doris had no input at all, merely inheriting it. This I guess is why I was perplexed, and behind the original post to start the thread. All the history, and noise, and board separations etc. between publication and now on both sites, seems to arise from selecting shares. The genesis of the "strategy" is more about the doing "nothing", and it (probably) working out ok, rather than the selection itself, and certainly not during "construction".

Obviously there is a little more history in the in between 18 years .

Anyway thank you for all the replies, and the fact the thread has remained civil.

jackdaww
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Re: "Building the Pot"

#173343

Postby jackdaww » October 12th, 2018, 5:32 pm

many of these posts invoke the concept of two investment "phases" - building and retirement .

i just dont see it that way .

i have always invested my earnings/dividends/interest - and lately state pension - into - for want of a better word - a "pot" .

the pot is made up of shares in companies - some are higher yielders but not HYP-P - and some cash .

my investment strategy has been always for total returns - a mix of capital gains/losses and dividends/interest.

my spending needs at any time came out of that pot .

now , approaching my final years , there has been no changeover point , i am still doing the same .

jackdaww
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Re: "Building the Pot"

#173683

Postby jackdaww » October 14th, 2018, 1:42 pm

reading through the stephen bland articles from 2000, (many thanks for the links) , it seems to condense down to this
--

the basic idea is to invest in directly shares rather than investments pushed by adviser's in their own interest , eg bonds , annuities..

diversify shares and sectors , but not too much .

hold long term - dont meddle or trade .

the shares selection stockscreen is --

high yielders
larger companies
moderate debt
rising dividends record

coupled with a dash of personal views and research

this last bit is important , it means i can screen out low margin contractors for example , and utilities in general .

the basic concept of direct shares investment at retirement is not of course new. a popular investment book published in 1965 said much the same , but also embracing total returns , and moderate yielders combined with capital withdrawal if needed.


all in all , controversial at the time perhaps , but maybe not now .

Alaric
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Re: "Building the Pot"

#173690

Postby Alaric » October 14th, 2018, 2:10 pm

jackdaww wrote:the basic concept of direct shares investment at retirement is not of course new.


Until solvency and accounting rules got in the way, it was the norm for private sector defined benefit pension schemes to be invested in this way. For as long as they were open to new members and new accruals, they were cash flow positive, in other words always having money to invest in excess of benefit outgo. Market value fluctuations did not bother them.

Gengulphus
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Re: "Building the Pot"

#173803

Postby Gengulphus » October 15th, 2018, 9:19 am

StepOne wrote:
Gengulphus wrote:
dealtn wrote:... certainly in the past when the original "Doris" articles were written, ...

Are you referring to pyad's two original HYP articles written in November 2000 or about his one and only (AFAIAA) "Doris" article written in December 2006? It makes quite a difference to when and what you're talking about!

First original HYP article
Second original HYP article
"Doris" article


Interesting that Pyad refers to 15 as a suggested maximum number of holdings. I think most people now treat 15 as the minimum.

I can't read the Doris article - it only shows me a preview, and asks me to log in, or register, to read the full thing. Are other people getting the same thing?

Apologies about that - I did check the link at the time and didn't see a preview problem, but checking it again just now, I do see one... My best off-the-cuff guess is that the download of the 'hide this article under a standard preview template' code was failing for some reason at the time, but succeeding now.

And thanks to Bree for supplying the alternative link while I wasn't around.

Gengulphus

vrdiver
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Re: "Building the Pot"

#173825

Postby vrdiver » October 15th, 2018, 10:29 am

Dod101 wrote:Who/what is CBA?

Dod

My best guess is "Commonwealth Bank of Australia", ticker = CBA which makes sense if my assumption that Pastcaring is based DownUnder is correct.

CBA might be the antipodean LLoyds equivalent ;) - not something I'd feel comfortable betting the farm on!

VRD

Gengulphus
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Re: "Building the Pot"

#173826

Postby Gengulphus » October 15th, 2018, 10:34 am

dealtn wrote:What I don't get is the constant reaffirmation to High Yielding shares, as a subset of all share alternatives, in what might be described as the "accumulation stage". Regardless of the arguments of which subset of equities has performed better in the past, under whatever conditions, isn't the aim in the "accumulation" phase to grow as big a pot as necessary, or at least in the most efficient form not detrimental to today's consumption, such that when the time for "retirement" arrives then the living off the (greatest possible) dividends stage of HYP commences.

Are you sure bigger pots are better? Or is it that pots that can be invested to produce (with sufficient safety) larger amounts of income are better? At any one time, the two tests will produce pretty much the same results - e.g. if you have a pot of £550k and I have a pot of £500k, then you can realise and re-invest yours for about 10% more income than I can (assuming low trading costs and no significant liquidity constraints). So your pot is better than mine by both the "bigger pot" test and the "pot that can be invested to produce larger amount of income" test, and the same sort of thing will apply (to within trading cost/liquidity differences) no matter what the numbers.

But the same is not true when looking at the same person's pot at different times. E.g. suppose I have a pot worth £550k when the markets are a bit frothy and the reasonably-safely obtainable yield is 4%, and over the next year they switch over to being a bit depressed and the reasonably-safely obtainable yield rises to 5%, as a result of which an unchanged portfolio's capital value might have dropped by 20% to £440k. But I'm still saving hard and so add £60k to the portfolio during the year, so it ends the year at £500k. Have I made progress towards retiring?

The "bigger pot" test sees that my pot of £550k has reduced to one of £500k and so says no, I haven't made progress - on the contrary, I've gone backwards and am further from retiring at the end of the year than I was at its start.

The "pot that can be invested to produce larger amount of income" test sees that the income my pot can reasonably safely be invested to produce has increased from 4%*£550k = £22k to 5%*£500k = £25k and so says yes, I have made progress towards retirement.

The "accumulation stage" HYPer is generally someone who believes (whether they've actually thought of it that way or not) that the "pot that can be invested to produce larger amount of income" test is the better one to use and that a HYP strategy is a good way to pursue success at that test. (Not saying there is any compelling reason to believe that, but I don't think there's any compelling reason to believe the opposite either...)

dealtn wrote:As an infrequent visitor to these parts I get the sense that much commentary is on buying the next candidate or reinvesting dividends, and very little on living off the dividend stream once retired. (I get that many, or most, aren't retired yet so that little commentary is likely in that respect).

It's not just that, there are at least two other reasons why there isn't much comment on living off the dividend stream once retired. Firstly, because there is a risk of dividend cuts depressing the income stream below what was expected, at least for a while, it's a good idea not to retire until one has some safety margin of the dividends being received over the required living costs. In good times, someone who does that has some surplus income - and once they have a big enough cash reserve to help tide them over bad times, what do they do with it? There are plenty of options, but one of them is to go on reinvesting some or all of the surplus income. I.e. retiring doesn't necessarily mean ceasing to have dividend reinvestment decisions to make.

And secondly, living off the dividend stream once retired is little different from living off other income streams, so the boards in the "Managing Your Finances" area and a few others will probably deal with most of the issues and expose those who ask to a wider range of answers.

dealtn wrote:Dividends will come from the profits (generally speaking) of the companies invested in, yet those profits can be reinvested internally and not paid out, or paid out to shareholders to decide to reinvest, so the quantum of the dividend is part of the companies investment decisions, not some magic signal about a companies health or future potential. ...

Obviously it's not a magic signal, but provided the dividend is sustainable, it does signal some things about the company and its directors. In particular, if it's significantly below where it could sustainably be, it indicates that the directors believe it can be reinvested especially effectively by the company - more effectively than shareholders are generally likely to be able to reinvest it. The word "believe" is very important there, because such beliefs have most certainly been known to be wrong on numerous occasions, especially when big, "company transforming" acquisitions are involved...

The proviso about the yield being sustainable is also important, though, and making sufficiently sure of that is IMHO the most difficult aspect of HYP strategies.

Gengulphus

Julian
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Re: "Building the Pot"

#174089

Postby Julian » October 16th, 2018, 11:32 am

dealtn wrote:...
As an infrequent visitor to these parts I get the sense that much commentary is on buying the next candidate or reinvesting dividends, and very little on living off the dividend stream once retired. (I get that many, or most, aren't retired yet so that little commentary is likely in that respect).
...

As someone who has lived entirely off his investment income since 2009, pretty much all of it dividend income, my excuse for not contributing much commentary on it is that I'm not sure what there is to say. Personally I do on occasion post about how I set things up post-retirement but all I do is pretty much explain the same thing and I could just as easily cut and paste or link to the same thing all the time so I sometimes feel awkward just saying the same thing over and over.

My challenge in saying anything meaningful is that I set up all my mechanisms for how my money flows in terms of dividends collected and cash paid to me years ago and now it all just chugs away in the background. I live off dividends. I get a fixed monthly payment into my bank account on the last day of every month. Every few years I adjust that payment upwards if I think I need an inflationary increase. That's it. For me living off a dividend stream is exactly like working for a big company except that I have to accrue my own tax (done automatically for me in the background), my monthly paymentsare a suspiciously round number (because I set the amount and it would be a bit weird to choose something like £2,386.11 to pay myself each month instead of £2,400 (not my real numbers)) and they aren't accompanied by a payslip or a year-end P60.

- Julian

P.S. I am about to get on an 18 hour flight in a couple of hours and will then be sorting myself out at my destination for a day or two so if anyone does ask me any questions then a lack of response for a few days is due to my travelling not my deliberately blanking anybody.

dspp
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Re: "Building the Pot"

#174123

Postby dspp » October 16th, 2018, 1:08 pm

Yes it was JimSusan.

SalvorHardin
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Re: "Building the Pot"

#174125

Postby SalvorHardin » October 16th, 2018, 1:14 pm

ap8889 wrote:Yes, I remember it well. His username eludes me (JimSusan maybe?) but he was always very highly recced. Wonder what he is up to these days? Probably still chasing his losses, hoping Lloyds will surely come good someday.....

I miss some of the TMF posters still. KingMcKongs Katastrophe Korner, Paulypilots Pub with the man in full flow over some special situation, Carmensfella, Emptyend was a great help for O&G. Wish they would pop up here a bit more! That said, we have a really super bunch of posters here these days. Occasionally I pop to ADVFN and gawp at the angst therein, and am reminded again why TLF is on my favourites tab.

Yes it was JimSusan for whom stockmarket investment meant buying more shares in LloydsTSB. I daresay that a lot of the recs were for well-written posts (they often covered other topics) rather than for investment advice. There were quite a few posters on TMF who ventured a bit further in that they saw diversification as buying shares in another bank, most of these vanished from TMF after 2008-09. Sadly a few of the TMF old timers will have succumbed to age.

Paulypilot is highly active at Stockopedia where he writes a regular column about small caps. Emptyend still posts on the Soco board at ADVFN, I last saw him a couple of years ago at the Soco AGM.

https://www.stockopedia.com/

http://uk.advfn.com/cmn/fbb/thread.php3?id=14382883

dspp
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Re: "Building the Pot"

#174131

Postby dspp » October 16th, 2018, 1:24 pm

ee has popped in to O&G&E board here from time to time, as you might expect on HUR matters. regards, dspp

Breelander
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Re: "Building the Pot"

#174161

Postby Breelander » October 16th, 2018, 2:58 pm

SalvorHardin wrote:Yes it was JimSusan for whom stockmarket investment meant buying more shares in LloydsTSB. I daresay that a lot of the recs were for well-written posts (they often covered other topics) rather than for investment advice....


Here are a couple, for old times sake...

https://web.archive.org/web/20041213093 ... id=8935451
https://web.archive.org/web/20041213101 ... id=8940611

monabri
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Re: "Building the Pot"

#174230

Postby monabri » October 16th, 2018, 7:09 pm

"Among these was BT who, after increasing it's div by 25%, was now paying 4.8%....not an unreasonable amount in anybody's book. Then Centrica got a mention who, last month, increased it's divi by...wait for it...47% and now pays 2.8%. Vodafone also got a mention because, apparently, it has pledged to double it's dividend. As Vodafone's divi currently stands at 2.1% it's going for 4.2% somewhere in the futuristic mists of time"

Not much change in yield from those days then! ;)

Breelander
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Re: "Building the Pot"

#174235

Postby Breelander » October 16th, 2018, 7:31 pm

TMF: A Foolish Interview with jimsusan wrote:The Fool: Briefly explain how you select shares.
jimsusan: After 25 years of investing I simply buy more Lloyds these days.
https://boards.fool.com/ProfileIntervie ... d=15565341

JuanDB
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Re: "Building the Pot"

#174271

Postby JuanDB » October 16th, 2018, 10:23 pm

Easy to look back on those posts with the power of hindsight. We can only hope the result was not catastrophically life affecting.

Itsallaguess
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Re: "Building the Pot"

#174301

Postby Itsallaguess » October 17th, 2018, 4:53 am

JuanDB wrote:
Easy to look back on those posts with the power of hindsight. We can only hope the result was not catastrophically life affecting.


We don't need hindsight to understand the investment risks that he was exposing himself to by putting so much capital into a single company.

Of course everyone hopes that things worked out in the end, but if by raising the story of a known investor who ignored the clear damage-limitation that diversification gives us, it helps to raise awareness in anyone at all who might be thinking of taking a similar path, then I think it's only right to do so.

New investors come to this site all the time, and I think more experienced investors have a duty to warn people away from these types of approaches.

Cheers,

Itsallaguess

jackdaww
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Re: "Building the Pot"

#174321

Postby jackdaww » October 17th, 2018, 8:24 am

Itsallaguess wrote:
We don't need hindsight to understand the investment risks that he was exposing himself to by putting so much capital into a single company.

New investors come to this site all the time, and I think more experienced investors have a duty to warn people away from these types of approaches.


Cheers,

Itsallaguess


=============================

dead right .

including screening stocks on high yield and little else.


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