Comparison: HYP1 and IT Alternatives

[IanTHughes]

Comparison: HYP1 and IT Alternatives

Thank you so much pyad for continuing to update us on the progress of HYP1. For anyone thinking about maybe following the High Yield Portfolio (HYP), a truly wonderful fount of information.

I have been comparing the progress of HYP1 since its set up in Nov 2000, with some possible alternative investment scenarios.

Income

 # | Portfolio |          Name            |  Income   
 1 | HYP1      | High Yield Portfolio     | 131,248.64
 2 | HHI       | Henderson High Income    | 127,966.68
 3 | AEI       | Aberdeen Equity Income   | 109,352.59
 4 | MRCH      | Merchants Trust          | 103,105.27
 5 | TMPL      | Temple Bar               |  99,191.26
 6 | CTY       | City of London           |  97,565.46
 7 | FGT       | Finsbury Growth & Income |  95,814.84
 8 | EDIN      | Edinburgh Investment     |  91,992.85
 9 | BNKR      | Bankers                  |  72,755.83
10 | MUT       | Murray Income Trust      |  66,399.73
11 | JCH       | JPMorgan Claverhouse     |  63,703.59
12 | SAIN      | Scottish American        |  53,695.11
13 | FCIT      | F&C Investment Trust     |  51,824.61
14 | SMT       | Scottish Mortgage        |  48,208.88

HYP1 was of course set up to receive an income with no need for any intervention, and I think from the foregoing we can deduce that it has done just that.


Of course, there are many that suggest that, despite the aim of simply receiving an income, Capital Value is also important. For those individuals, the following couple of tables – Capital Value and Annual Return - should be of interest.

Capital

 # | Portfolio |          Name            |  Capital  
 1 | SMT       | Scottish Mortgage        | 611,290.37
 2 | FGT       | Finsbury Growth & Income | 300,371.85
 3 | FCIT      | F&C Investment Trust     | 255,816.14
 4 | BNKR      | Bankers                  | 247,402.60
 5 | SAIN      | Scottish American        | 146,278.63
 6 | HYP1      | High Yield Portfolio     | 145,829.00
 7 | TMPL      | Temple Bar               | 140,737.77
 8 | CTY       | City of London           | 122,713.10
 9 | MUT       | Murray Income Trust      | 117,571.43
10 | AEI       | Aberdeen Equity Income   | 104,982.66
11 | MRCH      | Merchants Trust          | 104,210.53
12 | JCH       | JPMorgan Claverhouse     |  94,947.57
13 | HHI       | Henderson High Income    |  90,963.86
14 | EDIN      | Edinburgh Investment     |  90,659.34

Annual Return - XIRR

 # | Portfolio |         Name             |  XIRR 
 1 | SMT       | Scottish Mortgage        | 10.55%
 2 | FGT       | Finsbury Growth & Income |  8.86%
 3 | HYP1      | High Yield Portfolio     |  7.89%
 4 | HHI       | Henderson High Income    |  7.77%
 5 | BNKR      | Bankers                  |  7.54%
 6 | FCIT      | F&C Investment Trust     |  7.00%
 7 | TMPL      | Temple Bar               |  6.91%
 8 | MRCH      | Merchants Trust          |  6.40%
 9 | CTY       | City of London           |  6.27%
10 | AEI       | Aberdeen Equity Income   |  6.27%
11 | MUT       | Murray Income Trust      |  6.06%
12 | SAIN      | Scottish American        |  5.40%
13 | EDIN      | Edinburgh Investment     |  4.14%
14 | JCH       | JPMorgan Claverhouse     |  4.04%

Conclusion

1. HYP1 has splendidly achieved its Income aim, better than many alternative investment possibilities.
2. HYP1 has increased its Capital Value, better than many alternative investment possibilities.
3. HYP1 has achieved a reasonable Annual Return, better than many alternative investment possibilities.
4. HYP1 has been a success!

Enjoy!


Ian

Moderator Message:
The HYP guidelines rule as off-topic discussions about "the effectiveness and performance of HYP strategies versus other strategies, the desirability or otherwise of investment trusts as an alternative to HYP shares, nor discussions of other types of approaches." This thread has therefore been moved to a more appropriate board. -- MDW1954

[Itsallaguess]

I have been comparing the progress of HYP1 since its set up in Nov 2000, with some possible alternative investment scenarios.

Income

 # | Portfolio |          Name            |  Income   
 1 | HYP1      | High Yield Portfolio     | 131,248.64
 2 | HHI       | Henderson High Income    | 127,966.68
 3 | AEI       | Aberdeen Equity Income   | 109,352.59
 4 | MRCH      | Merchants Trust          | 103,105.27
 5 | TMPL      | Temple Bar               |  99,191.26
 6 | CTY       | City of London           |  97,565.46
 7 | FGT       | Finsbury Growth & Income |  95,814.84
 8 | EDIN      | Edinburgh Investment     |  91,992.85
 9 | BNKR      | Bankers                  |  72,755.83
10 | MUT       | Murray Income Trust      |  66,399.73
11 | JCH       | JPMorgan Claverhouse     |  63,703.59
12 | SAIN      | Scottish American        |  53,695.11
13 | FCIT      | F&C Investment Trust     |  51,824.61
14 | SMT       | Scottish Mortgage        |  48,208.88

HYP1 was of course set up to receive an income with no need for any intervention, and I think from the foregoing we can deduce that it has done just that.

I've updated the above 'income comparison table' to show the current yields of your 'comparisons' -

 # | Portfolio |          Name            |  Income      |  Yield
 1 | HYP1      | High Yield Portfolio     | 131,248.64   | 
 2 | HHI       | Henderson High Income    | 127,966.68   |  6.71%
 3 | AEI       | Aberdeen Equity Income   | 109,352.59   |  7.50%
 4 | MRCH      | Merchants Trust          | 103,105.27   |  5.24%
 5 | TMPL      | Temple Bar               |  99,191.26   |  4.01%
 6 | CTY       | City of London           |  97,565.46   |  5.09%
 7 | FGT       | Finsbury Growth & Income |  95,814.84   |  2.30%
 8 | EDIN      | Edinburgh Investment     |  91,992.85   |  3.96%
 9 | BNKR      | Bankers                  |  72,755.83   |  2.32%
10 | MUT       | Murray Income Trust      |  66,399.73   |  4.59%
11 | JCH       | JPMorgan Claverhouse     |  63,703.59   |  5.28%
12 | SAIN      | Scottish American        |  53,695.11   |  2.73%
13 | FCIT      | F&C Investment Trust     |  51,824.61   |  1.50%
14 | SMT       | Scottish Mortgage        |  48,208.88   |  0.57%

Are you able to explain why you think it's appropriate to list the above red highlighted options as being possible alternative income-investment options where they clearly deliver hands-off income at a level that would negate such options as being valid?

On the face if it, large parts of that 'income-comparison table' look rigged, so if there''s a good explanation for that then I think it's worth you perhaps putting your case forward with a little more clarity...

Cheers,

Itsallaguess

[daveh]

I thought including the growth ITs was interesting as it shows how HYP1 has performed on a total return basis against an alternative strategy. The answer being pretty well in third place behind SMT and FCIT. I hope SMT continues to perform that well as I added it to my income portfolio as a holding place for money in my taxable account to avoid tax until I have space in my ISA where I can invest it into high yield holdings.

[IanTHughes]

I have been comparing the progress of HYP1 since its set up in Nov 2000, with some possible alternative investment scenarios.

Income

 # | Portfolio |          Name            |  Income   
 1 | HYP1      | High Yield Portfolio     | 131,248.64
 2 | HHI       | Henderson High Income    | 127,966.68
 3 | AEI       | Aberdeen Equity Income   | 109,352.59
 4 | MRCH      | Merchants Trust          | 103,105.27
 5 | TMPL      | Temple Bar               |  99,191.26
 6 | CTY       | City of London           |  97,565.46
 7 | FGT       | Finsbury Growth & Income |  95,814.84
 8 | EDIN      | Edinburgh Investment     |  91,992.85
 9 | BNKR      | Bankers                  |  72,755.83
10 | MUT       | Murray Income Trust      |  66,399.73
11 | JCH       | JPMorgan Claverhouse     |  63,703.59
12 | SAIN      | Scottish American        |  53,695.11
13 | FCIT      | F&C Investment Trust     |  51,824.61
14 | SMT       | Scottish Mortgage        |  48,208.88

HYP1 was of course set up to receive an income with no need for any intervention, and I think from the foregoing we can deduce that it has done just that.

I've updated the above 'income comparison table' to show the current yields of your 'comparisons' -

 # | Portfolio |          Name            |  Income      |  Yield
 1 | HYP1      | High Yield Portfolio     | 131,248.64   | 
 2 | HHI       | Henderson High Income    | 127,966.68   |  6.71%
 3 | AEI       | Aberdeen Equity Income   | 109,352.59   |  7.50%
 4 | MRCH      | Merchants Trust          | 103,105.27   |  5.24%
 5 | TMPL      | Temple Bar               |  99,191.26   |  4.01%
 6 | CTY       | City of London           |  97,565.46   |  5.09%
 7 | FGT       | Finsbury Growth & Income |  95,814.84   |  2.30%
 8 | EDIN      | Edinburgh Investment     |  91,992.85   |  3.96%
 9 | BNKR      | Bankers                  |  72,755.83   |  2.32%
10 | MUT       | Murray Income Trust      |  66,399.73   |  4.59%
11 | JCH       | JPMorgan Claverhouse     |  63,703.59   |  5.28%
12 | SAIN      | Scottish American        |  53,695.11   |  2.73%
13 | FCIT      | F&C Investment Trust     |  51,824.61   |  1.50%
14 | SMT       | Scottish Mortgage        |  48,208.88   |  0.57%

Are you able to explain why you think it's appropriate to list the above red highlighted options as being possible alternative income-investment options where they clearly deliver hands-off income at a level that would negate such options as being valid?

On the face if it, large parts of that 'income-comparison table' look rigged, so if there''s a good explanation for that then I think it's worth you perhaps putting your case forward with a little more clarity...

Rigged? In what way rigged?

All I did was select a few possible alternatives that a retail investor would have been able to select 23 years ago. Of course, at that time, I was not able to filter out those that would have such a low yield 23 years after selection. You must show me how you do that!

Seriously, why do you persist in ignoring the elephant in the room? HYP1 has outstripped them all for Income!

With the benefit of hindsight, I am currently casting around for other possible alternatives, trying to find a competitor for HYP1's income success. I am sure they must exist although I am yet to find one.

But in any event, HYP1 has surely succeeded in its primary aim of producing an Income, or do you consider that to be rigged?

Enjoy!


Ian

[IanTHughes]

With the benefit of hindsight, I am currently casting around for other possible alternatives, trying to find a competitor for HYP1's income success.

Now added:

MYI – Murray International
LWDB - Law Debenture Corporation

Income

 # | Portfolio |           Name            |  Income   
 1 | HYP1      | High Yield Portfolio      | 131,248.64
 2 | HHI       | Henderson High Income     | 127,966.68
 3 | MYI       | Murray International      | 117,824.31
 4 | LWDB      | Law Debenture Corporation | 112,610.43
 5 | AEI       | Aberdeen Equity Income    | 109,352.59
 6 | MRCH      | Merchants Trust           | 103,105.27
 7 | TMPL      | Temple Bar                |  99,191.26
 8 | CTY       | City of London            |  97,565.46
 9 | FGT       | Finsbury Growth & Income  |  95,814.84
10 | EDIN      | Edinburgh Investment      |  91,992.85
11 | BNKR      | Bankers                   |  72,755.83
12 | MUT       | Murray Income Trust       |  66,399.73
13 | JCH       | JPMorgan Claverhouse      |  63,703.59
14 | SAIN      | Scottish American         |  53,695.11
15 | FCIT      | F&C Investment Trust      |  51,824.61
16 | SMT       | Scottish Mortgage         |  48,208.88

Capital

 # | Portfolio |           Name            |  Capital  
 1 | SMT       | Scottish Mortgage         | 611,290.37
 2 | FGT       | Finsbury Growth & Income  | 300,371.85
 3 | FCIT      | F&C Investment Trust      | 255,816.14
 4 | LWDB      | Law Debenture Corporation | 251,346.24
 5 | BNKR      | Bankers                   | 247,402.60
 6 | MYI       | Murray International      | 178,025.93
 7 | SAIN      | Scottish American         | 146,278.63
 8 | HYP1      | High Yield Portfolio      | 145,829.00
 9 | TMPL      | Temple Bar                | 140,737.77
10 | CTY       | City of London            | 122,713.10
11 | MUT       | Murray Income Trust       | 117,571.43
12 | AEI       | Aberdeen Equity Income    | 104,982.66
13 | MRCH      | Merchants Trust           | 104,210.53
14 | JCH       | JPMorgan Claverhouse      |  94,947.57
15 | HHI       | Henderson High Income     |  90,963.86
16 | EDIN      | Edinburgh Investment      |  90,659.34

Annual Return - XIRR

 # | Portfolio |           Name            |  XIRR 
 1 | SMT       | Scottish Mortgage         | 10.55%
 2 | LWDB      | Law Debenture Corporation | 10.38%
 3 | FGT       | Finsbury Growth & Income  |  8.86%
 4 | HYP1      | High Yield Portfolio      |  7.89%
 5 | HHI       | Henderson High Income     |  7.77%
 6 | BNKR      | Bankers                   |  7.54%
 7 | FCIT      | F&C Investment Trust      |  7.00%
 8 | TMPL      | Temple Bar                |  6.91%
 9 | MRCH      | Merchants Trust           |  6.40%
10 | MYI       | Murray International      |  6.40%
11 | CTY       | City of London            |  6.27%
12 | AEI       | Aberdeen Equity Income    |  6.27%
13 | MUT       | Murray Income Trust       |  6.06%
14 | SAIN      | Scottish American         |  5.40%
15 | EDIN      | Edinburgh Investment      |  4.14%
16 | JCH       | JPMorgan Claverhouse      |  4.04%

Enjoy!


Ian

[88V8]

Are you able to explain why you think it's appropriate to list the above red highlighted options as being possible alternative income-investment options where they clearly deliver hands-off income at a level that would negate such options as being valid?

Rigged? In what way rigged?
All I did was select a few possible alternatives that a retail investor would have been able to select 23 years ago.

I think there will always be a degree of unease about retrospective comparisons... I recall that Luni was often criticised for his back-tested portfolios.

If anything, I would suggest that your selections are rigged to the negative. After all, we know that ITs have a habit of disappearing or merging if they are not doing well. Those you have selected, on a survivorship basis, represent those that survived and thrived.
The investor of 23 years ago could easily have chosen a complete duffer and lost most of their money!

V8

[Itsallaguess]

‎
An interesting Monevator article has been discussed on the main HYP Practical thread.

It's a 'Five years and a bit' report from 2016 on a distinct Monevator HYP set up by Pyad in 2011, and it contains a capital comparison of that HYP portfolio set against a portfolio of three income-IT's -




Source - https://monevator.com/the-monevator-demo-hyp-five-years-and-a-bit-on/

What I found really interesting were some comments from pyad related to the above capital performance figures -

It obviously bears stating that the IT basket is doing much better than my 20 shares, too.

As I’ve said many times before, UK equity income investment trusts are pretty much my favourite vehicle for active UK investors. I keep an eye on a small portfolio of them for my mother, as it happens.

But even if we are still remembering to look back at this comparison after 20 years, we won’t be able to say anything truly definitive about their merits versus trackers or the HYP, because this portfolio is just a snapshot in time, from 2011 to whenever.

What if we’d started in 2007? Or 2003?

Also the whole shebang reflects my particular 20 stock picks and my arbitrary selection of three trusts. (Arbitrary in the sense that you might have chosen differently).

That’s idiosyncratic, not the stuff of scientific rigour.

Obviously the same is all true if the HYP comes good in the years to come, too.

I think the above comments are interesting because there's enough timing and randomness excuses in there, reflecting on that relatively poor capital-performance comparison, to suggest that if they're acceptable excuses for poor performance, then they can surely be flipped around and offered up as an excuse for any potential out performance as well, and his final point seems to readily accept that fact, so I thought the above might be worth capturing here on this HYP/IT comparison thread, for a little balance provided by pyad himself...

Cheers,

Itsallaguess

[moorfield]

‎
It's a 'Five years and a bit' report from 2016 on a distinct Monevator HYP set up by Pyad in 2011, and it contains a capital comparison of that HYP portfolio set against a portfolio of three income-IT's -

That looks a bit rigged to me IAAG Strictly speaking the benchmark there should also include income?

Difficult to qualify this, but I feel a PHY (of ITs) would better lend itself to being much more hands off than a HYP (of shares). A problem not often discussed in these comparisons is what I would coin "keyboard risk"; despite pyads advice not to tinker I think it has become endemic in HYP practice. For example the poster who has bought, sold, bought (or is it sold, bought, sold, I forget) the same shares again over a few years, apparently on a whim. That cannot be financially healthy - I do wonder how much loss has been crystallized there - and I think the guidelines and even the board itself to some extent contribute to that risk.

[Itsallaguess]

‎

It's a 'Five years and a bit' report from 2016 on a distinct Monevator HYP set up by Pyad in 2011, and it contains a capital comparison of that HYP portfolio set against a portfolio of three income-IT's -

That looks a bit rigged to me IAAG

Strictly speaking the benchmark there should also include income?

I agree that the lack of income-data is a glaring-miss, but pyad seems to accept on many of those Monevator HYP articles that he's not got the data for income-comparisons, where he's written later-years reviews on his various HYP's there.

A strange omission, of course, but I thought shining a light on the capital-performance comparison that is in the article was worth capturing on this thread, given that it's a rare additional data-set, and one that seems to counter the prevailing HYP1 'out-performance narrative' a little...

Difficult to qualify this, but I feel a PHY (of ITs) would better lend itself to being much more hands off than a HYP (of shares).

A problem not often discussed in these comparisons is what I would coin "keyboard risk", which despite pyads advice not to tinker I think has become endemic in HYP practice.

For example the poster who has bought, sold, bought (or is it sold, bought, sold, I forget) the same shares again over a few years, apparently on a whim. That cannot be financially healthy - I do wonder how much loss has been crystallized there - and I think the guidelines and even the board itself to some extent have contributed to that risk.

Well there's certainly 'worst adverts for the strategy' awards to be regularly handed out, that's for sure, but it's difficult to take that sort of stuff seriously where people don't actually need or rely on their HYP income in real life, so I tend to ignore it as 'need to be in a club' stuff in those particular cases, rather than serious income-investing that's aimed at providing post-work funds to actually live off.

As Dod's always quite rightly said - skin in the game focusses the mind...

Cheers,

Itsallaguess

[daveh]

For example the poster who has bought, sold, bought (or is it sold, bought, sold, I forget) the same shares again over a few years, apparently on a whim. That cannot be financially healthy - I do wonder how much loss has been crystallized there - and I think the guidelines and even the board itself to some extent have contributed to that risk.

Well there's certainly 'worst adverts for the strategy' awards to be regularly handed out, that's for sure, but it's difficult to take that sort of stuff seriously where people don't actually need or rely on their HYP income in real life, so I tend to ignore it as 'need to be in a club' stuff in those particular cases, rather than serious income-investing that's aimed at providing post-work funds to actually live off.

As Dod's always quite rightly said - skin in the game focusses the mind...

Cheers,

Itsallaguess

But how can we know if someone is living of their HYP or other investment portfolio unless they tell us (like Dod has). For example I'm still adding to my income portfolio and it won't be my only source of income in retirement (eventually) as I will have a DB pension from work and the state pension both of which will pay out at 67, though I could take the DB pension earlier with some loss of income. I also have some AVCs linked to the DB pension. However there is a possibility that I may be out of a job next year, so I may be living off just my Income Portfolio and perhaps the AVCs transferred to a SIPP and invested in the same way as my HYPish portfolio.

My aim with my investments was to provide an income to tide me over if I was out of work for a period, which it would have been able to do at a basic level for about the past 7 or 8 years (though 2020 would have been a bit tight due to covid) and if not needed to provide a top up to my pension during retirement (at the moment the income will about the same as my DB pension).

Edited cos I messed up the quotes

[Bubblesofearth]

‎
An interesting Monevator article has been discussed on the main HYP Practical thread.

It's a 'Five years and a bit' report from 2016 on a distinct Monevator HYP set up by Pyad in 2011, and it contains a capital comparison of that HYP portfolio set against a portfolio of three income-IT's -




Source - https://monevator.com/the-monevator-demo-hyp-five-years-and-a-bit-on/

What I found really interesting were some comments from pyad related to the above capital performance figures -

It obviously bears stating that the IT basket is doing much better than my 20 shares, too.

As I’ve said many times before, UK equity income investment trusts are pretty much my favourite vehicle for active UK investors. I keep an eye on a small portfolio of them for my mother, as it happens.

But even if we are still remembering to look back at this comparison after 20 years, we won’t be able to say anything truly definitive about their merits versus trackers or the HYP, because this portfolio is just a snapshot in time, from 2011 to whenever.

What if we’d started in 2007? Or 2003?

Also the whole shebang reflects my particular 20 stock picks and my arbitrary selection of three trusts. (Arbitrary in the sense that you might have chosen differently).

That’s idiosyncratic, not the stuff of scientific rigour.

Obviously the same is all true if the HYP comes good in the years to come, too.

I think the above comments are interesting because there's enough timing and randomness excuses in there, reflecting on that relatively poor capital-performance comparison, to suggest that if they're acceptable excuses for poor performance, then they can surely be flipped around and offered up as an excuse for any potential out performance as well, and his final point seems to readily accept that fact, so I thought the above might be worth capturing here on this HYP/IT comparison thread, for a little balance provided by pyad himself...

Cheers,

Itsallaguess

SP's and values at close yesterday;

ABRDN 1.64 £175
Admiral 27.09 £385
AZN 99 £793
Aviva 4.25 £239
BAE 10.5 £799
Balfour 3.26 £246
BHP 24.22 £252
BLND 3.46 £145
CNA 1.49 £118
DGE 27.74 £556
Halma 21.2 £1427
HSBC 6.07 £231
Pearson 9.34 £205
Shell 25.8 £290
S32 1.63 £17
SSE 18.25 £344
Tate 6.25 £255
Tesco 2.84 £172
ULVR 37.86 £476
Vod 0.71 £82

Total value of HYP £7475

City London 3.95 £2163
Edinburgh 6.61 £2328
Merchants £2056

Total value of IT's £6547

So 7 years on from the article, and 12 from inception, the capital value of the HYP has leapfrogged that of the IT's.

As for HYP1 there are clear winers and losers in this HYP with performance being driven by a perhaps even smaller fraction of winners, notably Halma.

Again, shame we don't have the income data.

BoE

ps Apologies for the poor formatting, combination of lack of tech skills and laziness!

[Arborbridge]

I'm butting in half way through a conversation which I not read properly, but it seems to me including SMT, for example, is both interesting and valid.
It does represent the opposite approach to HYP and as such it can be considerd an "alternative". Agreed, it does not fulfill this board's "high yield" mandate, but let's be a little generous and allow that the comparison is a least of interest to some of us.

Arb.

[Arborbridge]

But how can we know if someone is living of their HYP or other investment portfolio unless they tell us (like Dod has).

Well, that's a very good point - we don't have any sort of "register" so we have to rely on remembering what people have told us from a multitude of conversations. Not an easy task.

Anyhow, you can add me to the list! My monthly income is derived entirely from investment (largely dividends) plus state pension, and has been since 2010.

Just to add to the picture, my wife and I do have income coing in from BTLs, but this is not drawn on for my pension - it has stayed within a "house" portfolio which is held separately.

Didn't we once have a poll about people living on their HYPs?

Arb

[1nvest]

If you were offered a investment deal of three assets, where for a 10 year period you would be awarded the total return from a combination of 40% in the best performing asset, 35% in the second best, 25% in the worst ... then you might be attracted to that deal.

Here are some figures sourced from portfoliovisualizer.com (so US data) for a three asset set of stocks, REIT and gold, for each of three separate 10 year runs, where the actual non rebalanced CAGR was pretty close to that of the 40/35/25 (time weighted) average of the best/second best/worst outcome.



A basic simplification of a characteristic of what HYP non rebalanced does. As is holding a set of three IT's instead of 15 individual stocks (that could be clumped together as the 5 best, 5 second best, 5 worst).

Either way you might anticipate similar (broad) reward, plus/minus good/bad luck in the actual choices of stocks/IT's opted for.