BarrenWuffett wrote:I think there are many strategies to put bread on the table which are less risky and more suitable for the average small investor than a hyp. I look forward to reading strategies from others...should be interesting.
Far from being a controversial statement, I think that is merely the reiteration of the consensus view. HYP is an eclectic, fringe strategy that is unknown outside of the UK, and pretty much unknown outside of TMF and TLF. You will find precious few mentions of it in the general financial media, and none outside the UK. It's not considered to be a mainstream solution and so Ohno/Munro's point has merit, even if there is always the lingering feeling that everything he says is tainted by trying to subliminally market his eponymous fund.
I also thinks that HYP targets a fairly narrow demographic segment. If you have little or no capital, which is probably two thirds of the country, then it's moot. Likewise if you are fairly wealthy (say a few million) then you'd have no need of it either. You would probably choose a strategy that doesn't generate a lot of taxable income, and for that matter you could retire happily without any income at all, just spending the cash.
So who does that leave? Well, that depends on how much capital you have and how much income you need. If you need 35K a year and have a million quid, I'd buy an index fund. The market has an overall yield of about 3.5%, so why take on any more risk than that for income you don't need, especially when you always have the capital to fall back on?
Where HYP does seductively appeal is the class of people who don't quite have enough to retire on, but by pushing up the headline yield then they can. So if I still need that 35K a year, but only have 700K then I might normally think I have to carry on working. But push the portfolio yield up to 5% and, bingo, there's my 35K a year.
So the question remains, if not HYP for that demographic, then what?