HYP1 is 22 - thread discussing income and capital diversification

[Itsallaguess]

Pyad has released his 'HYP1 is 22' anniversary post here -

https://www.lemonfool.co.uk/viewtopic.php?f=15&t=36806

I've started this separate thread looking at the HYP1 income and capital diversification so as not to disrupt that thread with this analysis, as I completely understand that it may not interest everyone, and I do want to be respectful of Pyad's great ongoing HYP1 experiment by not including discussion of this specific aspect on that anniversary thread.

The data shown in this thread is specifically looking at the ongoing lumpiness of the income and capital derived from the long-running HYP1 portfolio.

Over the years, HYP1 has developed in a way that relies on a really quite small subset of holdings to deliver the bulk of its income and capital performance, and we can still see that when considering the percentage of overall dividend-income and capital that are delivered from its current top five holdings -



The underlying historical HYP1 income and capital data for the above table can be found here - https://i.imgur.com/DLlaZiB.png

Here's a chart showing the reliance that HYP1 has developed on it's top five holdings for both income and capital over the last thirteen years -



Pyad has reported that HYP1 has seen a 1.9% drop in overall dividend income since last year, which, in a period that's seen a number of global economic issues develop, continues to show the resilience of this type of income strategy to short and medium term market-related issues.

As can be seen from the above chart, the COVID-related spike in income-reliance seen in last-years data has since returned to near it's long-term trend, although as noted in Pyad's anniversary thread linked to earlier, he does expect Persimmon to lose some of it's high influence on income-delivery next year, due to an expected drop in payouts, so we might expect other dividend-paying holdings to bear a little more of the overall income-burden next year too.

The final table that I show below is an aggregated-income table, showing how much income is currently being delivered by HYP1 when we look at the ranking of top income-producing shares -



As we can see from the above table, just two holdings are currently delivering nearly 50% of the total HYP1 dividend income, with 76% of overall HYP1 income being delivered from just four individual HYP1 holdings.

I hope this exercise to look 'under the bonnet' a little regarding the income and capital concentration of HYP1 is instructive to those of us who might be interested in how a largely 'hands-off' income-portfolio can develop over the years, where that might not be immediately obvious to anyone just looking at the headline HYP1 numbers.

Cheers,

Itsallaguess

[kempiejon]

That is an interesting bit of analysis but I tihnk it tells me what I already know, diversification protects us by spreading the net, some shares have good times and bad, some recover, some fail. I believe HYP has lost a good number of its original consitiuents.
Now what we need is a system to concentrate on those top 5 or 6 shares and swap out to the next 5 or 6 every now and again.

Perhaps a table showing which shares and which years they are top of the league. In my own HYP I do see that different shares do have their time in the sun and rotate out but I've never been enough of a record keep or even to concerned to know which ones are in or out of favour or even to glean from others' records (like this) what that would mean to me as Joe investor.

[Itsallaguess]

Perhaps a table showing which shares and which years they are top of the league.

The underlying data linked to in my earlier post does highlight in yellow the relevant top-five income and capital deliverers in each of the past thirteen years -



Larger image available here - https://i.imgur.com/DLlaZiB.png

Please note, all images sourced from my own spreadsheet.

That is an interesting bit of analysis but I think it tells me what I already know, diversification protects us by spreading the net, some shares have good times and bad, some recover, some fail.

I agree, but a slightly alternative view might be that the historical data has shown how quickly a much smaller gravitational-mass might develop under these particular 'largely hands-off' circumstances, but I'm also interested in the longer-term results to see how that reduced gravitational-mass is then tested under ongoing market conditions...

Cheers,

Itsallaguess

[BullDog]

Thanks very much for the time you've taken to do this Iag. I appreciate it.

[kempiejon]

The underlying data linked to in my earlier post does highlight in yellow the relevant top-five income and capital deliverers in each of the past thirteen years -

Ah I missed that ta.

[Dod101]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

[BullDog]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

My bold. That's why it's absolutely essential that it should be reported on regularly. I definitely hope that continues.

[Dod101]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

My bold. That's why it's absolutely essential that it should be reported on regularly. I definitely hope that continues.

Very good point. I had not thought of it in that way. Thanks.

Dod

[Arborbridge]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

It might be rewarding to compare your income variation with HYP1 over, say, 2019-20-21-22, rather than just note that the last year for HYP1 has dropped slightly.
I notice income per £100 invested, in my IT basket, OEICS and HYP have all dropped over a couple of years, so I don't think HYP1 is particularly unusual. Perhaps it's that you've been skillful? Maybe you are the outlier?:)

Arb.

[tjh290633]

It might be rewarding to compare your income variation with HYP1 over, say, 2019-20-21-22, rather than just note that the last year for HYP1 has dropped slightly.
I notice income per £100 invested, in my IT basket, OEICS and HYP have all dropped over a couple of years, so I don't think HYP1 is particularly unusual. Perhaps it's that you've been skillful? Maybe you are the outlier?:)

Arb.

Here is my dividend per unit, compared with the RPI for the last 20 years:

.            Unitised             Change            
         .   Ordinary    RPI      Ordinary    RPI   
Year to      Divs/unit            Divs/unit         

05-Apr-02        12.46   175.70       9.36%    1.50%
05-Apr-03        11.68   181.20      -6.22%    3.13%
05-Apr-04        11.13   185.70      -4.70%    2.48%
05-Apr-05        13.03   191.60      17.01%    3.18%
05-Apr-06        14.21   196.50       9.11%    2.56%
05-Apr-07        15.18   205.40       6.78%    4.53%
05-Apr-08        18.73   214.00      23.40%    4.19%
05-Apr-09        21.60   211.50      15.30%   -1.17%
05-Apr-10        11.91   222.80     -44.84%    5.34%
05-Apr-11        15.12   234.40      26.98%    5.21%
05-Apr-12        17.78   242.50      17.59%    3.46%
05-Apr-13        19.93   249.50      12.06%    2.89%
05-Apr-14        20.34   254.80       2.05%    2.12%
05-Apr-15        21.35   258.00       4.99%    1.26%
05-Apr-16        21.68   261.40       1.55%    1.32%
05-Apr-17        25.40   270.60      17.17%    3.52%
05-Apr-18        27.02   279.70       6.37%    3.36%
05-Apr-19        26.36   288.20      -2.46%    3.04%
05-Apr-20        29.71   289.50      12.72%    0.45%
05-Apr-21        19.24   301.10     -35.23%    4.01%
05-Apr-22        25.81   334.60      34.10%   11.13%
05-Apr-23        27.14   356.20       5.15%    6.46% incomplete, Oct 22 RPI.

I went back that far because we have had three periods when dividends fell back. 2009-10 was the worst. I also think that it covers the life of HYP1. If anyone wants to do a comparison for a given period, the data is there. The unit is my dividend unit, which does not include accumulated dividends. Special dividends have been excluded.

TJH

[Dod101]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

It might be rewarding to compare your income variation with HYP1 over, say, 2019-20-21-22, rather than just note that the last year for HYP1 has dropped slightly.
I notice income per £100 invested, in my IT basket, OEICS and HYP have all dropped over a couple of years, so I don't think HYP1 is particularly unusual. Perhaps it's that you've been skillful? Maybe you are the outlier?:)

Arb.

I do not claim to follow the HYP rules but that is not in practice what matters. It is the outcome in real life and in that, an untouched HYP over many years does not do what is required. I am not particularly skilful but I am cautious and could never be bound by the HYP rules. 2019 was my best year ever. I substantial drop in 2020, a modest recovery in 2021 and this year I am confident in exceeding 2019 by a margin of around 7.5% 2019 which will be around 10% on 2021. I have no housebuilders (except a decent yielding Gleeson) and no miners which may be helping this year. I may be an outlier this year but have clearly lost out in other years. I am though perfectly happy to plough my own furrow.

None of that gets away from the previous point that HYP1 has failed in its primary objective.

Dod

[Arborbridge]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

It might be rewarding to compare your income variation with HYP1 over, say, 2019-20-21-22, rather than just note that the last year for HYP1 has dropped slightly.
I notice income per £100 invested, in my IT basket, OEICS and HYP have all dropped over a couple of years, so I don't think HYP1 is particularly unusual. Perhaps it's that you've been skillful? Maybe you are the outlier?:)

Arb.

I do not claim to follow the HYP rules but that is not in practice what matters. It is the outcome in real life and in that, an untouched HYP over many years does not do what is required. I am not particularly skilful but I am cautious and could never be bound by the HYP rules. 2019 was my best year ever. I substantial drop in 2020, a modest recovery in 2021 and this year I am confident in exceeding 2019 by a margin of around 7.5% 2019 which will be around 10% on 2021. I have no housebuilders (except a decent yielding Gleeson) and no miners which may be helping this year. I may be an outlier this year but have clearly lost out in other years. I am though perfectly happy to plough my own furrow.

None of that gets away from the previous point that HYP1 has failed in its primary objective.

Dod

But that doesn't make it a "failure", relative. One could say that investments in ITs or OEICs have also failed as my income from them dropped. The important factor for me is the comparison between various methods, and what else I could have done with the capital. Of course, by the time you've seen the answer, the band wagon has moved on, the market morphed into something else.

But HYP1 - which was, let's face it, a pure experiment in what an ordinary person could do - is far from a failure given that no one would be advised to draw out 100% income every year. Most of us - even "ordinary persons" - would have the sense to reinvest the excess to build up a margin of safety.

As a demo portfolio experiment in real time, it is one of the most interesting, in my view.

Anyhow, this section of the thread is OT as I've just realised this is about "diversification" so I will say no more.

Just on that point however, I note that the biggest shares do tend to vary over the years, as PYAD wrote earlier. However, for my peace of mind, I'd rather carry out a modicum of re-balancing on the grounds that if equal weighting is a good thing at the beginning, it stands to reason that it should also be further down the line.
The point of HYP1, of course, was to show what would happen without that and to confirm Pyad's idea that not tampering could still give one a practical and useful portfolio - and my belief is that he has proved that.

Arb.

[Dod101]

Thanks IAAG. For an income producer, HYP1 is not doing very well especially considering the rate of inflation. In fact I would call it a failure in its basic purpose which is to provide a substantial and growing income. This year for instance, my portfolio which is mostly made up of higher yielding shares will produce its best ever income, up about 10% on calendar 2021. I do not make a lot of changes to mine but enough to keep it doing what I need it to do, as I live off my dividend income. Doris would be showing a real and quite unnecessary drop in income had she adopted HYP1.

I think the annual reports on HYP1 could usefully be dropped as the experiment has shown that it would be unwise for anyone relying on dividend income not to modestly and from time to time to take action to refresh the portfolio. Leaving it untouched is simply not an option if you want to preserve and increase income, as anyone relying on it would.

Dod

It might be rewarding to compare your income variation with HYP1 over, say, 2019-20-21-22, rather than just note that the last year for HYP1 has dropped slightly.
I notice income per £100 invested, in my IT basket, OEICS and HYP have all dropped over a couple of years, so I don't think HYP1 is particularly unusual. Perhaps it's that you've been skillful? Maybe you are the outlier?:)

Arb.

I do not claim to follow the HYP rules but that is not in practice what matters. It is the outcome in real life and in that, an untouched HYP over many years does not do what is required. I am not particularly skilful but I am cautious and could never be bound by the HYP rules. 2019 was my best year ever. I substantial drop in 2020, a modest recovery in 2021 and this year I am confident in exceeding 2019 by a margin of around 7.5% 2019 which will be around 10% on 2021. I have no housebuilders (except a decent yielding Gleeson) and no miners which may be helping this year. I may be an outlier this year but have clearly lost out in other years. I am though perfectly happy to plough my own furrow.

None of that gets away from the previous point that HYP1 has failed in its primary objective.

Dod

But that doesn't make it a "failure", relative. One could say that investments in ITs or OEICs have also failed as my income from them dropped. The important factor for me is the comparison between various methods, and what else I could have done with the capital. Of course, by the time you've seen the answer, the band wagon has moved on, the market morphed into something else.

But HYP1 - which was, let's face it, a pure experiment in what an ordinary person could do - is far from a failure given that no one would be advised to draw out 100% income every year. Most of us - even "ordinary persons" - would have the sense to reinvest the excess to build up a margin of safety.

As a demo portfolio experiment in real time, it is one of the most interesting, in my view.

Anyhow, this section of the thread is OT as I've just realised this is about "diversification" so I will say no more.

Just on that point however, I note that the biggest shares do tend to vary over the years, as PYAD wrote earlier. However, for my peace of mind, I'd rather carry out a modicum of re-balancing on the grounds that if equal weighting is a good thing at the beginning, it stands to reason that it should also be further down the line.
The point of HYP1, of course, was to show what would happen without that and to confirm Pyad's idea that not tampering could still give one a practical and useful portfolio - and my belief is that he has proved that.

Arb.

The thread is about income and capital diversification. Well there is certainly not much income diversification the way HYP1 has developed and relying on 3 shares for 2/3rds of its income shows a total lack of diversification., especially when two of the three shares are very cyclical. That is what really shows a failure to me not the modest change in income itself. Even had the income increased by 10% this last year if two thirds of it came from but three shares that is a failure in the concept, unless you and others who are judging it do not care about such concentration, in which case you are braver than I would be, but then as I say, I rely on the income to live off.

Dod

[Arborbridge]

The thread is about income and capital diversification. Well there is certainly not much income diversification the way HYP1 has developed and relying on 3 shares for 2/3rds of its income shows a total lack of diversification., especially when two of the three shares are very cyclical. That is what really shows a failure to me not the modest change in income itself. Even had the income increased by 10% this last year if two thirds of it came from but three shares that is a failure in the concept, unless you and others who are judging it do not care about such concentration, in which case you are braver than I would be, but then as I say, I rely on the income to live off.

Dod

I don't disagree - I wouldn't be happy either, which is why I rebalance. But I'm not sure that makes HYP1 a failure - particularly as you say it isn't the modest change in income which worries you. In effect, you are saying you don't like what's under the bonnet, but the resulting performance of the motor is reasonably acceptable for a no tinker portfolio.

Well, that rather shows that Pyad's theory correct - or at least has proven so for 22 years. Maybe we need another 5 just to be sure

[IanTHughes]

None of that gets away from the previous point that HYP1 has failed in its primary objective.

Really?

Year to date | HYP1        | BNKR       | CTY        | EDIN       | FCIT       | FGT        | HHI         | JCH        | MRCH       | MUT        | SMT        | TMPL      
20-Nov-01    |    3,451.00 |   1,212.66 |   1,765.06 |   1,160.71 |     886.50 |   1,414.73 |    5,963.84 |     958.06 |   3,276.32 |   2,314.29 |     700.46 |   2,872.49
20-Nov-02    |    3,474.00 |   1,621.75 |   2,476.08 |   1,751.38 |     942.78 |   1,240.31 |    5,963.84 |   1,301.23 |   3,355.26 |   2,428.57 |   1,067.77 |   3,016.84
20-Nov-03    |    3,197.00 |   1,680.19 |   2,516.63 |   1,806.32 |   1,196.06 |   1,686.04 |    5,963.84 |   1,408.47 |   3,394.72 |   2,535.71 |   1,127.56 |   3,103.44
20-Nov-04    |    3,205.00 |   1,760.56 |   2,597.71 |   1,806.32 |   1,069.42 |   1,937.98 |    5,963.84 |   1,487.12 |   3,552.64 |   2,607.15 |   1,588.84 |   3,180.43
20-Nov-05    |    3,546.00 |   1,872.56 |   2,688.14 |   1,806.32 |   1,266.42 |   4,689.93 |    5,963.84 |   1,551.47 |   3,611.84 |   2,735.72 |     862.76 |   3,281.48
20-Nov-06    |    4,131.00 |   2,145.28 |   2,918.92 |   2,094.78 |   1,407.13 |   4,147.29 |    4,674.68 |   1,701.62 |   3,828.96 |   3,085.72 |   1,452.16 |   3,401.76
20-Nov-07    |    4,452.00 |   2,454.56 |   3,212.06 |   2,589.30 |   1,561.91 |   3,488.38 |    4,855.44 |   2,073.41 |   4,144.74 |   3,464.30 |   1,623.00 |   3,583.40
20-Nov-08    |    5,040.00 |   2,532.48 |   3,617.46 |   2,733.51 |   1,730.77 |   3,682.17 |    6,177.72 |   2,245.01 |   4,322.37 |   3,857.14 |   1,759.68 |   3,797.51
20-Nov-09    |    3,187.00 |   2,766.22 |   3,842.00 |   2,802.19 |   1,815.20 |   3,682.17 |    3,750.00 |   2,359.40 |   4,519.72 |   3,964.27 |   2,101.37 |   3,950.28
20-Nov-10    |    3,297.00 |   2,922.08 |   3,948.02 |   2,829.66 |   1,871.48 |   3,410.86 |    6,250.00 |   2,416.60 |   4,480.26 |   3,999.99 |   1,930.53 |   4,029.67
20-Nov-11    |    3,843.00 |   3,031.65 |   4,116.42 |   3,157.97 |   1,899.63 |   3,565.90 |    5,000.00 |   2,502.39 |   4,500.00 |   4,107.13 |   2,050.12 |   4,534.88
20-Nov-12    |    4,289.00 |   3,153.40 |   4,284.82 |   3,021.97 |   2,279.55 |   3,798.45 |    5,000.00 |   2,609.64 |   4,578.96 |   4,249.99 |   2,220.96 |   4,315.96
20-Nov-13    |    5,828.00 |   3,326.30 |   4,459.46 |   3,131.86 |   2,448.39 |   4,069.77 |    5,030.12 |   2,981.41 |   4,618.42 |   4,392.86 |   2,391.80 |   4,462.71
20-Nov-14    |    5,601.00 |   3,530.83 |   4,602.92 |   3,228.01 |   2,589.12 |   4,379.84 |    5,150.60 |   2,788.37 |   4,657.88 |   4,464.29 |   2,477.23 |   4,595.03
20-Nov-15    |    6,093.00 |   3,725.65 |   4,771.32 |   3,276.10 |   2,673.55 |   4,689.92 |    5,301.20 |   3,002.87 |   4,736.84 |   4,571.43 |   2,502.85 |   4,714.12
20-Nov-16    |    6,124.00 |   3,896.12 |   4,958.42 |   3,344.79 |   2,729.83 |   5,077.52 |    5,481.92 |   3,074.37 |   4,736.84 |   4,607.14 |   2,528.48 |   4,809.15
20-Nov-17    |    7,327.00 |   4,407.47 |   5,207.90 |   3,482.15 |   2,856.46 |   5,503.88 |    5,632.52 |   3,431.84 |   4,835.53 |   4,678.57 |   2,562.64 |   4,923.41
20-Nov-18    |    8,882.00 |   4,680.19 |   5,519.76 |   3,653.84 |   3,039.40 |   5,930.23 |    5,753.00 |   3,860.82 |   5,013.15 |   4,750.01 |   2,622.44 |   5,209.71
20-Nov-19    |   10,557.00 |   4,918.82 |   5,800.42 |   3,846.16 |   3,208.26 |   6,434.11 |    5,873.48 |   4,003.82 |   5,250.00 |   4,857.15 |   2,673.69 |   6,161.20
20-Nov-20    |    5,533.44 |   2,866.08 |   5,925.16 |   3,935.44 |   3,264.56 |   6,434.11 |    5,963.84 |   4,218.31 |   5,368.44 |   4,892.85 |   2,776.20 |   6,181.65
20-Nov-21    |   11,339.00 |   2,884.08 |   5,956.34 |   3,935.45 |   3,461.55 |   6,627.91 |    5,963.84 |   4,361.29 |   5,368.44 |   4,928.58 |   2,921.41 |   3,392.13
20-Nov-22    |   11,122.95 |   5,425.34 |   6,112.26 |   3,406.60 |   3,714.82 |   7,015.50 |    6,084.32 |   4,504.29 |   5,407.88 |   5,142.85 |   3,066.63 |   1,004.40
             |             |            |            |            |            |            |             |            |            |            |            |           
Total        | £123,519.39 | £66,814.27 | £91,297.28 | £62,800.83 | £47,912.79 | £92,907.00 | £121,761.88 | £58,841.81 | £97,559.21 | £86,635.71 | £45,008.58 | £88,521.65

Or, what about ......

viewtopic.php?f=31&t=36822&p=548510#p548510

     | Total Income
HYP1 |      123,520
B7   |      100,710
B8   |       89,054
U24  |       85,343

Do remind me again, what was the primary objective of HYP1 that you believe has not been achieved? How could it have been better achieved?

Enjoy!

Ian

[Lootman]

what was the primary objective of HYP1 that you believe has not been achieved?

Depends on what your criteria are but for me the problem would be that for 9 of the 20 years, almost half the time, the annual income from HYP1 was lower than in a previous year.

Compare with CTY, for which that never happened.

Now of course that HYP1 income volatility could be reduced by using some of its income to gradually build up an income reserve, as CTY does. But then the capital return of HYP1 and its ability to generate future income would be lower of course.

And given that 2 of those 9 years were in years 3 and 4, any HYP1 income reserve would not have been fully built up at that early point anyway. So for me it is interesting as a thought experiment, not least because it shows the riskiness and lumpiness of such an approach longer term. But I do not believe that anyone in their right mind would invest 100% that way.

[IanTHughes]

what was the primary objective of HYP1 that you believe has not been achieved?

Depends on what your criteria are but for me the problem would be that for 9 of the 20 years, almost half the time, the annual income from HYP1 was lower than in a previous year.

Compare with CTY, for which that never happened.

Now of course that HYP1 income volatility could be reduced by using some of its income to gradually build up an income reserve, as CTY does. But then the capital return of HYP1 and its ability to generate future income would be lower of course.

And given that 2 of those 9 years were in years 3 and 4, any HYP1 income reserve would not have been fully built up at that early point anyway. So for me it is interesting as a thought experiment, not least because it shows the riskiness and lumpiness of such an approach longer term. But I do not believe that anyone in their right mind would invest 100% that way.

Are you serious?

The first four years of Income:

HYP1 | 13,327.00
CTY  |  9,355.48

An HYP1 investor could have held back almost £4,000!

The annual income for CTY only overtook that of HYP1 during year 10, before which the income receipts would have been:

HYP1 | 30,496.00
CTY  | 21,792.06

An HYP1 investor could have held back over £8,700, more than twice the income from CTY during that 10th year!

The total for HYP1 so far - £123,519.39 - is £32,222.11 greater than what would have been received from CTY!

I know that you are ignorant with regard to the High Yield Portfolio (HYP) strategy, but surely you do understand what High Income is!



Enjoy!


Ian

[dealtn]

I know that you are ignorant with regard to the High Yield Portfolio (HYP) strategy, but surely you do understand what High Income is!

Enjoy!


Ian

So the strategy is to pay out (high) income, but the recipient is supposed to be aware enough not to spend it as it might be required?

You can't have it both ways I'm afraid. It's supposed to be a simple to follow and implement "buy and forget" strategy. You can't impose a restriction on followers of it to follow some unspoken rules to hold some of that income back. Odd that some don't appear to see the flaws in the strategy despite the obvious relative success of this single portfolio.

[Itsallaguess]

Depends on what your criteria are but for me the problem would be that for 9 of the 20 years, almost half the time, the annual income from HYP1 was lower than in a previous year.

Compare with CTY, for which that never happened.

Now of course that HYP1 income volatility could be reduced by using some of its income to gradually build up an income reserve, as CTY does. But then the capital return of HYP1 and its ability to generate future income would be lower of course.

And given that 2 of those 9 years were in years 3 and 4, any HYP1 income reserve would not have been fully built up at that early point anyway. So for me it is interesting as a thought experiment, not least because it shows the riskiness and lumpiness of such an approach longer term. But I do not believe that anyone in their right mind would invest 100% that way.

Are you serious?

The first four years of Income:

HYP1 | 13,327.00
CTY  |  9,355.48

An HYP1 investor could have held back almost £4,000!

The annual income for CTY only overtook that of HYP1 during year 10, before which the income receipts would have been:

HYP1 | 30,496.00
CTY  | 21,792.06

An HYP1 investor could have held back over £8,700, more than twice the income from CTY during that 10th year!

I know that you are ignorant with regard to the High Yield Portfolio (HYP) strategy, but surely you do understand what High Income is!

And if you clearly understand what 'High Income' is then Ian, are you able to explain why you're using things like Scottish Mortgage (SMT) and Foreign & Colonial (FCIT) in your earlier HYP1 comparison post linked below?

https://www.lemonfool.co.uk/viewtopic.php?p=548576#p548566

Could you not have found a couple of 'High Income' alternatives that yielded precisely 0%, just to try and prove your point even more?

Cheers,

Itsallaguess

[IanTHughes]

I know that you are ignorant with regard to the High Yield Portfolio (HYP) strategy, but surely you do understand what High Income is!

So the strategy is to pay out (high) income, but the recipient is supposed to be aware enough not to spend it as it might be required?

You can't have it both ways I'm afraid. It's supposed to be a simple to follow and implement "buy and forget" strategy. You can't impose a restriction on followers of it to follow some unspoken rules to hold some of that income back. Odd that some don't appear to see the flaws in the strategy despite the obvious relative success of this single portfolio.

Any portfolio requiring the purchase of Individual Shares, or even Investment Trusts, will require a certain amount of knowledge, forethought and investment understanding. Also, there are no "unspoken rules". Any investor, however much of a beginner they are, should be well aware that the capital value of, and income derived from, any investment, may go down as well as up.

Assuming one accepts the foregoing then yes, High Yield Portfolio (HYP) is indeed as simple to follow and implement a "buy and forget" strategy" as one can find.

Furthermore, the progress of HYP1 shows thet is can work, and work well too!

Enjoy!


Ian