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HYP dividend investing vs World Tracker drawdown

General discussions about equity high-yield income strategies
seekingbalance
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Re: HYP dividend investing vs World Tracker drawdown

#395849

Postby seekingbalance » March 15th, 2021, 5:44 pm

veeCodger1 wrote:I notice my total returns from the HYP are very poor when compared to a world tracker.

..........
Any comments please?

VC


I have been saying this for a while, but it does not go down well!

I did the same as you some time ago and abandoned the idea of a HYP entirely. Dividends make a big difference to performance, but over the last 25 years at least, do not make up for the appallingly poor performance of the UK stock market and dividend shares in particular.

When I saw the light and moved half my portfolio to US growth shares, US and World Trackers (and last year, Bitcoin) I saw an immediate turnaround and the 50% of my portfolio that this represents is now 75% of my portfolio, from the excess growth, not through extra investment.

Income is great, but not when it comes at the expense of a hugely outperforming growth potential.

Of course, this could all change - but after 15 years of waiting for it, I gave up, and I am glad I did. I wish now I had been more aggressive.

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Re: HYP dividend investing vs World Tracker drawdown

#395854

Postby scrumpyjack » March 15th, 2021, 5:52 pm

It isn't a matter of being unpopular. I don't think you are meant to mention at all heretical concepts like Total Return here. The board guidelines say this is only for high yield concepts. Other religions can be discussed on other boards! :D

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Re: HYP dividend investing vs World Tracker drawdown

#395866

Postby seekingbalance » March 15th, 2021, 6:15 pm

scrumpyjack wrote:It isn't a matter of being unpopular. I don't think you are meant to mention at all heretical concepts like Total Return here. The board guidelines say this is only for high yield concepts. Other religions can be discussed on other boards! :D


Indeed. Its why I rarely post anymore - investing is complicated enough, but always having to think what is allowed or not allowed in any given board is too exhausting.

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Re: HYP dividend investing vs World Tracker drawdown

#396065

Postby 1nvest » March 16th, 2021, 10:57 am

Surely its taking income out of total return against dividends that is seen as being a different style/strategy. The HYP's look to achieve a dividend value that broadly rises over time. Total return can still be used as a measure, indeed its pretty much the only way to compare two dissimilar style portfolios to see how successful or not each style might have been compared to each other.

No matter what stocks you hold at some point likely they wont have done well over a 10 year/whatever period. If you buy stock and 10 years later with dividends reinvested they're down to 66% of the inflation adjusted start date value then spending dividends will have pulled that down further. 1965 - 1974, and 1999 to 2008 for instance. Equally other assets might see the same, or worse, gold 1983 - 1992, 1988 - 1997 for instance where gold ended at 45% of the inflation adjusted start date value.

If you started with 50/50 in stock/gold and just let that run, stocks accumulating dividends ...etc. then in each of the above cases the bad asset was more than offset by the other asset, that across each of those gained something like 2.7 times in inflation adjusted terms. So 50/50 ended up with stock light/gold heavy, or stock heavy/gold light, but where the combined value was of the order of the average of 0.66 and 2.7 = 1.7 times more in inflation adjusted terms (5.5% annualised real). Similarly however 50/50 stock/gold bought and held had its worst 10 year period, 1994 - 2003 where that ended with a few percent more than the inflation adjusted start date amount. These are all figures since the end of WW2 and where silver was assumed to be held up to 1971, gold thereafter (after the US ended the pegging of the US$ to gold).

Spending dividends, and in a bad case of where total returns with dividends reinvested over 10 years sees 65% of (inflation adjusted) portfolio value remaining is a considerable risk. Not considering total returns would hide that risk. In sight of the risk however you might deduce that it would be better to put perhaps 30% into cash/bonds for draw-down over 10 years, 3%/year and leave the stock 70% total return to hopefully grow enough to offset that and more. However in a bad 10 years with that 30% of cash all spent, and 70% of stocks having declined to 65% of the inflation adjusted start date value = 45% of the overall inflation adjusted start date value remaining after 10 years. Considerably less than the 72% that 50/50 stock/gold 70% with 30% cash had remaining in its worst case.

At what cost though? All stock in the average case near doubled after 10 years (1.97 times more in inflation adjusted terms total returns) whilst 50/50 stock/gold had 1.77 times more on average. Which on a annualised measure = 7% versus 6% type difference.

I very much suspect that such characteristics are evident in each of HYP, World tracker ...etc. choices and its important to understand those risks as they are not trivial risks.

If you start with 30% cash to cover 10 years x 3%/year of spending and draw that down to zero then it average 15% cash. Split the remainder 50/50 between stock and gold and compare (rounding) 16 cash along with 42% in each of stocks and gold ... compared to 16 cash and 84 stock and reward wise they have been pretty similar since 1972 at least for US based data, but where the stock/gold choice did so with less volatility (which is commonly considered as being the better risk-adjusted reward).

Buffett advocates 90/10 stock/T-Bills, perhaps because he considers a 2%/year spend rate.

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Re: HYP dividend investing vs World Tracker drawdown

#396809

Postby TopOfDaMornin » March 18th, 2021, 4:11 pm

1nvest wrote:Surely its taking income out of total return against dividends that is seen as being a different style/strategy. The HYP's look to achieve a dividend value that broadly rises over time. Total return can still be used as a measure, indeed its pretty much the only way to compare two dissimilar style portfolios to see how successful or not each style might have been compared to each other.

No matter what stocks you hold at some point likely they wont have done well over a 10 year/whatever period. If you buy stock and 10 years later with dividends reinvested they're down to 66% of the inflation adjusted start date value then spending dividends will have pulled that down further. 1965 - 1974, and 1999 to 2008 for instance. Equally other assets might see the same, or worse, gold 1983 - 1992, 1988 - 1997 for instance where gold ended at 45% of the inflation adjusted start date value.

If you started with 50/50 in stock/gold and just let that run, stocks accumulating dividends ...etc. then in each of the above cases the bad asset was more than offset by the other asset, that across each of those gained something like 2.7 times in inflation adjusted terms. So 50/50 ended up with stock light/gold heavy, or stock heavy/gold light, but where the combined value was of the order of the average of 0.66 and 2.7 = 1.7 times more in inflation adjusted terms (5.5% annualised real). Similarly however 50/50 stock/gold bought and held had its worst 10 year period, 1994 - 2003 where that ended with a few percent more than the inflation adjusted start date amount. These are all figures since the end of WW2 and where silver was assumed to be held up to 1971, gold thereafter (after the US ended the pegging of the US$ to gold).

Spending dividends, and in a bad case of where total returns with dividends reinvested over 10 years sees 65% of (inflation adjusted) portfolio value remaining is a considerable risk. Not considering total returns would hide that risk. In sight of the risk however you might deduce that it would be better to put perhaps 30% into cash/bonds for draw-down over 10 years, 3%/year and leave the stock 70% total return to hopefully grow enough to offset that and more. However in a bad 10 years with that 30% of cash all spent, and 70% of stocks having declined to 65% of the inflation adjusted start date value = 45% of the overall inflation adjusted start date value remaining after 10 years. Considerably less than the 72% that 50/50 stock/gold 70% with 30% cash had remaining in its worst case.

At what cost though? All stock in the average case near doubled after 10 years (1.97 times more in inflation adjusted terms total returns) whilst 50/50 stock/gold had 1.77 times more on average. Which on a annualised measure = 7% versus 6% type difference.

I very much suspect that such characteristics are evident in each of HYP, World tracker ...etc. choices and its important to understand those risks as they are not trivial risks.

If you start with 30% cash to cover 10 years x 3%/year of spending and draw that down to zero then it average 15% cash. Split the remainder 50/50 between stock and gold and compare (rounding) 16 cash along with 42% in each of stocks and gold ... compared to 16 cash and 84 stock and reward wise they have been pretty similar since 1972 at least for US based data, but where the stock/gold choice did so with less volatility (which is commonly considered as being the better risk-adjusted reward).

Buffett advocates 90/10 stock/T-Bills, perhaps because he considers a 2%/year spend rate.


Following your comments, 1nvest, I have researched on some of your links above and moved 7% of my portfolio into gold, with the intention of rebalancing every quarter or 6 months.


TDM

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Re: HYP dividend investing vs World Tracker drawdown

#396815

Postby TUK020 » March 18th, 2021, 4:23 pm

TopOfDaMornin wrote:
1nvest wrote:Surely its taking income out of total return against dividends that is seen as being a different style/strategy. The HYP's look to achieve a dividend value that broadly rises over time. Total return can still be used as a measure, indeed its pretty much the only way to compare two dissimilar style portfolios to see how successful or not each style might have been compared to each other.

No matter what stocks you hold at some point likely they wont have done well over a 10 year/whatever period. If you buy stock and 10 years later with dividends reinvested they're down to 66% of the inflation adjusted start date value then spending dividends will have pulled that down further. 1965 - 1974, and 1999 to 2008 for instance. Equally other assets might see the same, or worse, gold 1983 - 1992, 1988 - 1997 for instance where gold ended at 45% of the inflation adjusted start date value.

If you started with 50/50 in stock/gold and just let that run, stocks accumulating dividends ...etc. then in each of the above cases the bad asset was more than offset by the other asset, that across each of those gained something like 2.7 times in inflation adjusted terms. So 50/50 ended up with stock light/gold heavy, or stock heavy/gold light, but where the combined value was of the order of the average of 0.66 and 2.7 = 1.7 times more in inflation adjusted terms (5.5% annualised real). Similarly however 50/50 stock/gold bought and held had its worst 10 year period, 1994 - 2003 where that ended with a few percent more than the inflation adjusted start date amount. These are all figures since the end of WW2 and where silver was assumed to be held up to 1971, gold thereafter (after the US ended the pegging of the US$ to gold).

Spending dividends, and in a bad case of where total returns with dividends reinvested over 10 years sees 65% of (inflation adjusted) portfolio value remaining is a considerable risk. Not considering total returns would hide that risk. In sight of the risk however you might deduce that it would be better to put perhaps 30% into cash/bonds for draw-down over 10 years, 3%/year and leave the stock 70% total return to hopefully grow enough to offset that and more. However in a bad 10 years with that 30% of cash all spent, and 70% of stocks having declined to 65% of the inflation adjusted start date value = 45% of the overall inflation adjusted start date value remaining after 10 years. Considerably less than the 72% that 50/50 stock/gold 70% with 30% cash had remaining in its worst case.

At what cost though? All stock in the average case near doubled after 10 years (1.97 times more in inflation adjusted terms total returns) whilst 50/50 stock/gold had 1.77 times more on average. Which on a annualised measure = 7% versus 6% type difference.

I very much suspect that such characteristics are evident in each of HYP, World tracker ...etc. choices and its important to understand those risks as they are not trivial risks.

If you start with 30% cash to cover 10 years x 3%/year of spending and draw that down to zero then it average 15% cash. Split the remainder 50/50 between stock and gold and compare (rounding) 16 cash along with 42% in each of stocks and gold ... compared to 16 cash and 84 stock and reward wise they have been pretty similar since 1972 at least for US based data, but where the stock/gold choice did so with less volatility (which is commonly considered as being the better risk-adjusted reward).

Buffett advocates 90/10 stock/T-Bills, perhaps because he considers a 2%/year spend rate.


Following your comments, 1nvest, I have researched on some of your links above and moved 7% of my portfolio into gold, with the intention of rebalancing every quarter or 6 months.


TDM


I have some 4% of my portfolio in physical gold ETF, and am considering increasing the portion allocated to gold.
I recall reading on this site someone (SalvorHardin?) talking of using gold miner equities as a leveraged way of exposure to gold.
Anyone have any suggestions on this?

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Re: HYP dividend investing vs World Tracker drawdown

#397984

Postby baldchap » March 22nd, 2021, 2:14 pm

Arborbridge wrote:BTW, could you give a clearer answer to VCs question
Do you mind if I ask what the names of 7 ITs are?
- it would help us all.

Arb.

Hello Arb

Sorry for the delay, busy week.
I still had some cash to allocate, and I am always wary of having my reasoning trounced and my mistakes exposed :oops:

Core: SAIN/JGGI/ BNKR/ LTI (71%)
Satellite's; Invesco Asia (IAT), IBT, & JAGI (27%)

It was quite emotional disposing of MYI & HFEL(my first IT's) as they produced great income. However, I finally realised that those high yields will always be a drag, and the recent rally let me exit with some gain in capital value.
It was also a big mistake favouring HFEL instead of JAGI last summer due to the amount of exposure to China.
HFEL has been dissolved into IAT and JAGI.
X-Ray now shows China at 8.5% overall and I can live with that.

It is no coincidence that all of the satellite's (and JGGI) aim to pay between 3.5 to 4% of NAV as dividends p.a. (Invesco Asia recently adopted this model).
I will come back in 2022 when I am very confident that there will be no further changes except possibly the addition of another satellite.

Arborbridge
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Re: HYP dividend investing vs World Tracker drawdown

#397998

Postby Arborbridge » March 22nd, 2021, 3:14 pm

baldchap wrote:
Arborbridge wrote:BTW, could you give a clearer answer to VCs question
Do you mind if I ask what the names of 7 ITs are?
- it would help us all.

Arb.

Hello Arb

Sorry for the delay, busy week.
I still had some cash to allocate, and I am always wary of having my reasoning trounced and my mistakes exposed :oops:

Core: SAIN/JGGI/ BNKR/ LTI (71%)
Satellite's; Invesco Asia (IAT), IBT, & JAGI (27%)

It was quite emotional disposing of MYI & HFEL(my first IT's) as they produced great income. However, I finally realised that those high yields will always be a drag, and the recent rally let me exit with some gain in capital value.
It was also a big mistake favouring HFEL instead of JAGI last summer due to the amount of exposure to China.
HFEL has been dissolved into IAT and JAGI.
X-Ray now shows China at 8.5% overall and I can live with that.

It is no coincidence that all of the satellite's (and JGGI) aim to pay between 3.5 to 4% of NAV as dividends p.a. (Invesco Asia recently adopted this model).
I will come back in 2022 when I am very confident that there will be no further changes except possibly the addition of another satellite.


Thanks for the ideas - I will take a look at some of those I am not familiar with.

Arb


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