Investment trusts

[Mike4]

Moderator Message:
Thread moved from HYP-P to HY-SSG because it essentially became another opportunity to discuss the merits of HYP versus ITs which, as most know, is fine when conducted here, but not fine when conducted on the board set up for practitioners* (because it annoys us). - Chris
*and those considering how so to become

a total HYP noob I've an idea that investment trusts are considered not acceptable as HYP constituents. Is that right?

I tried searching the board for "investment trusts" but my search term is rejected as too generic, grrr...

(I've got as far as my 8th choice and LAND IT is it!)

Thanks for any illumination.

[monabri]

As a total HYP noob I've an idea that investment trusts are considered not acceptable as HYP constituents. Is that right?

I tried searching the board for "investment trusts" but my search term is rejected as too generic, grrr...

(I've got as far as my 8th choice and LAND IT is it!)

Thanks for any illumination.

Try here ( Investment Trusts)

viewforum.php?f=54


HYP Rules

viewtopic.php?f=15&t=23846

[monabri]

"Home" of the Investment Trust

https://www.theaic.co.uk/

[Mike4]

Fanx monabri!

I can feel an IT portfolio coming on as a separate project...

[moorfield]

As a total HYP noob I've an idea that investment trusts are considered not acceptable as HYP constituents. Is that right?

I tried searching the board for "investment trusts" but my search term is rejected as too generic, grrr...

(I've got as far as my 8th choice and LAND IT is it!)

Thanks for any illumination.

Just a build yourself an HYP PHY instead, of 15-20 ITs from different AIC sectors yielding higher than FTSE that can reasonably be expected to sustain their dividends and preferably grow them. LTBH, do not be tempted to meddle.

This is probably a thread for the other place, folk get incredibly twitchy about ITs here! Perhaps because they cant really explain why a HYP PHY would be unsuitable for someone like a Doris.

It's all about the (overall) income, remember.

[scrumpyjack]

Of course ultimately, if the discount is too large and persistent, the IT can liquidate itself and return the proceeds to shareholders.

This does happen (eg The Fundsmith Emerging Markets IT last year)

[Rover110]

At the risk of dragging this thread too "off-topic", I shall state my reason for going HYP:
To try to reduce the number of "middlemen" between me and the companies that generate profits.
If you like a sort of "where are all the investor's yachts?" question.
At that time in Motley Fool HYP seemed to be a popular topic.

But many people find the effort of owning real shares - choosing which ones to get; the anguish when one of them is in trouble - is a significant cost. And there are some markets e.g. many overseas ones, that are difficult for the amateur investor to access without major costs. If a manager is prepared to do this effectively without taking an excessive fee, then why not use them.
Also, when your investment pot is small, it is hard to get sufficient diversity (spreading your investment among many companies) such that when one company is "unlucky" you don't suffer a serious loss.
As share-owning investors get older, they worry if the investments will be adequately managed if they die and it is all left e.g. to their husband who might not be as financially savvy but still needs to live off the returns.

And those arguments are encouraging some private share investors including HYPers to include Investment Trusts.

[kempiejon]

Moderator Message:
Thread moved from HYP-P to HYP-SS because it essentially became... tbc -Chris

a total HYP noob I've an idea that investment trusts are considered not acceptable as HYP constituents. Is that right?

I tried searching the board for "investment trusts" but my search term is rejected as too generic, grrr...

(I've got as far as my 8th choice and LAND IT is it!)

Thanks for any illumination.

Here on a more appropriate board*, I suggest that HYP excludes ITs because it's not part of the strategy. One of the reasons, as Rover110 mentions, is because you're paying a manager to pick shares for you so adding a layer of unnecessary fees to buy shares you could just buy yourself. Of course HYPs only buy higher yielding shares from the FTSE100. Not all ITs have high yields of course nor restrict themselves to the UK index.

LAND is a real estate investment trust which is not really like those regular ITs, I have a couple of shares, British Land and Segro both REITS and green infrastructure fund TRIG - The Renewables Infrastructure Group a large British investment trust dedicated to investments in assets generating electricity from renewable sources. . I couldn't buy the underlying assets directly myself so those are a cuple of exceptions. The oft proffered City Investment Trust CTY buys FTSE100 shares and you pay that nice Mr Curtis to buy them for you and churn your portfolio regularly to justify the wages for that nice house he has. Of course the ITs have different objectives to HYPers.
SO buy shares themselves and maintain their own weightings and objectives.

Nought wrong with wanting to buy ITs or try other strategies, just a different objective to HYPing.
If you're interested in alternative strategies try comparing them to the capital weighted global index, you can buy a collective to track that like vanguard's VWRL for example.

*Ta Chris.

[moorfield]

Here on a more appropriate board*, I suggest that HYP excludes ITs because it's not part of the strategy. One of the reasons, as Rover110 mentions, is because you're paying a manager to pick shares for you so adding a layer of unnecessary fees to buy shares you could just buy yourself. Of course HYPs only buy higher yielding shares from the FTSE100. Not all ITs have high yields of course nor restrict themselves to the UK index.

LAND is a real estate investment trust which is not really like those regular ITs, I have a couple of shares, British Land and Segro both REITS and green infrastructure fund TRIG - The Renewables Infrastructure Group a large British investment trust dedicated to investments in assets generating electricity from renewable sources. . I couldn't buy the underlying assets directly myself so those are a cuple of exceptions. The oft proffered City Investment Trust CTY buys FTSE100 shares and you pay that nice Mr Curtis to buy them for you and churn your portfolio regularly to justify the wages for that nice house he has. Of course the ITs have different objectives to HYPers.
SO buy shares themselves and maintain their own weightings and objectives.

Nought wrong with wanting to buy ITs or try other strategies, just a different objective to HYPing.
If you're interested in alternative strategies try comparing them to the capital weighted global index, you can buy a collective to track that like vanguard's VWRL for example.

*Ta Chris.

No, I disagree. The strategy is essentially to provide a high and rising retirement income and capital preservation - it's that simple. HYP doesn't have a monopoly on or "own" that strategy, rather it's one implementation of it. A portfolio of 15-20 ITs, say, is another. Whilst ITs might add a layer of fees, that "middleman risk" to your hard earned and saved income I suggest is small when stacked against the many other risks the DIY HYPster faces. CLLN, SSE (twice), IMB, RDSB VOD, HSBA, BT, GSK, DLG, DEC spring to mind, and not least - their own keyboards. As many here (including myself) will grimly attest to. (Any others, anyone?)

So it's perfectly reasonable to play off different implementations of that strategy against each other, imo. Asking the question "explain why a portfolio of ITs would be unsuitable for someone like a Doris" is not trolling HYP at all, it's convincing oneself that the HYP approach is the most robust one for delivering that high and rising retirement income with ones hard earned and saved.

[Itsallaguess]

Whilst IT's might add a layer of fees, that "middleman risk" to your hard earned and saved income is small when stacked against the many other risks the DIY HYPster faces.

CLLN, SSE (twice), IMB, RDSB VOD, HSBA, BT, GSK, DLG, DEC spring to mind, and not least - their own keyboards. As many here (including myself) will grimly attest to.

Any others, anyone?

How about some of the collective investments that HYP investors are 'allowed' to invest in, which have on-going charges similar to IT's...

Renewable Energy Infrastructure - https://www.theaic.co.uk/aic/find-compare-investment-companies?sec=REI&sortid=SPTR1Y&desc=false

Property - UK Commercial - https://www.theaic.co.uk/aic/find-compare-investment-companies?sec=PUC&sortid=SPTR1Y&desc=false

The above lists are ranked by 1-year total-return performance, with the poorest at the top, so hopefully it's absolutely clear in terms of recent performance and those ongoing charges, that 'middleman risk' is something that HYP-investors are clearly not immune from, even under their own 'rules'...

Cheers,

Itsallaguess

[moorfield]

How about some of the collective investments that HYP investors are 'allowed' to invest in, which have on-going charges similar to IT's...

There's nothing "similar to ITs" about those. They are ITs.

[Itsallaguess]

How about some of the collective investments that HYP investors are 'allowed' to invest in, which have on-going charges similar to IT's...

There's nothing "similar to ITs" about those. They are ITs.

Well, yeah, but my point was to highlight that fee-charging investments can be 'allowed' (*) under HYP rules, so it's a red-herring to think that HYP investing necessarily avoids such middle-man fees...

And my other point was to highlight that not only are such 'fee-paying' investments 'allowed' - anyone owning them recently will be quite aware of the type of 'middle-man performance' they've actually been paying for...

Cheers,

Itsallaguess

* - I still can't quite understand why private-investors nowadays would allow themselves to be straight-jacketed by a set of investment rules drawn up so long ago, they simply haven't managed to keep up with the huge strides made in cheap, global investment options in recent years...

[Dod101]

I started investing by buying some Alliance Trust shares and added a few individual shares, seeking in my naivety to make capital gains. I then realised a more reliable way of getting investment gains was through dividends and my version of a HYP was born. I have always avoided being in a strait jacket and when I found the HYP board I thought it reasonable but then found these absurd rules. What nonsense unless we take them as apparently intended; a simple unsophisticated guide for a Doris.
To me ITs are vehicles which will get me a wider spread of investments than I can access myself and that is how I use them. I make few changes to ITs or indeed my other investments. Interesting that these days ITs have become much more competitive, changing managers if they are seen not to be performing and even merging or selling themselves to others if they feel that is best for their shareholders.
Dod

[SalvorHardin]

I still can't quite understand why private-investors nowadays would allow themselves to be straight-jacketed by a set of investment rules drawn up so long ago, they simply haven't managed to keep up with the huge strides made in cheap, global investment options in recent years...

HYP has become an ideology for many, with fixed rules and enforcement of rules by deleting posts. Doris didn't have any investment trusts so if it was good enough for her then it should be good enough for everyone. The same with foreign shares.

The debate about REITs is a case in point. REITs are not investment trusts; they are property companies with a highly misleading name because legislators were too lazy to change the name from American English.

Many years ago on TLF I remember seeing a post which argued (tongue in cheek) that HYP might be a racist strategy because of the ban on foreign investing. It didn't stay up for long!

[Gollum voice on] "nasty foreign shares, we hates them my precious..."

[daveh]

I still can't quite understand why private-investors nowadays would allow themselves to be straight-jacketed by a set of investment rules drawn up so long ago, they simply haven't managed to keep up with the huge strides made in cheap, global investment options in recent years...

HYP has become an ideology for many, with fixed rules and enforcement of rules by deleting posts. Doris didn't have any investment trusts so if it was good enough for her then it should be good enough for everyone. The same with foreign shares.

The debate about REITs is a case in point. REITs are not investment trusts; they are property companies with a highly misleading name because legislators were too lazy to change the name from American English.

Many years ago on TLF I remember seeing a post which argued (tongue in cheek) that HYP might be a racist strategy because of the ban on foreign investing. It didn't stay up for long!

[Gollum voice on] "nasty foreign shares, we hates them my precious..."

Except it hasn't been deleted, just moved to a more appropriate board. I started by setting up a classic HYP as originally set out by PYAD on MF ( thank you Stephen it's served me well and I may soon have to live off it for a few years until I take my DB pension). However I have added to the original UK high yield shares, REITs and green ITs some FI in the form of NCYF and Pref shares and high yield ETFS for foreign shares (IDVY, EMDV, IAPD) and HEFL another IT. Recently I've also moved some of my cash from savings accounts to low coupon short dated gilts to avoid tax.

[Charlottesquare]

I started investing by buying some Alliance Trust shares and added a few individual shares, seeking in my naivety to make capital gains. I then realised a more reliable way of getting investment gains was through dividends and my version of a HYP was born. I have always avoided being in a strait jacket and when I found the HYP board I thought it reasonable but then found these absurd rules. What nonsense unless we take them as apparently intended; a simple unsophisticated guide for a Doris.
To me ITs are vehicles which will get me a wider spread of investments than I can access myself and that is how I use them. I make few changes to ITs or indeed my other investments. Interesting that these days ITs have become much more competitive, changing managers if they are seen not to be performing and even merging or selling themselves to others if they feel that is best for their shareholders.
Dod

1.What I do find strange is that the portfolio for Doris is intended , to a degree , to be an annuity substitute.
2.Trusts created on death etc often require an income stream to be paid out to parties so long as they live (IIP Trusts) .
3.I have never been a trustee of such a trust that invests in individual company shares, all have more likely, re equity interests, invested in Investment Trusts (Sample of 9 trusts I have been trustee for), the trustees always seem to view ITs as more appropriate to guarantee the payments to the parties
with the life interests (this can sometimes be a fixed annuity that needs covered)
4.Given there has been a tried and tested approach to creating such income streams over a large number of years (Scottish Trusts have operated for hundreds of years), often from the 20th century using ITs ,why are they, with regard to HYP, excluded investment types?

[BullDog]

I started investing by buying some Alliance Trust shares and added a few individual shares, seeking in my naivety to make capital gains. I then realised a more reliable way of getting investment gains was through dividends and my version of a HYP was born. I have always avoided being in a strait jacket and when I found the HYP board I thought it reasonable but then found these absurd rules. What nonsense unless we take them as apparently intended; a simple unsophisticated guide for a Doris.
To me ITs are vehicles which will get me a wider spread of investments than I can access myself and that is how I use them. I make few changes to ITs or indeed my other investments. Interesting that these days ITs have become much more competitive, changing managers if they are seen not to be performing and even merging or selling themselves to others if they feel that is best for their shareholders.
Dod

1.What I do find strange is that the portfolio for Doris is intended , to a degree , to be an annuity substitute.
2.Trusts created on death etc often require an income stream to be paid out to parties so long as they live (IIP Trusts) .
3.I have never been a trustee of such a trust that invests in individual company shares, all have more likely, re equity interests, invested in Investment Trusts (Sample of 9 trusts I have been trustee for), the trustees always seem to view ITs as more appropriate to guarantee the payments to the parties
with the life interests (this can sometimes be a fixed annuity that needs covered)
4.Given there has been a tried and tested approach to creating such income streams over a large number of years (Scottish Trusts have operated for hundreds of years), often from the 20th century using ITs ,why are they, with regard to HYP, excluded investment types?

Because the author had to dream up stuff to sell a tipsheet subscription. If an investment trust was recommended, there's no reason to buy the next tipsheet.

[Dod101]

Of course course fashions come and go. Most ITs started off investing surplus capital in mortgages for overseas investments, everything from oil wells in the US (Alliance Trust) to palm oil plantations and railroads. Then with the rise of the equity they gradually changed their portfolios to equities but the point being made is that most have mostly retained their emphasis on income, which is of course the old idea of investing, for sharing in the profits of the enterprise, not for treating shares like gambling chips. And so, with ITs, the traditional and long established ones tend to treat an increasing dividend income as sacrosanct and thus very useful for the income seeker.
Dod

[moorfield]

4.Given there has been a tried and tested approach to creating such income streams over a large number of years (Scottish Trusts have operated for hundreds of years), often from the 20th century using ITs ,why are they, with regard to HYP, excluded investment types?

It can't just be because "the guidelines say so" surely? Is there any post or discussion from the old days that verifies/explains this? All we have from the Stone Tablets as far as I know is "the FTSE 350", which does include some. Traditional sector diversification would preclude a whole portfolio of them of course - so granted that would certainly be something different (a PHY perhaps?). The "Breelander Convention" by the way was cooked up to enable Breelander to report his preference share containing HYP as a HYP on HYP Practical. Certainly none of those in the FTSE350!

[Dod101]

I meant to pick up on Charlottesquare’s comment about the age of Scottish investment trusts. Apart what is said to be oldest trust, F & C, the Scottish trusts are I think the oldest but they were first established in the 1850s or thereabouts so they are no older than about 160/170 years old as a means for using some of the huge profits arising from the industrial revolution in pre welfare state Victorian Britain, in much the same way that Hong Kong wracked up huge surpluses in the 20 year period prior to 1997 which enabled it to build huge infrastructure projects with almost no borrowings and China in the following 20 years.

Dod