Bubblesofearth wrote:
There are a number of posters perfectly happy to point out that the portfolio becomes too unbalanced, some shares wither away, it's too UK-centric and, because of factors such as these, it's an overly risky approach.
But there is never any rigorous analysis or quantification of this risk. It's rarely based on the industry standard of volatility and seems to be more in the gut-feel camp or simply 'looks too risky to me'.
I agree that it's difficult to talk about 'risk' sometimes, as we all have views and definitions that may not align with everyone else.
To help get around that, here's one of Pyad's own HYP-focussed risk-definitions, in his own words, from a 2005 article titled 'How To Pick A High Yield Portfolio' -
The most critical feature of HYP share selection is sector diversification in order to spread the risks around different industries.
Although a higher yield could be obtained by concentrating on certain sectors like utilities for example, the risks to the capital and income would be too high.
https://web.archive.org/web/20160609102814/http://news.fool.co.uk//valueinvesting/2005/vi050304.htm
Out of the 18 current HYP1 holdings, 58% of income now comes from just 3 sectoral holdings, and 76% of income comes from 6 of the 18 - https://www.lemonfool.co.uk/viewtopic.php?f=31&t=41460#p629797
Looking at capital, out of the 18 current HYP1 holdings, 58% of capital is now held within just 4 sectoral holdings, with nearly 78% of capital held within 7 of the 18 - https://www.lemonfool.co.uk/viewtopic.php?f=31&t=41460#p629855
Given the above two risk-based comments in that 'How To Pick A High Yield Portfolio' article, it seems to me that we need look no further for what people mean by 'risk' in this particular context, as not only has HYP1 proved beyond all doubt that a completely hands-off HYP portfolio is never likely to maintain it's own 'critical feature' of sectoral-diversity, he even then goes on, with that second line quoted above, to provide as clear an explanation as we're likely to see as to why HYP1 has been able to deliver such high income and capital returns...
Because it's been doing so at risk for such a long time by 'concentrating on certain sectors', as clearly acknowledged in that 2005 article...
Cheers,
Itsallaguess