Top-up HYP or IUKD?

[Gengulphus]

My main comment is that an investment in IUKD (or any other 'fund' investment, i.e. anything which is basically a portfolio of other investments) is a fundamentally different strategy from picking your own investments - in one, you get someone (or some computer!) else to decide what you're invested in for you, in the other, you make such decisions yourself.

The simple question is whether you think stock-picking is more powerful than compound interest.

No, that would only be the question if picking what you're invested in and compounding were alternatives to each other, such that one had to choose one or the other. Instead, they work together: one's method of picking investments determines the rates of return that get compounded.

Gengulphus

[OhNoNotimAgain]

My main comment is that an investment in IUKD (or any other 'fund' investment, i.e. anything which is basically a portfolio of other investments) is a fundamentally different strategy from picking your own investments - in one, you get someone (or some computer!) else to decide what you're invested in for you, in the other, you make such decisions yourself.

The simple question is whether you think stock-picking is more powerful than compound interest.

No, that would only be the question if picking what you're invested in and compounding were alternatives to each other, such that one had to choose one or the other. Instead, they work together: one's method of picking investments determines the rates of return that get compounded.

Gengulphus

Compound interest is one of the key factors in determing the return of the market, the beta if your like. By and large passive or rules-based funds investing acrross the majority of the market will give you that return less costs.

The alternative of an active fund that selects only a small cohort of that market relies on those stock-picking abilities to beat the market.

Actually, what I had forgotten is that IUKD only holds 50 stocks so although rules based it suffers the active management problem of only holding a small subset of the market.

[formoverfunction]

I'm some 10% up on IUKD, and I'm retaining that holding.

Back in February I bought UKDV as I thought it offered a lower over all risk profile than IUKD.

At the time it's yield was OK.

I was hoping for a 12 month total return of between 10-14%. That would be very acceptable. As of today, I'm on course for aound 11%. There's plenty of time left on the clock!

Hargreaves are quoting 4.2% yield.

It's an ETF that I'll buy more of on a strong correction. I usually only buy income focused ETF''s when they look under pressure.

So, at the moment IAPD is something I have my eye on.

[Gengulphus]

The simple question is whether you think stock-picking is more powerful than compound interest.

No, that would only be the question if picking what you're invested in and compounding were alternatives to each other, such that one had to choose one or the other. Instead, they work together: one's method of picking investments determines the rates of return that get compounded.

Compound interest is one of the key factors in determing the return of the market, the beta if your like. ...

Badly phrased - the return of the market in any particular historical year is just a fact about the world, not affected by compounding - but I assume you mean that it is one of the key factors in determining the return a particular investor gets over a period. And I agree - it is one of the key factors. Another is the rates of return achieved by the particular strategies they choose, i.e. their particular choice of stock-picking method.

... By and large passive or rules-based funds investing acrross the majority of the market will give you that return less costs.

And investing in passive or rules-based funds that invest across the majority of the market is a stock-picking method! A particularly easy and cheap stock-picking method, but a stock-picking method nevertheless.

My point is that compounding and choosing the right investments to be invested in are two key factors in investing success, and one really wants both of them - and that's not an impossible pipe-dream: it's perfectly possible to have both of them! That makes your question about whether "stock-picking is more powerful than compound interest" a particularly pointless way of thinking about investing.

It seems from the rest of your post that what you're actually trying to talk about is whether investing in passive / rules-based funds or picking individual shares for oneself is the better method of choosing the right investments to be invested in. Had you said "The simple question is whether you think picking individual shares yourself is more powerful than investing in passive or rules-based funds investing across the majority of the market", I would have agreed with you. (Though not with the suggestion that the answer is obvious: it seems pretty obvious to me from the varying historical performances of IUKD and other passive / rules-based funds that there is no answer that applies independently of the choice of such a fund and the choice of individual stock-picking method.)

But for some bizarre reason, you decided to treat compound interest as the alternative to individual stock-picking, and as a result got the sheer nonsense of "The simple question is whether you think stock-picking is more powerful than compound interest".

Gengulphus

[OhNoNotimAgain]

[
And investing in passive or rules-based funds that invest across the majority of the market is a stock-picking method! A particularly easy and cheap stock-picking method, but a stock-picking method nevertheless.

Gengulphus

If you hold 98% of the index it is pushing the definitions of stock picking to the absolute limit.

[Arborbridge]

Back in February I bought UKDV as I thought it offered a lower over all risk profile than IUKD.

At the time it's yield was OK.

I was hoping for a 12 month total return of between 10-14%. That would be very acceptable. As of today, I'm on course for aound 11%. There's plenty of time left on the clock!

Hargreaves are quoting 4.2% yield.

From my POV the jury is split on UKDV. I'm not too sure that it's what I want since the aethos is either wrong - or the theory is.
Dividends do not smoothly increase, in fact they sometimes do the opposite - e.g down 15% in 2014 and around 4% in 2016. The 2017-18 dividend of 51.34p is lower than the 2013-14 dividend of 54.11p. So as a subtitute for my own HYPing it seems to be not so great, and this is at a time when dividends have been generally increasing.
Having spoken with them on the phone a couple of years back, I think one problem might be their marketing needs. They suggested that the total income need not paid out, but converted into capital in order to make the share price chart look better - which the marketing boys prefer, apparently.
The other explanation might be that that theory - that of picking dividend aristocrats - may simply not work.

I'm hanging on to see what transpires in the next few years, but so far, I am not impressed compared with the bog-standard income ITs and OEICS. A shame, because otherwise at a 4.2% yield I'd be thinking of buying more.

Arb.

[Hariseldon58]

An interesting thread, I held IUKD from 2007 to 2013 and had quietly forgotten about it........

I was genuinely shocked that the present price was so low, I recollect that at one point it was around the £12 point and I bought some at over £10 and bought in as low as £7, overall my purchases were around £9, the price now in 2018 and I sold out over a period of time at something like an average of £8....

The logic behind this ETF has proved seriously flawed over the last 10 years. I also previously held UKDV and Vanguard UK Equity Income Index, whilst the Vanguard 'index' has done better than UKDV or IUKD none of these has fared well against a 50:50 mix of say FT100 and FT250 or most of the Income orientated UK Investment Trusts.

Gengulphus makes a strong point that holding a single fund/ETF?Investment Trust in an HYP is never going to make any significant difference and there is stronger argument of running a portfolio of income Investment Trusts ( or Income Index funds) as a separate portfolio.

[colin]

Over last five years IUKD total return has gone nowhere but UKDV has been even worse.
https://markets.ft.com/data/etfs/tearsheet/summary?s=IUKD:LSE:GBX

sorry you will have to click the comparisons tab for UKDV returns as the link has not worked quite as i expected.

[colin]

Sorry again seems those figures are just for share price only so returns have not been that bad!

[colin]

according to Morningstar which as far as I know gives total return performance figures IUKD has produced a five year annualized return of 4.64% so just ahead of inflation. UKDV only managed 2.87% annualized over five years so nothing to shout about from either really.