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Variations on PYADs HYP strategy
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- Lemon Half
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Re: Variations on PYADs HYP strategy
Having read the current spate of posts, it seems to come down to two points of view. One is a group who fear a holding vanishing without trace and the other is a group who are happy to embrace the HYP concept, albeit with some risk of an individual holding going belly up.
The first group ought to keep their investments in Investment Trusts or some other form of collective investment. They could perhaps pick a few hopefully blue chip shares, but the black swan can alight on any of them without warning. If they are not happy with the level of income they can get, they know the alternative.
TJH
The first group ought to keep their investments in Investment Trusts or some other form of collective investment. They could perhaps pick a few hopefully blue chip shares, but the black swan can alight on any of them without warning. If they are not happy with the level of income they can get, they know the alternative.
TJH
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- Lemon Half
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Re: Variations on PYADs HYP strategy
tjh290633 wrote:The first group ought to keep their investments in Investment Trusts or some other form of collective investment.
For the valid advocacy of a long term hold and forget strategy, why the exclusion of investment trusts from consideration?
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- The full Lemon
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Re: Variations on PYADs HYP strategy
ITH
I would never suggest that my opinion is any better than anyone else's, and I have never said that a very high yield should be the sole measure. It is though a very important pointer to the fact that there could be a problem and that it is worth looking into. It may of course be explained by say a market which is mature and unlikely to go grow very much, the classic cash cow, like the tobaccos for instance. it could though suggest that the market thinks that there is a serious risk of a cut, say with Vodafone or Centrica at the moment.
Please be aware that I know very well what the HYP consists of on the Practical Board and you need not waste your time reminding me.
Dod
I would never suggest that my opinion is any better than anyone else's, and I have never said that a very high yield should be the sole measure. It is though a very important pointer to the fact that there could be a problem and that it is worth looking into. It may of course be explained by say a market which is mature and unlikely to go grow very much, the classic cash cow, like the tobaccos for instance. it could though suggest that the market thinks that there is a serious risk of a cut, say with Vodafone or Centrica at the moment.
Please be aware that I know very well what the HYP consists of on the Practical Board and you need not waste your time reminding me.
Dod
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Re: Variations on PYADs HYP strategy
Itsallaguess wrote:
Coming back to your point regarding 'equities not being for me', I think this is an absolutely crucial reason why it's sometimes important to pop our heads into the HYP Practical room now and again, and to perhaps remind people, who themselves may often be struggling with similar 'investor sensibility' issues, that there are alternative income-related investment paths that might well be more compatible with them as individuals....
You've almost made the point for me that without people poking their heads into the HYP Practical room and raising this important point, some poor souls, that might only hear the echo-chamber inside the room, might well be convinced that no, equity-investment simply 'isn't for them', and that they should go away and think of something else to do......what a sad state of affairs that would be, given that I've been in the same situation in the past, and have found a way out of it that is equally as rewarding, but ultimately more compatible with me as an individual investor.....
Echo chambers really are dangerous things, and I think you've quite nicely highlighted one of the issues with them when it comes to HYP Practical......
Cheers,
Itsallaguess
I can't believe that someone reading about the HYP strategy on the Practical board needs to be treated as though they have never been exposed to any other strategies. Why is there a need for non-HYP investors "poking their heads into the HYP Practical room" to, however politely, attempt to rubbish the strategy? It's a bit like someone pointing out on the cycling board that cars are much faster and safer. Like cyclists, even the least confident new investor knows that there are lots of different strategies.
As an analogous case, I can't see an argument for "poking our heads" into the Oil and Gas board and pointing out to struggling new investors that there are lots of other sectors to invest in.
I'm not a HYP purist, but I like reading about the strategy and the need for strategic ignorance.
It's amusing, but counter-productive, that people have a missionary zeal which impells them to try and convert HYPers to some other "better" strategy.
regards
Howard
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- Lemon Half
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Re: Variations on PYADs HYP strategy
Howard wrote:
It's amusing, but counter-productive, that people have a missionary zeal which impels them to try and convert HYPers to some other "better" strategy.
Sorry Howard, but you've misunderstood me.
I've never said that any given strategy is 'better' than another - just that where a particular income-strategy might not suit an investor, that there may be a different strategy that might suit them better....
It's interesting that you use the words 'missionary zeal' and 'convert' though....
Go back and read Ian's post, and please read it whilst remembering that he's a big proponent of the HYP strategy -
In point of fact, the 'not happy' camp should stay out of equities all together. If you cannot accept the possibility of even one single 100% loss, equities are not for you.
https://www.lemonfool.co.uk/viewtopic.php?f=31&t=16895&start=20#p211452
It seems that I'm being told that if I personally wasn't 'happy' with the HYP Strategy, then I should simply forget about equity-investment for good - but doing so would have meant that I wouldn't have found the strategy that I'm currently using, and that I'm now entirely happy with....and it sounds like you're suggesting that shining a light on such bad advice would actually be inappropriate.....
It seems that when you're aiming your 'missionary zeal' gun, then perhaps your sights may sometimes need setting to a different set of targets....
Cheers,
Itsallaguess
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- Lemon Quarter
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Re: Variations on PYADs HYP strategy
Itsallaguess wrote:It seems that when you're aiming your 'missionary zeal' gun, then perhaps your sights may sometimes need setting to a different set of targets....
Cheers,
Itsallaguess
Yes, my comments were aimed more widely at those who can't resist having a go at HYPers. I didn't mean to single you out.
And I do admit that a bit of controversy makes the Lemon Fool an interesting group of forums. It would be sad if we all agreed about everything!
regards
Howard
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- Lemon Half
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Re: Variations on PYADs HYP strategy
Howard wrote:Itsallaguess wrote:
It seems that when you're aiming your 'missionary zeal' gun, then perhaps your sights may sometimes need setting to a different set of targets....
Yes, my comments were aimed more widely at those who can't resist having a go at HYPers. I didn't mean to single you out.
And I do admit that a bit of controversy makes the Lemon Fool an interesting group of forums. It would be sad if we all agreed about everything!
Thanks Howard.
Cheers,
Itsallaguess
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Re: Variations on PYADs HYP strategy
Itsallaguess wrote:Go back and read Ian's post, and please read it whilst remembering that he's a big proponent of the HYP strategy
Yes, I use the HYP strategy and I do believe it works for me. But my responses, to Dod101 from which your inaccurate assessment is made, is a refutation of the arguments used against HYP, being the usual straw men arguments that are always applied. I was not suggesting and nor have I ever suggested that the HYP Strategy was always superior and was for every investor the best choice, regardless of investment goals and individual temperament. I cannot say the same about the arguments used to knock the HYP Strategy.
Itsallaguess wrote:In point of fact, the 'not happy' camp should stay out of equities all together. If you cannot accept the possibility of even one single 100% loss, equities are not for you.
https://www.lemonfool.co.uk/viewtopic.php?f=31&t=16895&start=20#p211452
It seems that I'm being told that if I personally wasn't 'happy' with the HYP Strategy, then I should simply forget about equity-investment for good
I said absolutely nothing of the sort!
Ian
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- Lemon Half
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Re: Variations on PYADs HYP strategy
Alaric wrote:tjh290633 wrote:The first group ought to keep their investments in Investment Trusts or some other form of collective investment.
For the valid advocacy of a long term hold and forget strategy, why the exclusion of investment trusts from consideration?
You can consider them on this board to your heart's content, as you well know.
You can run an IT high yield portfolio alongside an all equity portfolio if you wish to back it both ways. Just discuss and report on it on the appropriate board.
TJH
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- Lemon Quarter
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Re: Variations on PYADs HYP strategy
Dod101 wrote:Surely no one would be happy to have a loss, ...
Of course they wouldn't. But losses in the underlying investments held by people's portfolios are basically inevitable. The differences lie in how visible those losses are to the investor and how the investor tries to minimise them, and broadly speaking, there are three solutions:
1) Direct holding and management of the investments, checking them frequently and carefully to try to minimise the losses.
2) Direct holding and management of the investments, not doing that careful, frequent checking, but instead just relying on the statistical behaviour of investments to swamp the losses with profits.
3) Indirect holding and management of the investments (by using ITs or other funds), employing the fund's manager to do the frequent, careful checking.
All three have things about them that people are liable to be unhappy about - to name some of them: approach 1 the time and effort required for the checking, the fact that the losses are highly visible to the investor, and the risk that the investor's judgement about what to sell out of, when and what to buy in its place actually ends up losing money; approach 2 the fact that the losses are highly visible to the investor and a somewhat different risk that the investor's judgement about those things actually ends up losing money; approach 3 the cost of employing the manager, the risk that the investor misjudges the manager's ability to make good judgements about those things and the fact that the investor is basically relinquishing control.
It's a question of picking the approach that overall, you're least unhappy with - not of avoiding all possible sources of unhappiness. So for instance, I'm definitely not happy about my Carillion loss, which is the second total loss I've experienced in 16 years of HYP being a major part of my investment strategy, but I would be even less happy about doing 8 years of careful watching of all my HYP shareholdings than I am about one such loss - especially as my fairly high level of diversification means that it was only a pretty small percentage of my investment portfolio. And at least at present, I like the fact that I'm in control of what I'm invested in, and especially (but not only) the fact that it enables me to choose which earnings I live off according to my ethical standards.
So I prefer approach 2, and HYP strategies seem to me to be very much designed for those investors who have that preference: they'll generally check only infrequently and do a small set of checks (at least compared with some shares-held-directly strategies), and they stress diversification to make the statistics less variable. But I do not expect every investor to share my preference... I would strongly advise any investor who prefers approach 1 or 3 to avoid HYP strategies!
Gengulphus
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Re: Variations on PYADs HYP strategy
Thanks Gengulphus. I could not have put it much better myself.
I try to practise the first solution and am not in the least unhappy about it. I happen to have the time and the interest to really quite enjoy that approach.
Investors should read that post.
Dod
I try to practise the first solution and am not in the least unhappy about it. I happen to have the time and the interest to really quite enjoy that approach.
Investors should read that post.
Dod
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- Lemon Quarter
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Re: Variations on PYADs HYP strategy
solution one for me , for total returns.
i spend a few hours a day most days , mainly maintaining a database of company shares that interest me.
as time goes by , i can envisage moving more towards investment trusts and away from growth shares , retaining my choice of reliable quality dividend payers.
i spend a few hours a day most days , mainly maintaining a database of company shares that interest me.
as time goes by , i can envisage moving more towards investment trusts and away from growth shares , retaining my choice of reliable quality dividend payers.
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- Lemon Slice
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Re: Variations on PYADs HYP strategy
A mix between 2 and 3. I used to trade very actively including the use of equity options. I have gradually chosen to reduce risk and/or volatility (having a sense of having won the game why play so much) and now sometimes don’t look at the portfolios much more than once a month (the once a month is month end checks that all dividends have been received etc).
I’m mostly in equities with a 50:50 split between direct holdings (many of which are high yield) and global ITs/ETFs.
I do have a small index linked pension and could take the state pension but chose to defer it. (So these are bond like diversity).
Best wishes,
Steve
I’m mostly in equities with a 50:50 split between direct holdings (many of which are high yield) and global ITs/ETFs.
I do have a small index linked pension and could take the state pension but chose to defer it. (So these are bond like diversity).
Best wishes,
Steve
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- Lemon Slice
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Re: Variations on PYADs HYP strategy
Option 3, in a passive, gives you the return of the asset class, the beta, without anyone having to fret about frequent checking, which keeps costs down.
That is the bit that people hope to get alpha, the additional return over the index either from dividends or capital, but usually causes them grief.
If you look at the information ratio for a collective it will tell you whether the additional risk has been rewarded.
I suspect that calculation for any PYAD type HYP will be negative. The additional risk of selecting a small subset of the asset class has not been rewarded by additional return over and above that offered by the asset class as a whole.
That is the bit that people hope to get alpha, the additional return over the index either from dividends or capital, but usually causes them grief.
If you look at the information ratio for a collective it will tell you whether the additional risk has been rewarded.
I suspect that calculation for any PYAD type HYP will be negative. The additional risk of selecting a small subset of the asset class has not been rewarded by additional return over and above that offered by the asset class as a whole.
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