Putting this smallish risk of a particular stock faltering or crashing together with the inbuilt safeguards of HYP investing renders a 15-share portfolio safer for income.
The one-per-sector tenet skirts the risk of chasing too many unsustainable yields, which tend to cluster in out-of-favour business areas, e.g. oils until lately or insurers after the Global Financial Crisis.
Equal amounts committed to each of the fifteen also limit exposure to defaulters: even a permanent abandonment of dividends by one constituent loses only 6.67% of the stream.
The problem with attempts at academic study, when used to back up a claim that 'Otherwise no [HYP] tweaks proposed on TMF or TLF stand up
' is that it takes no account of human nature, and the desires or needs of the personal investor as a human being....
Even if we could agree that a 15-share HYP is 'safe for income
' (I don't
, personally, and would never advocate such a concentrated income portfolio...), that still might not allow an owner of such a concentrated HYP to sleep comfortably at night.
If the owner of a 15-share HYP thinks that he would like to double-up in sectors, or widen his net to simply include more sectors in his HYP over the years that such fish might become available, and that he'd simply feel more comfortable in doing so
, then that's a 'good thing
' in my book, and a valid 'tweak' to the strategy if it either encourages an individual investor to the strategy in the first place, or allows him to continue with the strategy as his HYP grows in size and his nerves perhaps wobble a little when faced with an often considerable amount of later-years capital invested in it...
A similar theme can be used to discuss Terry's much-admired top-up process - again a 'tweak' that has been proposed over the original strategy - so let's start at the same place as above, and perhaps agree that at an technical level
, his top-up process is no better or worse, than the original strategy (again, I don't
agree with that, but let's start there for the sake of this discussion...).
But if individual investors can see the simplicity
of that top-up process, and see that it's both repeatable
over many years, then that's a 'good thing', right?
If it helps HYP investors to stay the course
, which many of us will surely agree is almost the single-most important aspect of any investment strategy, then that's a positive improvement to the strategy
, surely, even if it could be proved
that at a round-trip technical level, it's actually no better or worse than any other top-up strategy....
So that's just two examples why I think that anyone suggesting that 'Otherwise no tweaks proposed on TMF or TLF stand up
' might be entirely missing the point a little, and allowing themselves to be blinded by academic study somewhat.
Even if such tweaks were to be proved to be worthless
in a pounds, shilling, and pence valuation, often they are not supposed
to be a guaranteed method of improving profitability
- they are tweaks to help us manage things
in a way that means we can perhaps sleep at night
, and even it were proved to actually be costly
, to some small degree or other, over the original HYP edicts, then as individual investors, we are often even willing
to pay a price, if the return on that cost means being able to continue managing our finances
in a way that suits us
as individuals, and not just plough on regardless, following a set of rules dreamt up many years ago, since when the personal-investor market, and the options available to us, has grown well beyond the scope and ease that was originally available.
Lift your head up and look at the people wanting to use these tweaks and improvements - they are often doing so for personal
reasons, and are very often not purely
thinking about the pounds, shilling, and pence being delivered by the strategy itself....
Many of those tweaks are at a portfolio-management
level, and engage with the human element
doing the investing, and living
month-to-month, year-to-year with their investments....
To disregard them so easily is, I believe, entirely missing the actual point of them....