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Links to Luniversal’s investment trust baskets

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JohnTheJute
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Links to Luniversal’s investment trust baskets

#120011

Postby JohnTheJute » February 23rd, 2018, 9:09 pm

Luniversal’s posts on his investment trust “baskets” were one of my favourite parts of the old Motley Fool message boards. I didn’t always agree with him but he influenced my thinking, so—when the Motley Fool message boards died—I kept links to the new locations of some of his essays on the Wayback Machine.

Searching the Wayback Machine is difficult, so, in the hope that this will be useful to a new community of Fools, here is an annotated bibliography of some of Luniversal’s thought on IT investing.

Investing for income and growth—the B8 and the B7

His initial thoughts on the matter were summarized in a pair of posts in September 2010. The first of these proposed a basket of 10 equity income trusts:

https://web.archive.org/web/20161117062 ... 50077.aspx

and the second proposed a basket of 7 trusts with a slightly lower yield:

https://web.archive.org/web/20101026034 ... 51984.aspx

Over the next year, two of the 10 were dropped and one of the 7 was changed, giving the final forms of the B8 and the B7:

https://web.archive.org/web/20161213061 ... 09151.aspx

Hyperlinks within Wayback Machine pages do not always work; one that does is the link in this page to his November 2010 post comparing his ten-year-old HYP with his new B10 and B7 baskets.

A year later, in September 2012, he revisited the B8. I kept the whole thread for this review, since it contains some coherent questioning of his approach:

https://web.archive.org/web/20121001074 ... sort=whole

Luniversal was reluctant to change the baskets once they had stabilized. Partly, I think, this was because he believed that a portfolio should be changed as rarely as possible; partly, I suspect, it was because he want to track the performance of an unchanged basket over many years. Here are some of his responses to thoughts of changes:

Finsbury Growth & Income, Law Debenture, and Scottish American:

https://web.archive.org/web/20161213062 ... 89246.aspx

Schroder Income Growth:

https://web.archive.org/web/20161213062 ... 24411.aspx

J P Morgan Claverhouse:

https://web.archive.org/web/20161213062 ... 26813.aspx

F&C Capital & Income and Temple Bar:

https://web.archive.org/web/20160105105 ... 99494.aspx

More than a year after the closure of the Motley Fool message boards, there are doubtless even more pressures for change. For example, I feel that Luniversal was quite right in 2011 to decide that Shires Income was in a bad patch, and should be dropped from the B10, but I see from forrado’s post in

viewtopic.php?f=54&t=5638#p58587

that its board has been slowly rebuilding the trust ever since.

Finally, here are the most recent reviews of the B7 and the B8 that I have kept:

https://web.archive.org/web/20161117030 ... 20817.aspx

https://web.archive.org/web/20161213063 ... 69374.aspx

Investing for Growth—the G10

In 2012, a third basket appeared, of 10 large generalist trusts for those investing primarily for capital gain:

https://web.archive.org/web/20161213062 ... 80864.aspx

For some years, Luniversal maintained that this was not a basket—to be bought in its totality by a growth investor—but a list of possible options. Later, with experience of the G10’s performance, he accepted that it might indeed work well as a basket.

Conviction Investing—the C5

In 2012, in a pair of posts—the second of which I have unfortunately lost—Luniversal presented the Conviction 5: trusts whose primary aim was not to lose money:

https://web.archive.org/web/20161116024 ... 00356.aspx

The composition of the Conviction 5 never changed. The last annual review was a few days before the TMF message boards died:

https://web.archive.org/web/20161115154 ... t=postdate

Larger baskets (1)—the U24

There were income investment trusts that, for one reason or another, did not make the cut for inclusion in the B8 or the B7. Luniversal used the title “Universe of 24” to refer to all the options, and he published reviews of the U24 occasionally:

https://web.archive.org/web/20161213063 ... 64265.aspx

Larger baskets (2)—the 41

One of the groups of trusts which Luniversal reviewed regularly comprised the “big boys”—initially 40, later 41, of the largest generalists, introduced in a three-part study in 2012:

https://web.archive.org/web/20161213061 ... 65889.aspx

https://web.archive.org/web/20161213061 ... 67553.aspx

https://web.archive.org/web/20161213062 ... 71885.aspx

Here is the latest review of the 41 that I have:

https://web.archive.org/web/20161213063 ... 76593.aspx

Larger baskets (3)—the six monthly survey

Every six months or so, Luniversal would post a non-comprehensive survey of most London-listed investment trusts and some offshore investment companies:

https://web.archive.org/web/20161213063 ... 92479.aspx


If you have been, thanks for reading this,

John

tjh290633
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Re: Links to Luniversal’s investment trust baskets

#120051

Postby tjh290633 » February 24th, 2018, 8:43 am

Many thanks, John. An excellent summary and resource.

TJH

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Re: Links to Luniversal’s investment trust baskets

#120061

Postby Itsallaguess » February 24th, 2018, 9:42 am

A superb resource, well done for both archiving these and the great presentation of them here for prosperity.

I think the IT-basket work was the single best achievement by Luni, both in his research and the development of them, but one thing I always disagreed with was his insistence that the baskets were to be used as a single-shot investment for lump-sums, and should not be used as a drip-feed approach.

I never saw the merit in that argument, and I think it might have put off some people who thought he had good reasons to say it. He certainly never gave any justification to why he stuck by this idea, and I think it was the one flaw in his otherwise superb approach.

I personally think that building up such income-baskets, or similarly diverse ones to them, or making single-investments of lump sums into these types of investments makes no real difference to a long-term income plan related to Investment Trusts.

Having owned a more 'pure' HYP in the past, where it held a spread of shares to provide re-investible income (I am still working), I moved over to income-related Investment Trusts in recent years for a large section of my HYP, and have seen a big benefit personally in doing so.

Many of those I hold appear in some of Luni's baskets, and have performed well in both income and capital terms over the years, but I've drip-fed my capital into these holdings as I've never really been in a position to invest a lump-sum into my investments. I should add that I wouldn't see any problem in carrying out a lump-sum investment, but I could never understand why Luni took such a hard line on that point, and he never fully justified his position on that, in my view.

Given the success of the IT holdings in my HYP, and the crossover often seen between my holdings and those found in some of his baskets, I'd hate people to not think that the fantastic information held in the archived posts above can't also be seen as a great starting point for a more diverse, drip-fed approach into income-Investment Trusts, as well as taking advantage of them if people did indeed want to carry out lump-sum investments, as written on the tin....

Cheers,

Itsallaguess

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Re: Links to Luniversal’s investment trust baskets

#120163

Postby JohnTheJute » February 24th, 2018, 5:41 pm

Thank you.

Itsallaguess wrote:... presentation of them here for prosperity.

I did like your deliberate malapropism, leading the reader to expect the word “posterity” (the “new community of Fools” for whom I was writing) ... and then substituting a word that sounds similar and has a relevant meaning.

A nice play on words.

... one thing I always disagreed with was his insistence that the baskets were to be used as a single-shot investment for lump-sums, and should not be used as a drip-feed approach.

You’re not alone, of course; and it’s a disagreement that makes sense. Moreover, I haven’t been purist myself in my use of the B7 for part of our retirement income.

But, as someone who squirreled away Luniversal’s post for future reference, I am obviously something of a fan, so I tried to analyse why he was so insistent on investing in all of a basket at the same time.

I may be wrong, of course (I have never had personal contact with him) but I concluded that it was because of the value of diversification. We usually think of this as being: if we hold seven trusts, then there is little chance of more than one of them going badly wrong.

But I think Luniversal saw the B7 as being more tightly coupled: each trust in the B7 is unlikely to go badly wrong, but is most likely to have a bad patch from time to time. At any given time, one of the B7 is likely to be struggling and the needs the support of the other six members of the basket.

Let’s take a fictitious retired Jutish mathematician called John, who plans to invest about £100,000 in the B7 over the next seven years by investing about £14,000 each year in an ISA. John could do this by investing £14,000 each year in one of the B7. Or he could invest £2000 in each of the B7 every year. The latter course would involve paying an extra six stockbroker fees each year: say £60, or about 0.4% of his investment. On the other hand, the basket wouldn’t be fully mutually supportive until the final year.

Is this mutual support worth 0.4% to John? My understanding is that Luniversal would have said yes.

Later,

John

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Re: Links to Luniversal’s investment trust baskets

#120465

Postby Avantegarde » February 26th, 2018, 8:58 am

Has Luniversal stopped posting altogether? I always enjoyed his posts because he had done his own thorough research and presented the facts. The data he had gathered appeared to be unavailable from any other source, unless you wanted to copy him and go back decades in various annual reports and crunch the numbers yourself. I borrowed his idea of a basket/portfolio of ITs, when setting up my own Bakers Dozen portfolio of 13 ITs about five years ago, and I am glad I did. I certainly did not agree with his view that the constituent ITs should be left untouched - that just seemed daft if any had clearly gone off the boil and were failing to deliver. I note that after a few years Luniversal changed his tune a bit, and acknowledged that some of his choices for the various baskets - and therefore the concept itself - had not been as reliable as he first thought. But there is nothing wrong with changing your mind when the facts change.

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Re: Links to Luniversal’s investment trust baskets

#120467

Postby jackdaww » February 26th, 2018, 9:04 am

many thanks indeed.

:)

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Re: Links to Luniversal’s investment trust baskets

#120495

Postby ReformedCharacter » February 26th, 2018, 10:58 am

Avantegarde wrote:Has Luniversal stopped posting altogether?

Yes, unfortunately he 'retired' when the MF closed. I miss him :)

RC

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Re: Links to Luniversal’s investment trust baskets

#120507

Postby Avantegarde » February 26th, 2018, 11:40 am

That is a pity, I liked his argument that the point of investing (for some of us) is to generate an income that rises steadily, and faster than inflation. A very sensible guiding principle for most people, in my view.

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Re: Links to Luniversal’s investment trust baskets

#120524

Postby Dod101 » February 26th, 2018, 12:46 pm

The problem with these commentaries is that they were at a point in time and will eventually if not now, go out of date. The posts are though a great reminder of LUNI's well considered views and his style which made them a joy to read.

Dod

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Re: Links to Luniversal’s investment trust baskets

#121950

Postby Peter1B1 » March 3rd, 2018, 7:55 pm

L'Uni did me a huge service as a newbee in investing and Investment Trusts. He showed how a relatively stable collection of pedigree investment vehicles could be relied upon - broadly and over the long term - to produce an agreeable level of compounding. Whether on the drip or via lump sum made little difference to me: it created a process that I could manage myself, avoid investment fees, track and sleep easily at night.

This has been the underpinning to family SIPPs for young people, using the annual tax free allowance of £3500 gross, that's all. Over the years I have culled the occasional holding and gingered it up with higher risk theme trusts. But the blend is still compounding away and I feel confident to continue that approach for the long term.

I thank him and wish him a long, happy and profitable retirement.

Peter1B1

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Re: Links to Luniversal’s investment trust baskets

#122126

Postby mickeypops » March 4th, 2018, 5:06 pm

I also have to record my thanks to Luni. Over time, I became convinced to move from a HYP portfolio into ITs, because of his writings, reinforced by John Baron's articles. IT investing has been much more suited to my personality than the vagaries of a HYP, and I'm very grateful.

I hope (probably in vain) that he pops in here now and then - if so, thanks again LUNI.

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Re: Links to Luniversal’s investment trust baskets

#122237

Postby greygymsock » March 5th, 2018, 4:24 am


gadgetmind
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Re: Links to Luniversal’s investment trust baskets

#122267

Postby gadgetmind » March 5th, 2018, 9:17 am

Is anyone running a B7 now?

I'm interested in some ITs for income but am not after "income at all costs" as we're in our mid 50s.

Thoughts?

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Re: Links to Luniversal’s investment trust baskets

#122361

Postby BrummieDave » March 5th, 2018, 3:22 pm

I'm running a B7 portfolio but one that was created only only 18 months ago. In terms of how it's performing, I can't provide the level of quantitative measures that other posters seem to have at their finger tips, predominantly because keeping and reviewing such stats is not what I do and was, therefore, the reason to invest in a pre-determined LTBH portfolio that had as its mandate, just what I needed: increasing levels of income, with secondary capital growth.

Looking at the capital values and income over the period, and as I'm not yet taking the income, on a TR basis there are clear winners and losers. The loser seems to be PLI followed by FCI, and the winners being BNKR, JCH and MRC. As you might expect from this MRC and BNKR seem to have the lowest running yields.

A common criticism of the basket now, compared to when L'Uni set it up, is that it's too UK focused for the current post-Brexit global economy, and for that reason, and because I find the yields to be lower than I want overall when I start taking the natural yield, I've not added to the positions since. Only two of the basket are global, and one of those is classified as Global Growth, not Equity Income anyway. So since setting it up, I have bought some of B8 already reflecting this wish to have higher yielders, as well as other more global and internationally focused ITs, and may even sell some the the better B7 TR performers, and buy more B8 and other ITs to broaden the diversified nature of my portfolio.

So in summary, whilst someone may come back with far greater quantitative reviews, like L'Uni would have done of course in his annual update, I think they've done what they were set up to do, although I have no doubt that L'Uni and others may well have tweaked them by now to maintain the original mandate, and reflect changes to the economic climate.

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Re: Links to Luniversal’s investment trust baskets

#123462

Postby MDS1951 » March 9th, 2018, 12:58 pm

Approximately 3 years ago I drip-fed my IT portfolio, using Luni's B8 list for the main constituents (6 ITs), 3 from his B7 list and one on neither list to make 10 ITs in total. I checked all these ITs with their Morningstar ratings (and still do) and also with the holdings of fellow Fools who had been kind enough to divulge their own holdings. I moved on from these to unit trusts/OEICS in July 2016, having invested approximately £2k in each IT making £19.9k in total.

As of 5/3/2018 the portfolio is worth £21.8k which is nice, but was a bit nicer two months ago. The dividend income, using historic dividends and announced increases, looks like £856 up to 31/12/2018 but I would expect it to be a little higher than that - a current yield of 3.9%.

So far I'm happy with the performance of the portfolio, and many thanks to Luni for being the inspiration for it. I didn't write up its performance for calendar 2017 because I realised the income increase figure compared with the previous year would still be distorted by our old friend dividend drag, but I will do a write-up for 2018 and use that as the base for future annual comparisons.

MDS1951

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Re: Links to Luniversal’s investment trust baskets

#123870

Postby Eboli » March 11th, 2018, 2:38 am

I've run a Bo7 since 2011 and have been more than happy with it. Though I added my own mechanical twist to it. I started drawing from it in 2013 and I see no real distinction between using a Bo7 in the pre-retirment phase using reinvested dividends to re-balance. It was originally this re-balancing that led to my mechanical twist as Luni was adamant any idea of re-balancing was not part of his philosophy.

It always struck me as somewhat silly to present historical data based on even division between the constituent 7 ITs at a point in time, which was not relevant to a basket started either earlier or later. In the extreme it is the reason that put me off Pyad's HYP - for example the original untouched portfolio being very unbalanced with a large holding in British American Tobacco to the extent that forward performance is of dubious merit except to those who want to concentrate their investment into one share so much.

Somewhere someone suggested on TMF the solution in the case of a HYP was to cap value so that any individual share should not exceed a pre-set amount. Similarly, I have run my Bo7 by placing a collar - a relatively wide one - around each IT so that the value of any one IT never diverges by more than a pre-set percentage from 1/7th of the value of the whole. The higher collar becomes tighter as the Bo7 approaches or sits at new highs and mutates mutants for the lower collar and new recent lows. I have made 19 'adjustments' since setting up the Bo7 in 2011 and this has worked well as far as I can tell. This rebalancing requires a cash reserve as part of the Bo7 (or using dividends in the pre-withdrawal phase) - though in my case I held Personal Assets as a cash substitute for this purpose (indeed I originally divided the lump sum raised from selling my previous investments into 8 and holding the extra 1/8th in PNL alongside the ITs in the Bo7.

Eb.

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Re: Links to Luniversal’s investment trust baskets

#123872

Postby Itsallaguess » March 11th, 2018, 5:25 am

Eboli wrote:
It was originally this re-balancing that led to my mechanical twist as Luni was adamant any idea of re-balancing was not part of his philosophy.

It always struck me as somewhat silly to present historical data based on even division between the constituent 7 ITs at a point in time, which was not relevant to a basket started either earlier or later.

In the extreme it is the reason that put me off Pyad's HYP - for example the original untouched portfolio being very unbalanced with a large holding in British American Tobacco to the extent that forward performance is of dubious merit except to those who want to concentrate their investment into one share so much.


I agree with this and I'm glad it's mentioned on this thread.

Luni's baskets were a fantastic approach to income-related Investment Trusts, but his insistence that any purchases baskets 'must' be bought outright, with no drip-feeding accumulation being 'allowed', and then his further insistence that the baskets should remain untouched, with no potential for re-balancing, were the two flaws in his otherwise great approach to the issue.

I'm really glad that people are sensible enough to take the positive aspects of the IT basket-approach, and then apply their own common-sense twists to the strategy.

Stick to your gut-feelings. No-one has a monopoly on good ideas.....

Cheers,

Itsallaguess

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Re: Links to Luniversal’s investment trust baskets

#123901

Postby tjh290633 » March 11th, 2018, 9:51 am

Eboli, how big is your collar? My approach with an HYP was initially to set a limit of 10% when I had about 20 shares, then I switched to twice the median holding value and finally, with over 30 holdings, to 1.5 times the median.

Obviously the allowable spread has to recognise the smallest economical trade, which will be different for every individual. With seven holdings, a median related collar makes sense, and avoids a single holding dominating the portfolio. This then raises the question about what do you do with the cash released. Do you bring the lowest valued up to median? Do you decide which is the best to top up on other grounds? Do you have any rules to exclude top ups?

Finally, what is the extent of the divergence from the mean? Both upwards and downwards are of interest.

TJH

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Re: Links to Luniversal’s investment trust baskets

#124053

Postby BrummieDave » March 11th, 2018, 7:48 pm

Interesting idea Eboli.

L'Uni was thorough and clever I have no doubt, and had good reason to suggest the approach that he outlined and reviewed so exhaustively on an annual basis.

When I look at my experience to date, the TR of the more growth orientated lower yielders (eg BNKR) has led to higher valuations than the higher yielding low performers (eg PLI).

L'Uni would have left them alone, you would re-balance. Food for thought.

GadgetMind asked if anyone has experience of running a B7. I think three of us have answered. You still there GM, any response to the views we shared?

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Re: Links to Luniversal’s investment trust baskets

#124100

Postby vrdiver » March 12th, 2018, 12:57 am

BrummieDave wrote:GadgetMind asked if anyone has experience of running a B7. I think three of us have answered. You still there GM, any response to the views we shared?


Not guaranteed, but a better chance of attracting another poster's attention is to name-check them: e.g.

GadgetMind wrote:

as that will create a "notification" for them when they next log in, provided they have their profile set to notify them when they are quoted (which I think is the default setting?)

Cheers
VRD


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