Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

General discussions about equity high-yield income strategies
GoSeigen
Lemon Quarter
Posts: 4350
Joined: November 8th, 2016, 11:14 pm
Has thanked: 1590 times
Been thanked: 1579 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223311

Postby GoSeigen » May 21st, 2019, 4:22 am

MDW1954 wrote:You can humour me all you like, but I'm not going to engage with someone who thinks that making mocking references to an 11-year old's fluffy toys is an acceptable debating tactic.

Learn some manners.

This, sir, seems to be your issue, not mine.

I know what I do, and why I do it. And I know why I continue to hold (say) Greggs (bought at £4.17 in 2013 and now worth £21.18) and Compass (£5.75 and £18.04) when you and others would presumably have me switch into something else.


Which was precisely my point earlier: it suits you [and no criticism there at all] but you apparently have nothing to say about how it might be useful to anyone else.


GS

Alaric
Lemon Half
Posts: 6033
Joined: November 5th, 2016, 9:05 am
Has thanked: 20 times
Been thanked: 1399 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223375

Postby Alaric » May 21st, 2019, 9:53 am

If you are investing for income, your future returns will come from the initial amount of income and the rate at which it will increase in the future. The former is mostly known and the second less so. If you've held a share for a number of years, you will have the history of dividend increases. Dividing the current income by the historic price is a convenient short cut metric which identifies the increases.

In current conditions, the "market" seemingly has a preference for Companies with good records of dividend increase. The result of this drives their share prices to a premium with the subsequent reduction in yield. Thus Greggs, Compass etc. as mentioned by an earlier poster.

Itsallaguess
Lemon Half
Posts: 9129
Joined: November 4th, 2016, 1:16 pm
Has thanked: 4140 times
Been thanked: 10023 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223386

Postby Itsallaguess » May 21st, 2019, 10:29 am

MDW1954 wrote:
I think of it [yield-on-cost] in terms of 'additional information', using 'information' in the statistical sense that it has now, as opposed to when I did university-level stats 40 years ago.

If I compare two yields on Hargreaves Lansdown, say, and contemplate switching from the lower yielder to the higher yielder, as you seem to be advocating, then the only 'information' (again in that sense) that I have about the higher-yielder is its yield. About the lower-yielder, though, I have more 'information': I have held it for several years. I 'know' it. How best to summarise this 'information'? Ideally in a single metric? I happen to use bought-cost yield, but I could fire up spreadsheets and use XIRRs or all manner of things.

So invariably, there's premium for the share you hold (the devil you 'know'), versus the unknown share.

Now, I could investigate the unknown share, and spend hours acquiring a comparable state of knowledge. Across multiple shares, that is a lot of hours. Which I (mostly) don't have. Bought-cost yield is a handy heuristic, which I often find brings me to (mostly) the same place.


Thanks - this is the sort of detail that I think is useful.

Before we go any further with this though, can I please ask a related question -

If you've got some investment capital that you wish to deploy as part of your income-portfolio, and you're whittled down to a short-list of let's say three options, none of which you've owned before, what general 'historical performance' measures might you use to compare those final three options, and how long would you take gaining visibility of those options?

Cheers,

Itsallaguess

Julian
Lemon Quarter
Posts: 1385
Joined: November 4th, 2016, 9:58 am
Has thanked: 532 times
Been thanked: 676 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223397

Postby Julian » May 21st, 2019, 10:58 am

tjh290633 wrote:...
The idea here was that one might simplify the portfolio by selling at either end, getting rid of both the lower yield shares and those with very high yields, to end up with a 20-share portfolio. That might be too indiscriminate, so looking at sectors, to ensure that one kept some of each, could be a way forward.

Just an idle thought.

TJH

The idle though that I have been having quite often over the last year or two until I actually got to the point of doing it for real yesterday and discovered that it wasn't as simple as I thought.

Your situation might be different but for me the vast majority of my investments are outside of either ISA or SIPP tax wrappers(*). I spent a good 5 or 6 hours yesterday at my computer(**) going through my portfolio, looking at yields and current capital that could be released, ranking all my holdings by current yield, and knocking up quite a few spreadsheet models where I could look at the effects of various combinations of high-low "nibble both ends" scenarios that you mention. My models allowed me to see total capital raised from sales, total capital gain/loss arising from those sales, total income lost from sales, total income generated by re-investment of some or all of the capital into new high-yield instruments (in my models those were all investment trusts) and finally figures for the net income gain/loss from whatever I was modelling and any surplus capital left over (my models allowed for me not re-investing all the capital released from the sales in case I wanted to siphon some of it off into my growth/tracker portfolio).

The gotcha that jumped out and whacked me was capital gains tax. Even offsetting some stonking losses in percentage terms from Centrica sales and some quite modest losses from SSE sales I was still not able to "harvest" very much "yield-upwards" trades from my Diageo and Unilever holdings because the stored capital gains there were such that extremely light sell-downs of those holdings were taking me right up to the £12,000 2019/2020 CGT allowance. (My DGE and ULVR holdings are the two lowest yielders in my HYP and are standing at 237% and 155% gains respectively i.e. DGE is more than a 3-bagger and ULVR about a 2-and-a-half-bagger - all Friday afternoon prices vs my S104 costs.)

I ended up dumping SSE and CNA across the board. Within my SIPP I did actually go further and implement the "nibble both ends" idea with wholesale sell-offs not only of CNA and SSE at the top but also ULVR, TATE and AZN at the bottom. The net effect was a 5.8% increase in my forecast total annual SIPP income. (My forecasts don't use broker forecasts, I forecast myself where my forecast is simply that next year's payout will be equal to the most recently declared interim+final or most recently declared 4 quarterlies as applicable with special adjustments always downwards if a rebasement is widely anticipated so I think quite conservative forecasting.)

My SIPP activities yesterday aren't quite as drastic as they sound. My SIPP is my smallest account and I still hold loads of ULVR, TATE , DGE and AZN in other accounts. I thought I might as well use the SIPP as a test bed. It's the last line of defence in my finances, hopefully never to be drawn from, but if it is I want as much stability as I can get which is why I shifted all the capital released into a combination of City IT (heaviest weighting), Murray International, Merchants IT and Henderson Far East (lightest weighting because I don't want to chase yield too much). Yes, I've probably given up some big yield increases from the likes of DGE and ULVR but the IT yields have still been growing at something like 6% for CTY, 3% for MYI, 4.8% for MRCH and 3.8% for HFEL (last year figures). All of those are above inflation and all have fairly healthy revenue reserves to buffer bad years although with the internationalists, and to some extent the UK ones due to non-GDP-denominated dividends, I suspect that continued political turmoil in the UK might well give some positive currency effects to the earnings stream.

I now need to work out what further steps, if any, to take with my main HYP and how/if I re-invest the proceeds of the total CNA & SSE sell-outs. I also have a lot of contract notes to enter into my CGT narratives and file away for my tax return :(.

- Julian

(*) Not because I've failed to make full use of ISAs and some use of SIPPs but because my investments are reasonably substantial.

(**) It would probably have been more like 3 or 4 hours if I hadn't also been glued to these forums at the same time!

Julian
Lemon Quarter
Posts: 1385
Joined: November 4th, 2016, 9:58 am
Has thanked: 532 times
Been thanked: 676 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223406

Postby Julian » May 21st, 2019, 11:50 am

Julian wrote:... the IT yields have still been growing at something like 6% for CTY, 3% for MYI, 4.8% for MRCH and 3.8% for HFEL (last year figures). ...

Correction to the above after edit window closed - "yields" was obviously meant to read "dividend payouts".

- Julian

moorfield
Lemon Quarter
Posts: 3523
Joined: November 7th, 2016, 1:56 pm
Has thanked: 1546 times
Been thanked: 1402 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223417

Postby moorfield » May 21st, 2019, 12:26 pm

Interested in taking this another angle and discussing risks of investing in one investment trust only vs. a portfolio of self selected (HYP) shares.

For arguments sake let’s say I’m considering buying just CTY or MRCH, and rolling up the dividends each year until retirement.

Wise, or Unwise?

Julian
Lemon Quarter
Posts: 1385
Joined: November 4th, 2016, 9:58 am
Has thanked: 532 times
Been thanked: 676 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223423

Postby Julian » May 21st, 2019, 12:53 pm

moorfield wrote:Interested in taking this another angle and discussing risks of investing in one investment trust only vs. a portfolio of self selected (HYP) shares.

For arguments sake let’s say I’m considering buying just CTY or MRCH, and rolling up the dividends each year until retirement.

Wise, or Unwise?

Personally it would make me uncomfortable. I'm not going for the level of diversification that I have in my HYP (23 companies, was 25 until yesterday when I dumped CNA and SSE and has also shrunk in the past from dumping 3 or 4 other shares over the last few years with no new holdings added) but I'm not going all-in on one IT. I also don't equally weight my IT investments but am open to arguments there.

Right now I have two core holdings which have the heaviest weightings, CTY to anchor my UK-centric exposure and MYI to anchor my international exposure. Around those I have reasonable holdings in a few others such as MRCH to boost yields, SOI (Schroeders Oriental Income), HFEL (Henderson Far East) and AAIF (Aberdeen Asian Income). I also have some diversity in my UK-centric holdings from a reasonable-sized EDIN holding bought in the Woodford days and not added to much and a few others where I've dipped a toe into the water such as TMPL (Temple Bar), DIG (Dunedin Income Grorth) EAT (European Asset Trust) and SCAM (Scottish American - unfortunate ticker symbol!) that I bought at various points over the years. I might yet build out some of those holdings further if the yields look acceptable at the time and depending what current re-evaluation of their credentials says to me. Certainly yield-wise EDIN, DIG and EAT would give me no qualms at current prices but I would want to re-evaluate other aspects before adding extra funds.

In the UK-centric part of my HYP though CTY, with its 50+ year record of growing dividends, is my benchmark that any alternative UK-centric topup candidate needs to meet or at least get close to otherwise it is just too tempting to add more into CTY.

When I get to my next round of IT investment I'm going to revisit my own thread here (viewtopic.php?f=54&t=17103) as my starting point to look for diversification candidates to consider.

- Julian

tjh290633
Lemon Half
Posts: 8208
Joined: November 4th, 2016, 11:20 am
Has thanked: 913 times
Been thanked: 4096 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223462

Postby tjh290633 » May 21st, 2019, 4:47 pm

Julian wrote:
tjh290633 wrote:...
The idea here was that one might simplify the portfolio by selling at either end, getting rid of both the lower yield shares and those with very high yields, to end up with a 20-share portfolio. That might be too indiscriminate, so looking at sectors, to ensure that one kept some of each, could be a way forward.

Just an idle thought.

TJH

The idle though that I have been having quite often over the last year or two until I actually got to the point of doing it for real yesterday and discovered that it wasn't as simple as I thought.

Your situation might be different but for me the vast majority of my investments are outside of either ISA or SIPP tax wrappers(*). I spent a good 5 or 6 hours yesterday at my computer(**) going through my portfolio, looking at yields and current capital that could be released, ranking all my holdings by current yield, and knocking up quite a few spreadsheet models where I could look at the effects of various combinations of high-low "nibble both ends" scenarios that you mention. My models allowed me to see total capital raised from sales, total capital gain/loss arising from those sales, total income lost from sales, total income generated by re-investment of some or all of the capital into new high-yield instruments (in my models those were all investment trusts) and finally figures for the net income gain/loss from whatever I was modelling and any surplus capital left over (my models allowed for me not re-investing all the capital released from the sales in case I wanted to siphon some of it off into my growth/tracker portfolio).

The gotcha that jumped out and whacked me was capital gains tax. Even offsetting some stonking losses in percentage terms from Centrica sales and some quite modest losses from SSE sales I was still not able to "harvest" very much "yield-upwards" trades from my Diageo and Unilever holdings because the stored capital gains there were such that extremely light sell-downs of those holdings were taking me right up to the £12,000 2019/2020 CGT allowance. (My DGE and ULVR holdings are the two lowest yielders in my HYP and are standing at 237% and 155% gains respectively i.e. DGE is more than a 3-bagger and ULVR about a 2-and-a-half-bagger - all Friday afternoon prices vs my S104 costs.)

I ended up dumping SSE and CNA across the board. Within my SIPP I did actually go further and implement the "nibble both ends" idea with wholesale sell-offs not only of CNA and SSE at the top but also ULVR, TATE and AZN at the bottom. The net effect was a 5.8% increase in my forecast total annual SIPP income. (My forecasts don't use broker forecasts, I forecast myself where my forecast is simply that next year's payout will be equal to the most recently declared interim+final or most recently declared 4 quarterlies as applicable with special adjustments always downwards if a rebasement is widely anticipated so I think quite conservative forecasting.)

My SIPP activities yesterday aren't quite as drastic as they sound. My SIPP is my smallest account and I still hold loads of ULVR, TATE , DGE and AZN in other accounts. I thought I might as well use the SIPP as a test bed. It's the last line of defence in my finances, hopefully never to be drawn from, but if it is I want as much stability as I can get which is why I shifted all the capital released into a combination of City IT (heaviest weighting), Murray International, Merchants IT and Henderson Far East (lightest weighting because I don't want to chase yield too much). Yes, I've probably given up some big yield increases from the likes of DGE and ULVR but the IT yields have still been growing at something like 6% for CTY, 3% for MYI, 4.8% for MRCH and 3.8% for HFEL (last year figures). All of those are above inflation and all have fairly healthy revenue reserves to buffer bad years although with the internationalists, and to some extent the UK ones due to non-GDP-denominated dividends, I suspect that continued political turmoil in the UK might well give some positive currency effects to the earnings stream.

I now need to work out what further steps, if any, to take with my main HYP and how/if I re-invest the proceeds of the total CNA & SSE sell-outs. I also have a lot of contract notes to enter into my CGT narratives and file away for my tax return :(.

- Julian

(*) Not because I've failed to make full use of ISAs and some use of SIPPs but because my investments are reasonably substantial.

(**) It would probably have been more like 3 or 4 hours if I hadn't also been glued to these forums at the same time!

Julian, it strikes me that your best approach would be to start realising capital gains, sufficient to fund his and hers ISAs (if applicable) each year, or to use up your CGT allowance(s) in full. It might take a few years, but getting it all under tax shelters ought to be a first priority.

I used up my PEP and ISA allowances over a good few years, so I have virtually no concerns about income tax or CGT, but IHT is ever present. I can mitigate some of that by charitable bequests, but not all of it.

The saying is don't let the tax tail wag the investment dog. Nevertheless, don't let your allowances go to waste.

TJH

Itsallaguess
Lemon Half
Posts: 9129
Joined: November 4th, 2016, 1:16 pm
Has thanked: 4140 times
Been thanked: 10023 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223465

Postby Itsallaguess » May 21st, 2019, 4:51 pm

moorfield wrote:
Interested in taking this another angle and discussing risks of investing in one investment trust only vs. a portfolio of self selected (HYP) shares.

For arguments sake let’s say I’m considering buying just CTY or MRCH, and rolling up the dividends each year until retirement.

Wise, or Unwise?


I think it would generally be a bad idea to invest for income in a single UK-centric Investment Trust.

If you look closely at the make-up of City of London or Merchants, they are really quite focussed at sector-level -

City have nearly 50% in just two sectors - Financials (27%) and Consumer Goods (20.5%) - https://www2.trustnet.com/Factsheets/Fa ... n&skipre=1

Merchants have nearly 50% in two sectors as well - Financials (29.4%) and Industrials (18.3%) - https://www2.trustnet.com/Factsheets/Fa ... n&skipre=1

It's definitely worth spending some time on the above Trustnet 'breakdown' pages if anyone is interested in extending their portfolio diversification with income-oriented investment trusts, especially if we've already got holdings of single-company HYP stocks that we may well simply be replicating further by some of the more UK-centric offerings.

MorningStar also have a good 'instant x-ray' tool that allows you to enter multiple tickers (or single tickers...) and get a good breakdown of x-ray components such as cyclical/defensive make-ups and potential geographical splits -

http://tools.morningstar.co.uk/uk/xray/ ... dings.aspx

I also personally wouldn't be too comfortable with single-entity risk if I was invested in a single Investment Trust, no matter how good the underlying investments or the (current...) manager...

Given the ease that we can research different sectoral and geographical slants with income-IT's, I think it would be a bit of a wasted opportunity not to diversify into a wider pool of them, to try and help achieve as globally and sectorally diverse an income-stream as desired.

Cheers,

Itsallaguess

88V8
Lemon Half
Posts: 5769
Joined: November 4th, 2016, 11:22 am
Has thanked: 4098 times
Been thanked: 2560 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223503

Postby 88V8 » May 21st, 2019, 8:15 pm

Itsallaguess wrote:If you look closely at the make-up of City of London or Merchants, they are really quite focussed at sector-level -
City have nearly 50% in just two sectors - Financials (27%) and Consumer Goods (20.5%)
Merchants have nearly 50% in two sectors as well - Financials (29.4%) and Industrials (18.3%) -


I do hold both CTY and MRCH but the typical problem with adding trusts to an HYP is of course duplication of the usual suspects.
Which I have dealt with by ignoring it :o

And you mention managers. I think this feeds in to Dod's concept of 'culture', What happens when managers change or retire. Wither then the impeccable record.

V8

moorfield
Lemon Quarter
Posts: 3523
Joined: November 7th, 2016, 1:56 pm
Has thanked: 1546 times
Been thanked: 1402 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223507

Postby moorfield » May 21st, 2019, 8:28 pm

Itsallaguess wrote:
If you look closely at the make-up of City of London or Merchants, they are really quite focussed at sector-level -

City have nearly 50% in just two sectors - Financials (27%) and Consumer Goods (20.5%) - https://www2.trustnet.com/Factsheets/Fa ... n&skipre=1

Merchants have nearly 50% in two sectors as well - Financials (29.4%) and Industrials (18.3%) - https://www2.trustnet.com/Factsheets/Fa ... n&skipre=1



I think you are quoting industry classifications here rather than sectors, as many HYPsters recognize them. Those weightings don't surprise me, after all there are more sectors to choose from within Financials and Consumer Goods, but they are a reminder that HYPsters can (and should) have more control over their relative weights. I use a 20% limit in my portfolio and fwiw here are my own weightings at industry level: viewtopic.php?p=190660#p190660 - approx. 35% capital in / 40% income from those top two. It would be interesting to see those ITs broken down at sector level also.

Julian
Lemon Quarter
Posts: 1385
Joined: November 4th, 2016, 9:58 am
Has thanked: 532 times
Been thanked: 676 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223597

Postby Julian » May 22nd, 2019, 10:12 am

tjh290633 wrote:Julian, it strikes me that your best approach would be to start realising capital gains, sufficient to fund his and hers ISAs (if applicable) each year, or to use up your CGT allowance(s) in full. It might take a few years, but getting it all under tax shelters ought to be a first priority.

I used up my PEP and ISA allowances over a good few years, so I have virtually no concerns about income tax or CGT, but IHT is ever present. I can mitigate some of that by charitable bequests, but not all of it.

The saying is don't let the tax tail wag the investment dog. Nevertheless, don't let your allowances go to waste.

TJH

Terry,

Absolutely, on all points. I began to realise that using my annual CGT allowance each year was sensible about 5 years ago but it hasn't quite become ingrained yet. On something like 8th April this year I did post an annoyed-at-myself aside in one of my replies to some post on this board because in replying I had suddenly realised that I had completely forgotten to make the 2018/2019 CGT-realisation trades that I had planned to make. I really kicked myself for quite a few days afterwards for having let the tax-year-end slip by without taking my intended action. Oh well, hopefully I won't make that mistake again.

On ISAs I have been lucky enough in previous years to have had sufficient income coming in from my HYP that I didn't need to make capital selloffs to fund my ISA contributions each year, even at the point when the limit had risen to well above the original (I think) £7,000 per year. With the current £20,000 allowance and my having sold off a large chunk of the shares in my ISA feeeder account (one of my broker accounts dedicated entirely to generating the income I used for my annual ISA subscriptions and the one that I decimated to buy a holiday home) I will need to start selling holdings in my wider HYP in the 2020/2021 tax year to continue making full use of the allowance each year and I shall definitely be doing that but even so I am unlikely to ever get all my investments into an ISA wrapper before I die, unless of course I live an extraordinarily long time (and that is my intention :)), the ISA allowances increase significantly, or the capital value of my investments decreases significantly. Still, the objective is to get as much as possible in there as quickly as regulations allow. An added factor of course is that none of us can know how long ISAs will continue for, or if they do continue whether the limit will ever be cut back down again, so it really is a case of "grab as much as you can while you can".

I have diligently made use of my full ISA allowance every year since ISAs were launched but PEPs are another matter and maybe a lesson learned that others might want to consider. At the time I certainly earned enough to fully subscribe to a full PEP allowance, including adding a single-company one on the side when that was introduced, as I was fully aware of the regulations and allowances at the time. At that point in my life however I was fixated on paying off my mortgage as quickly as I could. My logic at the time was that when paying something like a 9% interest rate on a mortgage and maybe even higher at times, and with MIRAS not covering most of my mortgage, it was something like a 15% gross return on capital used to pay down the mortgage. What I didn't factor in was the longer-term view (I was young and wanted instant gratification even from savings). In retrospect perhaps I would have been better to make sure I had fully used my PEP allowances first since I had decades to pay down the mortgage but the PEPs where a buy-it-while-it-lasts opportunity that would have introduced me to the benefits of compounding much earlier (assuming I invested wisely) and would have provided residual benefit every year thereafter. Oh well. I am where I am, and where I am now is not exactly a bad place, so just a vague "maybe I could have done better" thought. It's all water under the bridge now.

- Julian

OLTB
Lemon Quarter
Posts: 1343
Joined: November 4th, 2016, 9:55 am
Has thanked: 1339 times
Been thanked: 607 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223601

Postby OLTB » May 22nd, 2019, 10:23 am

Julian wrote:At that point in my life however I was fixated on paying off my mortgage as quickly as I could. My logic at the time was that when paying something like a 9% interest rate on a mortgage and maybe even higher at times, and with MIRAS not covering most of my mortgage, it was something like a 15% gross return on capital used to pay down the mortgage. What I didn't factor in was the longer-term view (I was young and wanted instant gratification even from savings). In retrospect perhaps I would have been better to make sure I had fully used my PEP allowances first since I had decades to pay down the mortgage but the PEPs where a buy-it-while-it-lasts opportunity that would have introduced me to the benefits of compounding much earlier (assuming I invested wisely) and would have provided residual benefit every year thereafter. Oh well. I am where I am, and where I am now is not exactly a bad place, so just a vague "maybe I could have done better" thought. It's all water under the bridge now.

- Julian


Hi Julian

Just reading your response to TJH, this comment stood out for me as I am thinking of upping my mortgage repayments!

As a slight deviation, I turn 50 later this year and really wish to repay my mortgage as soon as possible (from an internal peace of mind position) as currently it runs until I'm 62. However, I also realise that I need to save a lot in order to have a reasonable income in retirement. My mortgage interest rate is fixed and pretty low (1.99%) for the next four years so I have also been wondering if repaying it is such a good idea.

Perhaps I will use any spare income into topping up my ISA instead given what you say your experience has been. I don't have a lot of spare income as income pretty much matches outgoings, but I will do what I can, when I can.

Thanks again for your thoughts.

Cheers, OLTB.

Itsallaguess
Lemon Half
Posts: 9129
Joined: November 4th, 2016, 1:16 pm
Has thanked: 4140 times
Been thanked: 10023 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223623

Postby Itsallaguess » May 22nd, 2019, 11:32 am

OLTB wrote:
Julian wrote:
At that point in my life however I was fixated on paying off my mortgage as quickly as I could. My logic at the time was that when paying something like a 9% interest rate on a mortgage and maybe even higher at times, and with MIRAS not covering most of my mortgage, it was something like a 15% gross return on capital used to pay down the mortgage.

What I didn't factor in was the longer-term view (I was young and wanted instant gratification even from savings). In retrospect perhaps I would have been better to make sure I had fully used my PEP allowances first since I had decades to pay down the mortgage but the PEPs where a buy-it-while-it-lasts opportunity that would have introduced me to the benefits of compounding much earlier (assuming I invested wisely) and would have provided residual benefit every year thereafter.

Oh well. I am where I am, and where I am now is not exactly a bad place, so just a vague "maybe I could have done better" thought. It's all water under the bridge now.


Just reading your response to TJH, this comment stood out for me as I am thinking of upping my mortgage repayments!

As a slight deviation, I turn 50 later this year and really wish to repay my mortgage as soon as possible (from an internal peace of mind position) as currently it runs until I'm 62. However, I also realise that I need to save a lot in order to have a reasonable income in retirement. My mortgage interest rate is fixed and pretty low (1.99%) for the next four years so I have also been wondering if repaying it is such a good idea.


Interesting discussion, but having paid my mortgage off some years ago now I've got to say that I've had the opposite experience.

During my early HYP years, as I was initially building my first income-portfolio and learning the ropes, I had a decision to make to either plough on full-tilt into aggressively investing any spare funds from accumulated dividends and ongoing wages, when spare cash was available, or whether to address a mortgage that still had a relatively substantial sum outstanding on it.

Interest rates weren't dramatically high, and mortgage payments were manageable, but I always had the nagging feeling that I'd get more 'benefit' from paying off my mortgage than I could perhaps ever actually 'quantify' using a calculator...

This has definitely turned out to be the case for me personally, and whilst I had a 'feeling' that the emotional-benefit to me (never mind any actual, quantifiable financial benefit...) of being mortgage-free would be something that I'd enjoy, the actual post-pay-off period has been a time where I've experienced far less work-related stress than during my mortgage-payment years, even though during that period I've changed posts a couple of times and would have expected the work-related stress issues to have at least been maintained, or even grown to a certain extent. I certainly do see the two events as being intrinsically linked...

So I think that personally, I'll always take the view that there are many things in this world that can't be quantified using a pen and paper, and sometimes the longer-term emotional-benefits of our financial decisions can often actually outweigh the actual real-life financial aspects, and I think paying off a main-home mortgage is one of those instances, or at least it certainly has been in my case..

I can see the 'opportunity cost' angle with regards to tax-shelters, of course, and it's difficult to come to any great conclusion with these questions that might fit every one of us, especially given the benign interest-rate environment that we're currently living in, and with little idea regarding the future direction that they might go in, but I just wanted to mention my own experience with this subject, because if I had my time again I would do exactly the same thing and look to remove the mortgage debt as quickly as I could.

This has been a great thread by the way, both to read about other peoples experiences in such diverse areas, and also to contribute to. I certainly think one of the biggest benefits of the High Yield Strategies Board is that we're not tied to the tighter guidance on HYP Practical, and I think this thread is testament to that.

Cheers,

Itsallaguess

kempiejon
Lemon Quarter
Posts: 3488
Joined: November 5th, 2016, 10:30 am
Has thanked: 1 time
Been thanked: 1145 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223630

Postby kempiejon » May 22nd, 2019, 11:55 am

Itsallaguess wrote:Interest rates weren't dramatically high, and mortgage payments were manageable, but I always had the nagging feeling that I'd get more 'benefit' from paying off my mortgage than I could perhaps ever actually 'quantify' using a calculator...

This has definitely turned out to be the case for me personally, and whilst I had a 'feeling' that the emotional-benefit to me (never mind any actual, quantifiable financial benefit...) of being mortgage-free would be something that I'd enjoy, the actual post-pay-off period has been a time where I've experienced far less work-related stress than during my mortgage-payment years, even though during that period I've changed posts a couple of times and would have expected the work-related stress issues to have at least been maintained, or even grown to a certain extent. I certainly do see the two events as being intrinsically linked...


And for me the opposite is true, we took a mortgage 5 or 6 years ago and did add most of our spare cash and I sold some investments to CGT harvest so bring the LTV down for the cheaper rates. I have a few years of investing experience and my spreadsheets so knew I could get a few multiples of the mortgage rate back as my return so I opted to invest rather than overpay. I'm also adding the maximum to the SIPP so I have the tax deferment advantage their too. We have added a lump sum and I might do again but that's more to do with the S.O. not interested in investing and letting cash accumulate. As the cash rates are so poor the overpay makes sense. We could settle the mortgage but that'd cost me some of my ISAd funds.
Oh and my job has got much easier so I'm more chilled as an employee anyway. Perhaps a high stress for high reward job and at risk of burnout and I'd think differently.

OhNoNotimAgain
Lemon Slice
Posts: 767
Joined: November 4th, 2016, 11:51 am
Has thanked: 71 times
Been thanked: 147 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223632

Postby OhNoNotimAgain » May 22nd, 2019, 12:00 pm

tlf67482 wrote:I have had a HYP for a good fifteen years or so.

Looking at my overall performance over this period I am at a current yield of 5.5% and a current unrealised profit of 25% (and a realised profit of 15%). Comparing to my Pension funds and Fidelity Funds I have, my HYP is probably underperforming these by 25%.

Even though timing shouldn't be a overall factor I have been very unluckly with this due in the banking sector and now the utility sector. Also in retrospect some choices may not have been the best for a HYP but I was certainly not alone in making the same mistakes. There are also some dot com disasters mixed in with my figures which are dragging the figures down somehwat.

I have some uninvested funds but I am struggling to find new sectors / new shares without breaking the rule of not over investing in specific shares or sectors (lesson learnt from banking share crash) or just having lost faith in my choices. To be honest I am already quite a bit overweight on Banks (LLOY) already and tempted to add more!

Out of my current holdings only really VOD and BT are showing a 20-30% loss have a few around 10% loss UU, EMG and LLOY and the rest are a few small loss, a few small gain and the rest reasonable gains.

My main current concerns are I have United Utilities showing a 10% loss and SSE a 2% loss and National Grid showing a 55% profit. My gut feeling is get rid of UU and SSE and keep a very close eye on NG am I mad? Should I be ignoring the current political environment?

Am I better off just converting to IUKD UK Dividend and IDVY Euro Dividend iShares to reduce the worry a bit and spread the risk a bit more but then again apart from the specific shares above it is not all bad and income is quite healthy.

I have 22 shares, 18 sectors (16 if SSE/UU are sold with the sector names I use).


Or, do I keep hoping to get some alpha or just accept the reality that beta is easy and cheap to achive and usually beats alpha anyway.

Julian
Lemon Quarter
Posts: 1385
Joined: November 4th, 2016, 9:58 am
Has thanked: 532 times
Been thanked: 676 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223635

Postby Julian » May 22nd, 2019, 12:06 pm

Itsallaguess wrote:This has been a great thread by the way, both to read about other peoples experiences in such diverse areas, and also to contribute to. I certainly think one of the biggest benefits of the High Yield Strategies Board is that we're not tied to the tighter guidance on HYP Practical, and I think this thread is testament to that.

Cheers,

Itsallaguess

I've been thinking exactly the same thing. Actually I've been thinking 2 things about this thread.

1 - Most importantly I hope that tlf67482 (the original poster who posed the original question that started all of this off) is OK and not frustrated by how the discussions here have unfolded. As someone who has posted a lot in this thread I have always been aware of the OP and have posted some of my contributions in the hope that, even though not all posts are directly addressing the original question, hopefully eavesdropping on "coffee machine conversations" about these various issues (although admittedly mortgage pay-downs are maybe quite off topic but it was me that bought that up so 100% my fault) will still be helpful in framing a general context and benefiting from other's experiences in wrestling with these sorts of dilemmas.

2 - This thread has also reminded me what a great site this place is and has made me suddenly remember quite vividly how bereft I was however many years ago when the other place (The Morley Fool) announced the impending closure of its boards. I had begun to forget how relieved I was at the time to see this site spin up and gain traction and how wonderful it is that so many of the old hands from the other place made the transition, remain active, and keep the community thriving, plus all the other great new contributors who have joined since of course.

All good stuff - assuming we're not actually p*ssing off tlf67482 with any of this.

Edit: Ironically my post made at almost the exact instant that OhNoNotimAgain makes a post directly addressing the original question!

- Julian

tlf67482
2 Lemon pips
Posts: 174
Joined: November 22nd, 2017, 11:23 am
Has thanked: 135 times
Been thanked: 16 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223706

Postby tlf67482 » May 22nd, 2019, 4:01 pm

Julian wrote:1 - Most importantly I hope that tlf67482 (the original poster who posed the original question that started all of this off) is OK and not frustrated by how the discussions here have unfolded.


The thread has gone slightly off topic but there has been plenty of useful replies so no complaints from me.

I am still dithering not sure what to do with SSE/UU and I know this dithering is costing money as the prices are down again.

If anyone has any insights on "iShares Quality Dividend ETFs & What Are The GBP Based Equivalents" viewtopic.php?f=31&t=17742 it would be great as it may help me decide on what to invest in but I am just at a complete loss of what to do at the moment and dont want to make a rash decision.

MDW1954
Lemon Quarter
Posts: 2358
Joined: November 4th, 2016, 8:46 pm
Has thanked: 526 times
Been thanked: 1011 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223757

Postby MDW1954 » May 22nd, 2019, 6:07 pm

Itsallaguess wrote:
MDW1954 wrote:
I think of it [yield-on-cost] in terms of 'additional information', using 'information' in the statistical sense that it has now, as opposed to when I did university-level stats 40 years ago.

If I compare two yields on Hargreaves Lansdown, say, and contemplate switching from the lower yielder to the higher yielder, as you seem to be advocating, then the only 'information' (again in that sense) that I have about the higher-yielder is its yield. About the lower-yielder, though, I have more 'information': I have held it for several years. I 'know' it. How best to summarise this 'information'? Ideally in a single metric? I happen to use bought-cost yield, but I could fire up spreadsheets and use XIRRs or all manner of things.

So invariably, there's premium for the share you hold (the devil you 'know'), versus the unknown share.

Now, I could investigate the unknown share, and spend hours acquiring a comparable state of knowledge. Across multiple shares, that is a lot of hours. Which I (mostly) don't have. Bought-cost yield is a handy heuristic, which I often find brings me to (mostly) the same place.


Thanks - this is the sort of detail that I think is useful.

Before we go any further with this though, can I please ask a related question -

If you've got some investment capital that you wish to deploy as part of your income-portfolio, and you're whittled down to a short-list of let's say three options, none of which you've owned before, what general 'historical performance' measures might you use to compare those final three options, and how long would you take gaining visibility of those options?

Cheers,

Itsallaguess


Apologies for the delayed reply. The answer may disappoint you: probably measures that very similar to those used by other HYPers. The only way in which I *may* differ is that I appear to place a greater reliance on sectoral share price falls than do some others.

Separately, to provide you with fair warning, I may seek your opinion over on the financial software board in connection with logarithmic linear least squares estimation of dividend growth. This has a bearing on the second part of your question, which is why I raise it.

MDW1954

tjh290633
Lemon Half
Posts: 8208
Joined: November 4th, 2016, 11:20 am
Has thanked: 913 times
Been thanked: 4096 times

Re: Losing the faith - should I just sell and move to funds (Poor Performance / Renationalisation)

#223767

Postby tjh290633 » May 22nd, 2019, 6:52 pm

Itsallaguess wrote:
Before we go any further with this though, can I please ask a related question -

If you've got some investment capital that you wish to deploy as part of your income-portfolio, and you're whittled down to a short-list of let's say three options, none of which you've owned before, what general 'historical performance' measures might you use to compare those final three options, and how long would you take gaining visibility of those options?

Cheers,

Itsallaguess

When I had to do this to set up an ISA alongside my PEP, with no duplications, I actually used the "Beat the FTSE" principle, taking the FT30 index as a source.

At that time my portfolio contained:

AstraZeneca plc
BAe Systems plc
BG Group plc
BOC Group plc
BP Amoco plc
British Telecom plc
Cadbury-Schweppes plc
Halifax plc
Hanson plc
Imp.Chem.Ind.plc
Imperial Tobacco Group plc
Lattice Group plc
Lloyds TSB Group plc
Marconi plc
Marks & Spencer plc
Pilkington plc
Prudential Corp plc
Scottish Power plc
Tesco plc
Whitbread plc

For the ISA I picked:

Allied-Domecq plc
Blue Circle Ind plc
British Airways plc
Royal & Sun All Ins Gp plc
Stagecoach Hldgs plc
Tate & Lyle plc

Allied Domecq turned rapidly into Bass, after a radical demerger and then a takeover. It complemented Whitbread.

Blue Circle complemented Hanson and Pilkington in Building materials.

RSA complemented Prudential after selling off its life business.

Stagecoach had just bought Porterbrook and Coach USA. It was a wild card.

Tate & Lyle complemented Cadbury Schweppes.

British Airways was there for the yield. It didn't last long.

Apart from Stagecoach, they were the highest yielding shares that I didn't hold. The FT30 of 2003 contained:

LLOY*
BA.*
RTR
PRU*
PO
SPW
EMI
ICI*
BATS
TATE
GKN
BOC*
BOOT
ALLD
RSA
DGE
BP.*
ISYS
LOG
MKS*
GSK
CBRY*
BT.A*
TSCO*
RBS
CPG
GAA
VOD
BG.*
BAY

Sorry about the EPICs. They are sorted by yield.

As comparison with my portfolio above, You can see that I already held a few of them marked *.

TJH


Return to “High Yield Shares & Strategies - General”

Who is online

Users browsing this forum: No registered users and 12 guests