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Moving to HY ITs from HYP.

General discussions about equity high-yield income strategies
seagles
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Moving to HY ITs from HYP.

#247247

Postby seagles » August 27th, 2019, 1:23 pm

Made a decision over the weekend to work towards making my SIPP a HY IT portfolio. I started out in 2015 with a roughly 50:50 split between ITs and HY Shares. It was my first move away from HYP and came about after a very good thread on TMF about what to do with your portfolio if you no longer want to or have the ability to manage your portfolio.
I had started working that way, selling out of Carillion (CLLN) whilst I still had a value, top slicing a few others when they breached my criteria for size and/or income, and only reinvesting dividends into IT's.
Today I sold all of my GSK (Glaxo Smithkline) and BA (British Aerospace), I now have no GSK at all and a small holding of BA in my S&S ISA. Both were sold at a profit. I then topped-upd 2/3 in MRCH and the rest in HFEL. The dividend of both sold shares was at the "low" end for me and yieldi n the 2 I brought is the high end (for me).
I do have a small "wedge" in my SIPP (just transferred the last of my DB pensions and some dividends), just waiting for a final dividend payment on Friday. Next week I will then buy some more JETI, thrying to get this up to Median value.
This will leave me with 7 ITs and 2 company shares (Taylor Wimpey, TW and SSE).
I have decide to keep my dealing account and ISA with pure HYP shares (well my flavour of HYP anyway). Maybe at some future date this will prove onerous for me and I will convert them over. Will discuss that with my daughter at that time to see if she wants to take them on.

I was wondering what others have been doing as there has been quite a few threads and posts of people moving in the IT direction?

Arborbridge
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Re: Moving to HY ITs from HYP.

#247252

Postby Arborbridge » August 27th, 2019, 1:52 pm

seagles wrote:
I was wondering what others have been doing as there has been quite a few threads and posts of people moving in the IT direction?




I've been doing the same in a rather small way. My ratio of HYP capital to incIT capital is 1.4:1 whereas a few years ago it was 1.7:1 or more. Owing to the difference in yield, my HYP still provides nearly twice as much income, so I will not be making really major switches since my income drop would be too much.

I do quite like ITs but also enjoy the HYP which I find quite interesting to be involved in. Perhaps one day, I'll make more significant changes, but at present it looks like a slow process.

What sort of age are you? if you don't mind my asking. I'm 74 next B day.

Arb.

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Re: Moving to HY ITs from HYP.

#247258

Postby ReformedCharacter » August 27th, 2019, 2:22 pm

seagles wrote:
I was wondering what others have been doing as there has been quite a few threads and posts of people moving in the IT direction?


Yes, I'm slowly moving in the IT direction. However, I do get tempted by HY shares that seem to be good value, eg. HSBA, LGEN etc. and do a certain amount of pickering whether or not to up my ITs. I currently hold MYI, HFEL and AAIF and am thinking of buying some JP Morgan Asian Investment Trust (JAI). I'd like to buy some North American Income Trust (NAIT) but as an income seeker they seem a little expensive at the moment.

RC

Arborbridge
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Re: Moving to HY ITs from HYP.

#247264

Postby Arborbridge » August 27th, 2019, 2:34 pm

ReformedCharacter wrote:
seagles wrote:
I was wondering what others have been doing as there has been quite a few threads and posts of people moving in the IT direction?


Yes, I'm slowly moving in the IT direction. However, I do get tempted by HY shares that seem to be good value, eg. HSBA, LGEN etc. and do a certain amount of pickering whether or not to up my ITs. I currently hold MYI, HFEL and AAIF and am thinking of buying some JP Morgan Asian Investment Trust (JAI). I'd like to buy some North American Income Trust (NAIT) but as an income seeker they seem a little expensive at the moment.

RC

However, I do get tempted by HY shares that seem to be good value, eg. HSBA, LGEN etc.

Yes, isn't that true! There is something a little compulsive about running a HYP as it is difficult to resist what looks a good buy. Otherwise, I'm sure I would have moved more by now towards ITs.

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Re: Moving to HY ITs from HYP.

#247266

Postby OLTB » August 27th, 2019, 2:41 pm

Arborbridge wrote:
Yes, isn't that true! There is something a little compulsive about running a HYP as it is difficult to resist what looks a good buy. Otherwise, I'm sure I would have moved more by now towards ITs.


Definitely - I sold a small holding in an IT to buy a top-up in TUI in March this year when the price was 725p. Grabbing that extra yield is tempting indeed (even if a little dangerous sometimes).

Cheers, OLTB.

seagles
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Re: Moving to HY ITs from HYP.

#247270

Postby seagles » August 27th, 2019, 2:57 pm

Arb - I am 65 and just retired, 7 weeks.

RC - know what you mean. Recently added AV Aviva to sit alongside LGEN L & G.

I still have 20 HYP share portfolio. With this change it looks to be giving me 60% of my dividends. At the moment all of that is being drawn as building a pot to pay for an upcoming medical bill for my daughter. Though I could live with no problem on my pensions.

tjh290633
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Re: Moving to HY ITs from HYP.

#247277

Postby tjh290633 » August 27th, 2019, 3:20 pm

My thoughts have revolved around when and how to make the transition. I might add that I am 86, but do not feel a pressing urge to do this.

First idea was to start with the lowest yield shares, say those yielding below 3%, and moving that money into ITs with yields in the 4-5% region. This would immediately increase the income, but the opposite would apply at the top end of the yield range, where TW. for example has a yield over 10%. Should I therefore realise pairs of high yielders and low yielders, to minimise the effect? The current yield is in excess of 5%, so a reduction in income in the short term seems inevitable. This would not lead to hardship in my case, but it might be a factor for others.

What about a one fell swoop approach? A bit drastic, but I feel that it now requires rather more research into the choice of ITs. I am gradually investigating a number of ITs, with a view to comparing total return (fainites), yields and dividend growth rates. Do I hold on to my REITs and even add to them with PHP, DIGS, TBX etc?

How long have I got? Should I just let sleeping dogs (unfortunate word) lie?

Tomorrow or the day after, perhaps, but tomorrow never comes.

TJH

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Re: Moving to HY ITs from HYP.

#247306

Postby Arborbridge » August 27th, 2019, 4:32 pm

seagles wrote:Arb - I am 65 and just retired, 7 weeks.



A youngster, then! Enjoy your retirement - I'm still fit and active, thank goodness. But it's scary that the probabilty is I won't be here in ten years, because the past ten since retirement have just flashed passed.

Don't put anything off in life: when you think of it, book it and do it!

As regards HYP and other investments, they've been fine for giving me a pension income - apart from the State Pension, it's all I have. What will happen in the next down turn? Who knows, but I expect I will cope as I have a reasonable excess of income over expenditure.

Arb.

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Re: Moving to HY ITs from HYP.

#247308

Postby Arborbridge » August 27th, 2019, 4:36 pm

tjh290633 wrote:My thoughts have revolved around when and how to make the transition. I might add that I am 86, but do not feel a pressing urge to do this.

First idea was to start with the lowest yield shares, say those yielding below 3%, and moving that money into ITs with yields in the 4-5% region. This would immediately increase the income, but the opposite would apply at the top end of the yield range, where TW. for example has a yield over 10%. Should I therefore realise pairs of high yielders and low yielders, to minimise the effect? The current yield is in excess of 5%, so a reduction in income in the short term seems inevitable. This would not lead to hardship in my case, but it might be a factor for others.

What about a one fell swoop approach? A bit drastic, but I feel that it now requires rather more research into the choice of ITs. I am gradually investigating a number of ITs, with a view to comparing total return (fainites), yields and dividend growth rates. Do I hold on to my REITs and even add to them with PHP, DIGS, TBX etc?

How long have I got? Should I just let sleeping dogs (unfortunate word) lie?

Tomorrow or the day after, perhaps, but tomorrow never comes.

TJH


TBX?

tjh290633
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Re: Moving to HY ITs from HYP.

#247328

Postby tjh290633 » August 27th, 2019, 6:04 pm

Arborbridge wrote:TBX?

My guess for BBOX

TJH

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Re: Moving to HY ITs from HYP.

#247331

Postby TUK020 » August 27th, 2019, 6:10 pm

seagles wrote:I was wondering what others have been doing as there has been quite a few threads and posts of people moving in the IT direction?


I am 58, and now have about 25% of my total portfolio in ITs:
City of London (CTY)
F&C Investment Trust (FCIT)
Henderson Far East (HFEL)
HICL Infrastructure
Law Debenture (LWDB)
Merchants Trust (MRCH)
Murray International (MYI)
River and Mercantile UK Micro cap (RMMC) this one a mistake I think
Temple Bar Investment Trust (TMPL)
Not all of these are higher yield, some are growth.

Intent was to make a significant step into ITs to increase macro diversity (doen) and then gradually increase ITs by reinvesting dividends in them. (particular emphasis on my SIPP rather than my ISA). Reason was to make the portfolio more neglect proof as my years advance.

Reality is that since adopting TJH's re-balancing mechanism, I have been compulsively reinvesting is stocks that are falling out of favour. So not too much progress yet. Need to get better at sitting on my hands.
tuk020

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Re: Moving to HY ITs from HYP.

#247491

Postby spiderbill » August 28th, 2019, 1:20 pm

seagles wrote:I was wondering what others have been doing as there has been quite a few threads and posts of people moving in the IT direction?


I've been gradually diversifying into all of OEICs, ITs and ETFs over the last couple of years. The ITs are as yet still a small part of the overall portfolio but I've been increasing them whenever the chance came along from forced sales (as you'll have seen on the threads about RPC and KCOM), and will be putting about 2/3 of my share dividends into them for the next couple of years. After that I'll review the performances and make some longer term decisions.

My reasoning was partly to test the various investment channels to see if there was any obvious "best buy", though it's not always easy to compare them and be sure you're seeing a like-for-like picture, and partly to have some degree of diversification - though obviously a major crash would affect everything unless you're brave enough to be in gold or Bitcoin.

Individual HYP-ish shares make up about 47%, this currently gives an income of around £8k but has been poor on capital - one of the reasons for looking at other channels.

OEICs total about 45% after I invested a lump sum from an inheritance last year to another one I've had since 2012. The old one has done ok but nothing spectacular - CAGR of about 7.2%. The new one was badly timed and dropped last autumn but is now about 2.5% up compard to the FT100 TR being down about 2% so I have some hopes for that if we can avoid disaster.

ITs and ETFs are only about 6.5% of the total so far but as mentioned will get the bulk of ongoing investments. So far in the last two years I've bought
HFEL - just under level so far but a good yield
MYI - 11% down on capital, decent yield
FCIT - 5% up but of course far lower yield
MRCH - just under level (bought to see if managers handle HY shares any better than I do)
and most recently
BRNA
JPGI
to widen out the geographical exposure a bit more.

So far the best looking option from the headline figures are the ETFs - well one of them, VWRL, which is 12% up over two years but of course has low divs. I'll do a proper TR comparison once they've had a bit longer to mature. Too much noise and politics in the last couple of years

In my case a lot depends on what happens with Brexit and/or Scottish independence. If Brexit goes ahead and Scotland doesn't break away then I may well decide to seek permanent residence in Slovenia, where I have a house from which this is being written. Then tax differences could mean a big change in investment strategy as the ISA sheltering would become meaningless and income tax is higher. Much to be clarified there.

cheers and good luck, and keep us updated

Spiderbill (64½)


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