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Question,questions

Investment discussion for beginners. Why you should invest your money, get help getting started
Bena48
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Question,questions

#74167

Postby Bena48 » August 13th, 2017, 7:10 pm

Hi

I acquired a portfolio approximately 3 1/2 years ago. It was my first experience of shares. Last year the portfolio achieved a yield of approximately 4.6 %. I think I could improve upon this but I am starting from a low baseline of knowledge and would very much appreciate any morsels that members can throw to me.

*I would like to read up on HYP. Initially something brief that will engage me.
*Should I continue to diversify the portfolio or invest in more of the same? Instinctvley I am not keen to sell any of the shares merely to acquire more.

AstraZeneca-11.3%
BAE-13.3%
Barclays-1.7%
BHP-2.6%
BP-12.5%
BAT-10%
BT-3.6%
Centrica-2.7%
GSK-2.8%
Legal and General-3%
LLoyds-6.3%
National Grid-9.8%
Rio Tinto-2%
Standard Chartered -0.4%
Shell-9.2%
United Utilities-1.6%
Vodaphone-6.5%

*I currently record dividends on spreadsheet and keep an eye of the portfolio capital value using the 'This is money power portofolio'. I would like more analytical tools to assess the performance of the portfolio and to make future investments. Can anyone suggest some better software?

tjh290633
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Re: Question,questions

#74232

Postby tjh290633 » August 13th, 2017, 11:04 pm

Not a bad portfolio. With 16 holdings, you have the option of topping up existing holdings or adding new ones.

What is obvious is the way in which the weightings of the holdings is very widely spread, and topping up the holdings with lower weighting would reduce the spread, always assuming that there are no indications that a holding should be not topped up. By this I mean that it is not paying dividends, for example.

Although it appears that most or all of the Motley Fool material has now been deleted, some of it hs been archived and there are links to be found in posts on the HYP-Practical forum.

Regarding methods of recording progress and assessing what shares to add to the portfolio or to increase the size of a holding, there are some pieces of software available at http://lemonfoolfinancialsoftware.weebly.com/ and you may find these to be useful. I'm afraid that after 30 years of running my portfolio, from the date when PEPs were introduced to the present, I have a considerable number of spreadsheets, and perhaps this is inevitable. I find it useful to have a sheet for each individual holding, as well as those of the portfolio as a whole. Often a retrospective look at the data you hold can tell you quite a lot. You can learn from your mistakes.

Good luck with your investments.

TJH

argoal
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Re: Question,questions

#74290

Postby argoal » August 14th, 2017, 9:59 am

Just a couple of observations/questions about portfolio risk rather than outright suggestions about what you should do.

1. The portfolio has 21.7% invested in the two oil shates (BP and Shell). That is quite a large sector concentration risk. It might be worth thinking about trimming this down and redeploying the cash to another sector.

2. The top 5 holdings represent 56.6% of the portfolio value. The top 6 is 65.8% of the total value. It is therefore a pretty concentrated portfolio by any standards. Do you feel comfortable having 2/3 of the portfolio in a handful of shares?

3. The yield at 4.6% is pretty healthy compared to the FTSE100. Would striving to increase this yield increase the risk of introducing a company that cuts its dividend and possibly counterproductive in the long run?

Urbandreamer
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Re: Question,questions

#74346

Postby Urbandreamer » August 14th, 2017, 2:04 pm

Bena48 wrote:Hi

I acquired a portfolio approximately 3 1/2 years ago. It was my first experience of shares. Last year the portfolio achieved a yield of approximately 4.6 %. I think I could improve upon this but I am starting from a low baseline of knowledge and would very much appreciate any morsels that members can throw to me.

*I would like to read up on HYP. Initially something brief that will engage me.
*Should I continue to diversify the portfolio or invest in more of the same? Instinctvley I am not keen to sell any of the shares merely to acquire more.
....

*I currently record dividends on spreadsheet and keep an eye of the portfolio capital value using the 'This is money power portofolio'. I would like more analytical tools to assess the performance of the portfolio and to make future investments. Can anyone suggest some better software?


We have little information other than that you aquired the portfolio about 3 1/2 years ago. Nothing about your position on lifes road or your attitude to risk. How much effort you are willing to put in etc.

The first question that you should have asked was "Is this portfolio suitable for me" closely linked to "What were they trying to achieve".

The HYP concept was for a limited life, income generating portfolio, that should need little to no effort over its lifespan. It was designed to replace annueties. Over time, with little input, it will become quite unballanced and arguably risky. That is fine for what it was originally designed to do.

TMF has vanished, but I did google this link that you might like.
http://www.businessinsider.com/high-yie ... 012-9?IR=T

HYP has become very popular and most have slightly modified the concept from the original.
The first modification is to question the limited life concept coupled with the no effort original idea.
Many of us review our portfolio's with an eye to risk from time to time. Hence the points made by argoal.
"Tinkering" use to be a constant debate back on the Fool.

The second modification is linked to the first. People started REAL portfolios BEFORE they retired and hence were constantly adding funds. This automatically helped to adjust weightings.

Others talked about using Investment or Unit trusts to help manage risk.

I decided to keep some of the HYP concepts, but to add investment trusts and some low yielders with expected high growth. As such I'm possibly not best qualified to comment upon the HYP concept. I modified the concept because I believe that I will need my portfolio to last significantly longer than the original concept imagined.

If you are concerned about your lack of experience but want to do well at DIY investment then the only solution is to invest the time to improve what you know.

I subscribe to free podcasts from the FT and the Investors Chronical. I have done a number of MOOC (Massively Open Online Courses) on investment and I pay subscription to recieve the magazeens MoneyObserver and Investors Chronical. I'm still learning and I've been at it 25 years.

Bena48
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Re: Question,questions

#74651

Postby Bena48 » August 15th, 2017, 6:11 pm

Thanks to all 3 of you for sharing your thoughts. I came across the forum with no knowledge of HYP but with your assistance I found three articles that layout the guiding principles , downloaded the HYP spreadheet and plugged in my figures.

I am 54 and aim to retire or work less in my early sixties. until such time all dividends will get reinvested. At some point the dividends will be used for living expenses but at present I cannot be sure as to precisely when, life is just too convoluted .

I had been investing for high dividends only and thus I can really benefit from some of the finer points of HYP which hopefully will contribute to control of risk. Possibly I am willing to take on risk for high yielding shares but would seek to counter this by having a diverse portfolio in terms of the sectors invested in. I guess the trick is to find high yielders in all or most sectors....Technology seems a hard one to crack.

Agoal's comments concerning the lack of diversity and concentration across my portfolio are food for thought. Until now the categories I had used are as set out below which gives a slightly different picture but in any case there are gaping holes for Consumer Services and Industrials. The Materials sector also needs bolstering. Is there a problem with using such broad categories?

Materials –Rio & BHP-4.6%
Consumer goods-BAT-10%
Consumer services-0%
Financial services-L&G, Barclay, Lloyds, Stnd ,Chrted-8.4%
Healthcare-Astra Z,GSK-14.1%
Industrials-BAE-13.8%
Oil & Gas-Bp, RDS-21.7%
Technology-0%
Telecomuinications-BT and Vodaphone-10.1%
Utlities-Nat grid, UU-11.4%

My intention is to have holdings of 10% or more in each category within three years and then to apply the top up ranking. Hopefully this two pronged approach will lower risk .

It was interesting to read that initially the system was thought to be useful only for the short term. I can see arguments on both sides for HYP to have continued success.

A couple more cheeky questions if you do n't mind.

#Is there a reliable go to ratio for company debt when making an assessment of a company?

# Most of my shares were held in certificated form. My wife and I have had to use all of our ISA allowance's to transfer a significant proportion across to share ISA's held on a platform to avoid dividend tax. Unfortunately this leaves a significant sum of dividends lying around uninvested until April next year. Any suggestions as to how I can move the portfolio along in the short term?

Thanks again for your interest and help.

DrBunsenHoneydew
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Re: Question,questions

#74655

Postby DrBunsenHoneydew » August 15th, 2017, 6:24 pm

Bena48 wrote:
# Most of my shares were held in certificated form. My wife and I have had to use all of our ISA allowance's to transfer a significant proportion across to share ISA's held on a platform to avoid dividend tax. Unfortunately this leaves a significant sum of dividends lying around uninvested until April next year. Any suggestions as to how I can move the portfolio along in the short term?

Do you mean dividends that are now accumulating in the ISAs?
They can be reinvested at any time (assuming there is a cost-effective amount). You don't have to wait until next year as income bring in the ISA does not count towards the annual investment limit.

Urbandreamer
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Re: Question,questions

#74685

Postby Urbandreamer » August 15th, 2017, 8:12 pm

Bena48 wrote:It was interesting to read that initially the system was thought to be useful only for the short term. I can see arguments on both sides for HYP to have continued success.


Sorry, possibly I was not clear, or thought that you knew a bit more history.

HYP was the portfolio owned by the mythical retired lady Dorris, who had little to no interest in shares. Given Dorris's age and expected lifespan at that time she is unlikely to have long left on this mortal coil. Today life expectancy at a symilar age is almost 10 years longer.

I would argue that your sector characterisation is a good idea to control risk, but question if you have thought deeply about the shares that you have in any given "sector". Possibly fighting words there, but read on.

What you have called "Health care" simply isn't. It's drug companies who compeat directly with each other. I also own both of them, but can you really claim that health care is simply drugs? What of Smith & Nephew who make good money from wound dressings etc, and no I don't own them. Instead I own IBT, currently yielding 3.9% taken from capital. High risk growth, but with a yield. Not for everyone and STILL not "health care".

"Financial services", well I'll accept that L&G isn't a bank, but the rest are.

As has been pointed out you are a bit heavy in "Oil and gas", but the key question might be your view on the future for oil. Likewise 10% in fags? Still you may be right, others have been on BAT in the past.

Technology tends not to fit well into a traditional HYP. As I said I'm quite happy to accept low yields in return for growth, so would include it in my portfolio. I use to own ARM at one point and Baltimore, back in the dot com days. I made money on both, but they are definatly not HYP shares. Baltimore by the way dropped off a cliff and you can't buy ARM anymore.

While I don't have any of the shares I'm drawn to TEM investment trust. Polar has done a LOT better, but works on a high fee/high return model. I also like TEM's exposure to emerging markets.

The traditional HYP is limited to about 15 shares to reduce effort. Provided that you put the effort in doubling that to 30 well thought out holdings can significantly reduce risks. I currently have 24 holdings, though I'll be replacing one or possibly selling three and buying TEM.

BTW I'm also 54 and The Wife doesn't want me to retire before 60.

Oh, and while you don't mention your pension arrangments I am investing in a SIPP as well as my company pension. That allows me to indulge my stock picking fetish and reinvest/divert dividends. Of course not everyone has space to add funds to their pension before they get concerned about the "Life time allowance" or the £40kpa cap, but I do.

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Re: Question,questions

#74688

Postby PinkDalek » August 15th, 2017, 8:21 pm

Bena48 wrote:Thanks to all 3 of you for sharing your thoughts. I came across the forum with no knowledge of HYP but with your assistance I found three articles that layout the guiding principles , downloaded the HYP spreadheet and plugged in my figures. ...


In case you've yet to find them, there are two boards on The Lemon Fool which might be of interest (I don't think they've been mentioned to date):

High Yield Portfolios (HYP) - Practical
Practical discussions about equity High-Yield Portfolios (HYP) for income
viewforum.php?f=15

High Yield Share Strategies - General
General discussions about equity high-yield income strategies
viewforum.php?f=31

Urbandreamer
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Re: Question,questions

#74693

Postby Urbandreamer » August 15th, 2017, 8:57 pm

Urbandreamer wrote:HYP was the portfolio owned by the mythical retired lady Dorris,


Ooops Retired Widow Dorris.

Bena48
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Re: Question,questions

#74707

Postby Bena48 » August 15th, 2017, 10:40 pm

DrBunsenHoneydew wrote:
Bena48 wrote:
# Most of my shares were held in certificated form. My wife and I have had to use all of our ISA allowance's to transfer a significant proportion across to share ISA's held on a platform to avoid dividend tax. Unfortunately this leaves a significant sum of dividends lying around uninvested until April next year. Any suggestions as to how I can move the portfolio along in the short term?

Do you mean dividends that are now accumulating in the ISAs?
They can be reinvested at any time (assuming there is a cost-effective amount). You don't have to wait until next year as income bring in the ISA does not count towards the annual investment limit.

Thanks I did not know that unfortunately though most of the funds are outside of the ISA but nevertheless I will be able to start investing again soon with this bit of good news.

Bena48
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Re: Question,questions

#74711

Postby Bena48 » August 15th, 2017, 11:23 pm

Urbandreamer wrote:...but question if you have thought deeply about the shares that you have in any given "sector". Possibly fighting words there, but read on..

Yes I can see why you say that . The combinations are a little strange and some of them feel as though they might date. There are reasons why I have come into their ownership which I will not burden you with here but most of them are HYP shares and I will need compelling reasons to get rid. In essence I wish to concentrate on buying more and different HYP shares rather incurring costs from sales and subsequent repurchases.

Oil and gas will see me out. Our everyday world is shaped by it and will be for some decades to come..for good and ill. Not that I do n't threat about BP's ability to keep paying out their dividend.

The problem with my broad classes of shares are that they include some very disparate companies as you have illustrated in the case of Healthcare.

Thanks for the challenges and your thoughtful insight. They are most welcome and have set the grey cells to work.

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Re: Question,questions

#74713

Postby Alaric » August 16th, 2017, 12:19 am

Bena48 wrote:Any suggestions as to how I can move the portfolio along in the short term?


What some do is to sell in the early days of April to raise enough for the next tax year's ISA subscription, then hold cash overnight on April 5th and put the money into ISAs on April 6th or the first working day.

It's a lot easier to do this if you hold shares on a Broker platform. With most Brokers it's free and a lot easier to sell. All you have to do is to print out a form and send in the traditional post with the share certificates to your Broker. Using the ISA provider for this is the simplest, provided they offer taxable accounts.

The subtle point about waiting to the end of the tax year is that you can utilise the Capital Gains tax allowances without looking over your shoulder as to whether there are any compulsory takeovers in offing.

Alternatively Brokers will offer "Bed and ISA" services with the transfer taking place in the same tax year, but again that's going to work better if the stocks aren't in certified form.


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