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HYP Income unit performance

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Wizard
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HYP Income unit performance

#268741

Postby Wizard » December 3rd, 2019, 10:33 am

Unfortunately the thread where this appears has been locked...

IanTHughes wrote:The value of an Accumulation Unit calculated for my HYP, started in February 2012 at £10.0000, has today reached a new record high of £19.4441, an increase of 94.44% over 7 ¾ years. The previous high - £19.3650 - was set on 22 May 2018.

The value of an Income Unit calculated for my HYP of £13.1804 still straggles some way behind the all-time high of £14.6005 achieved on 26 May 2017, although it is ahead of the re-based value of the FTSE 100 Unit.

There has been - mostly - steady progress as follows:

Date | Accum. Value (£) | Income Value (£) | FTSE 100 Re-Based
10 Feb 12 | 10.0000 | 10.0000 | 10.0000
01-Jan-13 | 10.9153 | 10.3985 | 10.0776
01-Jan-14 | 14.2079 | 12.9293 | 11.5322
01-Jan-15 | 15.0530 | 13.1582 | 11.2195
01-Jan-16 | 15.2404 | 12.7310 | 10.6663
01-Jan-17 | 17.2406 | 13.7244 | 12.2050
01-Jan-18 | 18.8433 | 14.2403 | 13.1361
01-Jan-19 | 16.5709 | 11.8531 | 11.4964
Today | 19.4441 | 13.1804 | 12.7079
...


At risk of being told I am a "doubter" I wanted to raise some points about what the data appears to me to be showing. I am no expert on unitisation, so my first question is a pretty basic one, am I correct in my understanding that Income Units (despite the name) represent 'pure' capital performance, i.e. they are based on all the income from the investments being withdrawn?

Assuming that is the case I wanted to test my understanding of what the graph is showing (unfortunately I can't copy it now I am unable to reply to the original post). Does the graph show, that...

1. ...capital value (as represented by Income Units), absent income reinvestment has been flat between mid January 2014 and November 2019?
2. ...over the period between February 2012 and November 2019 capital value has increased by c.31.8% vs an increase in the FTSE100 over the same period of c.27.1%?
3. ….between February 2012 and mid January 2014 capital value had increased by c.32% vs an increase in the FTSE100 of c.17%?

If this is the case I would say the statement regarding "...mostly - steady progress..." may apply to accumulation units (Total Return?), but not to Income Units (Capital). Rather for Income Units there was a relatively short period of strong out performance of the index being used for comparison between February 2012 and mid January 2014, followed by steady under performance with since mid January 2014. If this is not a correct conclusion can somebody point me to what I am missing?

One could actually break this down further, as between February 2012 and around May 2013 the performance of the HYP and FTSE100 seems, from the graph, to have been essentially the same. All the out performance actually happened between June 2013 and January 2014.

Later on there is a graph plotting the Accumulation Units against the FTSE100 TR Index, which was deemed a fairer comparison. Looking at that graph it seems between January 2013 and November 2019 vs the increase in Accumulation Units of c.77% the FTSE100 TR has increased by c.66%. I am working on the assumption that this outperformance is driven by two things:
i) the capital out performance as shown in the Income Unit analysis, as the period covered includes the period of significant outperformance in the second half of 2013 and very early 2014; and,
ii) I assume over the period the HYP has had a higher yield and therefore generated more income to reinvest than the FTSE100 TR.
Does that seem reasonable?

It is very rough and ready as I am reading off the graph, but I take the values as of February 1st 2014 on the TR graph as, HYP £12.90 and FTSE100 TR £11.40. Again from the graph I read the final values as HYP £17.70 and FTSE100 TR as £16.50. That equates to a gain in the HYP over the period of £4.80 or roughly 37%, and in the FTSE100 TR of £5.10 or c.44%.

If all of the above is correct what it tells me is that the outperformance in terms of both Capital and Total Return is down to the period between June 2013 and mid January 2014. Over the rest of the period the HYP has underperformed the benchmark indexes.

Now I am sure I will be said by some to be just knocking HYP and if anyone can point out errors in my analysis or resulting conclusions please do so. However, if it is broadly correct what this raises in my mind is a question as to what were the conditions between June 2013 and mid January 2014 that allowed such over performance of the HYP that it has allowed it to still be out performing the relevant benchmarks so much later, despite steady under performance? If we could understand that it would be extremely helpful.

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Re: HYP Income unit performance

#268776

Postby IanTHughes » December 3rd, 2019, 12:27 pm

Wizard wrote:
IanTHughes wrote:The value of an Accumulation Unit calculated for my HYP, started in February 2012 at £10.0000, has today reached a new record high of £19.4441, an increase of 94.44% over 7 ¾ years. The previous high - £19.3650 - was set on 22 May 2018.

The value of an Income Unit calculated for my HYP of £13.1804 still straggles some way behind the all-time high of £14.6005 achieved on 26 May 2017, although it is ahead of the re-based value of the FTSE 100 Unit.

There has been - mostly - steady progress as follows:

Date | Accum. Value (£) | Income Value (£) | FTSE 100 Re-Based
10 Feb 12 | 10.0000 | 10.0000 | 10.0000
01-Jan-13 | 10.9153 | 10.3985 | 10.0776
01-Jan-14 | 14.2079 | 12.9293 | 11.5322
01-Jan-15 | 15.0530 | 13.1582 | 11.2195
01-Jan-16 | 15.2404 | 12.7310 | 10.6663
01-Jan-17 | 17.2406 | 13.7244 | 12.2050
01-Jan-18 | 18.8433 | 14.2403 | 13.1361
01-Jan-19 | 16.5709 | 11.8531 | 11.4964
Today | 19.4441 | 13.1804 | 12.7079
...

At risk of being told I am a "doubter" I wanted to raise some points about what the data appears to me to be showing. I am no expert on unitisation, so my first question is a pretty basic one, am I correct in my understanding that Income Units (despite the name) represent 'pure' capital performance, i.e. they are based on all the income from the investments being withdrawn?

Yes. Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt.

One thing to note in this area is that the capital value of my portfolio at any one time includes an amount equal to the amount of those dividends already Ex-Dividend, but not yet received. This means that my Income Units do not drop in value at the Ex-Dividend date, as of course the FTSE 100 obviously does, but do drop in value at the Payment date, when the extra units are purchased. I am currently pondering whether to amend this such that the Income Unit value does not include any value for Ex-Dividend. This would mean that the “drop in value” would occur at the Ex-Dividend date, just like the FTSE 100, which is probably more correct.

Wizard wrote:Assuming that is the case I wanted to test my understanding of what the graph is showing (unfortunately I can't copy it now I am unable to reply to the original post). Does the graph show, that...

1. ...capital value (as represented by Income Units), absent income reinvestment has been flat between mid January 2014 and November 2019?
2. ...over the period between February 2012 and November 2019 capital value has increased by c.31.8% vs an increase in the FTSE100 over the same period of c.27.1%?
3. ….between February 2012 and mid January 2014 capital value had increased by c.32% vs an increase in the FTSE100 of c.17%?

1. Yes. Not exactly flat of course, there are ups and downs, but the current Income Unit value is no higher than it was in December 2014
2. Yes.
3. Yes.

Wizard wrote:If this is the case I would say the statement regarding "...mostly - steady progress..." may apply to accumulation units (Total Return?), but not to Income Units (Capital). Rather for Income Units there was a relatively short period of strong out performance of the index being used for comparison between February 2012 and mid January 2014, followed by steady under performance with since mid January 2014. If this is not a correct conclusion can somebody point me to what I am missing?

I don’t think you are missing anything really. But do bear in mind that the table is only snapshot values at the end of each year. The graphs clearly show the values of both Accumulation and Income units do not follow a straight line at all, hardly surprisingly.

Wizard wrote:One could actually break this down further, as between February 2012 and around May 2013 the performance of the HYP and FTSE100 seems, from the graph, to have been essentially the same. All the out performance actually happened between June 2013 and January 2014.

I have no argument with that. Mind you, I would point out that, in my opinion, even the overall timeline of 7 year 9 months is not really long enough to properly extract a trendline which I would suggest requires a minimum of 10 years. Your sub-periods are even more short term.

Wizard wrote:Later on there is a graph plotting the Accumulation Units against the FTSE100 TR Index, which was deemed a fairer comparison. Looking at that graph it seems between January 2013 and November 2019 vs the increase in Accumulation Units of c.77% the FTSE100 TR has increased by c.66%. I am working on the assumption that this outperformance is driven by two things:
i) the capital out performance as shown in the Income Unit analysis, as the period covered includes the period of significant outperformance in the second half of 2013 and very early 2014; and,
ii) I assume over the period the HYP has had a higher yield and therefore generated more income to reinvest than the FTSE100 TR.
Does that seem reasonable?

Yes, on both counts. One must compare Accumulation Units with an “Accumulation” Index, not one where dividends are excluded and yes, the higher yield of an HYP should of course generate a higher level of income than the whole index. The whole point of my keeping these records is to prove that that is actually occurring.

Wizard wrote:It is very rough and ready as I am reading off the graph, but I take the values as of February 1st 2014 on the TR graph as, HYP £12.90 and FTSE100 TR £11.40. Again from the graph I read the final values as HYP £17.70 and FTSE100 TR as £16.50. That equates to a gain in the HYP over the period of £4.80 or roughly 37%, and in the FTSE100 TR of £5.10 or c.44%.

If all of the above is correct what it tells me is that the outperformance in terms of both Capital and Total Return is down to the period between June 2013 and mid January 2014. Over the rest of the period the HYP has underperformed the benchmark indexes.

Now I am sure I will be said by some to be just knocking HYP and if anyone can point out errors in my analysis or resulting conclusions please do so. However, if it is broadly correct what this raises in my mind is a question as to what were the conditions between June 2013 and mid January 2014 that allowed such over performance of the HYP that it has allowed it to still be out performing the relevant benchmarks so much later, despite steady under performance? If we could understand that it would be extremely helpful.

For what it is worth, I do not believe your analysis is anything other than a thoughtful attempt to fully understand the performance the HYP as reported by myself. I cannot fundamentally disagree with your analysis but once again, you should bear in mind the relatively short timeline being analysed. Ignoring that for a moment though, I am sure you would agree that, if over the next 7 years 9 months my HYP again beats the index by the same margin, the cumulative results of by then more than 15 years, will surely have made it all worthwhile.


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Re: HYP Income unit performance

#268796

Postby Wizard » December 3rd, 2019, 1:44 pm

IanTHughes wrote:For what it is worth, I do not believe your analysis is anything other than a thoughtful attempt to fully understand the performance the HYP as reported by myself. I cannot fundamentally disagree with your analysis but once again, you should bear in mind the relatively short timeline being analysed. Ignoring that for a moment though, I am sure you would agree that, if over the next 7 years 9 months my HYP again beats the index by the same margin, the cumulative results of by then more than 15 years, will surely have made it all worthwhile.

Ian

I agree 100%, beating the index is beating the index, whether that is done by means of steady over performance or over performance in some periods and under performance in others, it is the overall result that counts.

In terms of understanding what happened between June 2013 and January 2014, I don't suppose your records provide details on what you held at the time?

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Re: HYP Income unit performance

#268809

Postby Arborbridge » December 3rd, 2019, 2:46 pm

IanTHughes wrote:
Wizard wrote:
IanTHughes wrote: I am no expert on unitisation, so my first question is a pretty basic one, am I correct in my understanding that Income Units (despite the name) represent 'pure' capital performance, i.e. they are based on all the income from the investments being withdrawn?

Yes. Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt.


Ian



I'm finding that a bit confusing. Wizard makes the point that income units mean are based on all the income being withdrawn.

Fine, no confusion there.

Then Ian agrees, but continues "Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt. "

Now, here I'm confused. If the income is withdrawn, why are the dividends being used to buy more units? The capital should not be altered by dividends because they are being withdrawn. In fact, income units should ignore dividends - they should not be used to increase the number of units.

The number of units stays constant until and unless some more of a given share is purchased, and at that date one buys more units. i.e. if I made no top ups in the year, the number of units would stay constant. The flow of income is invisible to income units, though not to accumulation units in which case they are added to cash which may be used to buy more shares eventually.

Arb.

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Re: HYP Income unit performance

#268810

Postby IanTHughes » December 3rd, 2019, 2:47 pm

Wizard wrote:
IanTHughes wrote:For what it is worth, I do not believe your analysis is anything other than a thoughtful attempt to fully understand the performance the HYP as reported by myself. I cannot fundamentally disagree with your analysis but once again, you should bear in mind the relatively short timeline being analysed. Ignoring that for a moment though, I am sure you would agree that, if over the next 7 years 9 months my HYP again beats the index by the same margin, the cumulative results of by then more than 15 years, will surely have made it all worthwhile.

I agree 100%, beating the index is beating the index, whether that is done by means of steady over performance or over performance in some periods and under performance in others, it is the overall result that counts.

In terms of understanding what happened between June 2013 and January 2014, I don't suppose your records provide details on what you held at the time?

As it happens ...... I do :) I really should get a life .......

Here is the portfolio as at 31 Dec 2013 ...

Epic | Company           | Weight (%) | Yield (%) | XIRR (%) | 1st Purchase
AZN | AstraZeneca | 7.86% | 5.03% | 3.75% | 10-Feb-12
BA | BAE Systems | 7.79% | 4.53% | 5.61% | 10-Feb-12
AV | Aviva | 7.06% | 3.25% | 4.17% | 10-Feb-12
SSE | SSE | 7.69% | 6.15% | 2.13% | 10-Feb-12
SGRO | Segro | 7.89% | 5.90% | 5.22% | 12-Mar-12
VOD | Vodafone Group | 8.02% | 4.30% | 5.80% | 11-Apr-12
CLLN | Carillion Plc | 8.48% | 5.25% | 3.37% | 11-Apr-12
SBRY | J Sainsbury | 7.00% | 4.58% | 3.37% | 10-May-12
RDSB | Royal Dutch Shell | 8.11% | 5.00% | 1.68% | 11-Jun-12
KIE | Kier Group | 8.44% | 3.71% | 6.51% | 11-Jun-12
HSBA | HSBC Holdings | 7.47% | 4.60% | 2.60% | 11-Jun-12
BVIC | Britvic | 12.36% | 2.57% | 11.84% | 10-Aug-12
RMG | Royal Mail | 1.85% | 3.51% | 9.30% | 11-Oct-13


Only 12 full holdings plus the minnow of Royal Mail Group (RMG), because of course the portfolio was still under construction. Apart from RMG, all original purchases were for about the same amount, although half of them had been subsequently topped up. Britvic Plc (BVIC) became the largest holding due to it doubling in value within a couple of weeks of purchase (thanks to a mooted merger with A G Barr (BAG) subsequently abandoned)


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Re: HYP Income unit performance

#268817

Postby Breelander » December 3rd, 2019, 3:11 pm

Arborbridge wrote:I'm finding that a bit confusing. Wizard makes the point that income units mean are based on all the income being withdrawn.

Fine, no confusion there.

Then Ian agrees, but continues "Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt. "

Now, here I'm confused. If the income is withdrawn, why are the dividends being used to buy more units? The capital should not be altered by dividends because they are being withdrawn. In fact, income units should ignore dividends - they should not be used to increase the number of units.


For Income Units any purchase of more shares by adding new cash to a portfolio has to be accounted for as a purchase of new units. It seems Ian is reinvesting the dividends. As the dividends are treated as 'paid away' in Income Units then that counts as adding new cash to the portfolio, hence the need to calculate the number of new units purchased.

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Re: HYP Income unit performance

#268821

Postby Arborbridge » December 3rd, 2019, 3:21 pm

Breelander wrote:
Arborbridge wrote:I'm finding that a bit confusing. Wizard makes the point that income units mean are based on all the income being withdrawn.

Fine, no confusion there.

Then Ian agrees, but continues "Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt. "

Now, here I'm confused. If the income is withdrawn, why are the dividends being used to buy more units? The capital should not be altered by dividends because they are being withdrawn. In fact, income units should ignore dividends - they should not be used to increase the number of units.


For Income Units any purchase of more shares by adding new cash to a portfolio has to be accounted for as a purchase of new units. It seems Ian is reinvesting the dividends. As the dividends are treated as 'paid away' in Income Units then that counts as adding new cash to the portfolio, hence the need to calculate the number of new units purchased.


OK, I think I get it now. Ian is retaining the dividends and creating new units so when he tops up for real, he does not need to make any further adjustment.
In my case, the dividends are paid away immediately so no more units are created. At a later date - should I then decide to use those dividends or other capital to make a top up - I create more units, but only at the point when the top up happens.

So Ian's keeping his cash "on ice" and creating units for them. I'm not holding the cash, but create units on purchase.

Thanks Bree.

Arb.

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Re: HYP Income unit performance

#268826

Postby IanTHughes » December 3rd, 2019, 3:44 pm

Arborbridge wrote:
IanTHughes wrote:
Wizard wrote:I am no expert on unitisation, so my first question is a pretty basic one, am I correct in my understanding that Income Units (despite the name) represent 'pure' capital performance, i.e. they are based on all the income from the investments being withdrawn?

Yes. Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt.


I'm finding that a bit confusing. Wizard makes the point that income units mean are based on all the income being withdrawn.

Fine, no confusion there.

Then Ian agrees, but continues "Every time a dividend is received, the amount is used to “purchase” Income Units at the Unit price recorded for the day before the dividend receipt. "

Now, here I'm confused. If the income is withdrawn, why are the dividends being used to buy more units? The capital should not be altered by dividends because they are being withdrawn. In fact, income units should ignore dividends - they should not be used to increase the number of units.

The number of units stays constant until and unless some more of a given share is purchased, and at that date one buys more units. i.e. if I made no top ups in the year, the number of units would stay constant. The flow of income is invisible to income units, though not to accumulation units in which case they are added to cash which may be used to buy more shares eventually.

In my case I am not withdrawing the dividends but rather re-investing them. This means that, in order to correctly measure the value of an Income Unit, I have to record that I am fact adding cash to the portfolio every time dividend cash is not removed.

I look at it this way:

Accumulation Units
Event              | Units
Add Cash | Buy
Remove Cash | Sell

Dividend Receipt | Sell
Dividend Re-invest | Buy

You will notice that the Dividend Receipt causes a Sale because it is in effect a "Remove Cash". Similarly, the "Dividend Re-Invest" is in effect an "Add Cash" which of course cancels out the "Dividend Receipt". As a result, assuming the Dividend Amount and the Amount to be Re-Invested are the same, nothing actually changes and dividends can be ignored.

Income Units
Event              | Units
Add Cash | Buy
Remove Cash | Sell

Dividend Re-Invest | Buy

You will notice that there is no "Dividend Receipt" because of course it is assumed that dividends are received outside the portfolio. If, contrary to that assumption, the amount of the dividend is to be Re-Invested within the portfolio, one must record a "Dividend Re-Invest", which is off course an "Add Cash" transaction, and buy Income Units. In this case it is when the dividend amount is not re-invested that it can be ignored.


Ian

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Re: HYP Income unit performance

#268833

Postby Lootman » December 3rd, 2019, 3:56 pm

Wizard wrote:
IanTHughes wrote: you should bear in mind the relatively short timeline being analysed. Ignoring that for a moment though, I am sure you would agree that, if over the next 7 years 9 months my HYP again beats the index by the same margin, the cumulative results of by then more than 15 years, will surely have made it all worthwhile.

I agree 100%, beating the index is beating the index, whether that is done by means of steady over performance or over performance in some periods and under performance in others, it is the overall result that counts.

The concern I have with the cited time period is not its short duration. 7/8 years is a reasonable time period to get a good hint about whether your strategy is meeting its goals. But rather that this particular seven year period is not typical since it has been one relentless bull market, with only minor setbacks which each turned out to be buying opportunities.

As I stated on the other topic, the starting point here is around about the end of the sub-prime crash. And the end point, whilst not unreasonably being today, is an all-time high in the market. So yes the cited portfolio did well. But then almost any equity portfolio would have done well, and of course some did better.

So what I really think we need to see here is not so much more years of the same, but rather how this works in a serious bear market. Long-time readers will recall that most HYP's, including Pyad's own ones, failed critical tests during the 2007-2011 bear markets. Whilst HYP1 owes much of its relative success to the good fortune of starting right when the dot.cm crash started, which of course boosted HY and value shares, at least relative to LY growth shares and therefore the index.

One final note. The guidelines about HYP for this board indicate that shares should be drawn from the FTSE-350 and not the FTSE-100, so perhaps that it is a better index for comparison? Even if you only pick shares from the FTSE-100, it is not unusual for a HY share to be demoted from the senior index.

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Re: HYP Income unit performance

#268856

Postby Arborbridge » December 3rd, 2019, 4:45 pm

Ian,

Do doubt your explanation is correct, but it makes it sound quite complex, especially for newcomers :(

In my case I think of it this way:

Accumulation Units.

All dividends stay inside the account "box", without additional unitisation. When a sale or purchase is made nothing happens! Simple. One only has to create new units if there isn't sufficient cash inside the box. Alternatively, if too much cash builds up, one might like to surrender units to reduce cash.
Otherwise, there's nothing to do except calculate the unit price once in a while.

Income Units.

Dividends are completely ignored - yippee - they flutter off to various places.

Only when buying or selling shares does one create or surrender units, with the price ruling on the day (I take the price as being that at the previous day's close).
New cash for the purchase might come from one's back pocket or dividends that float about, but who cares? Until one needs cash for a purchase, creation of units isn't needed. For sales, the opposite applies and units are surrendered and you go down the pub - or whatever.

I believe we are essentially doing the same thing, but expressing it differently.

Arb.

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Re: HYP Income unit performance

#268858

Postby Arborbridge » December 3rd, 2019, 4:52 pm

Lootman wrote:So what I really think we need to see here is not so much more years of the same, but rather how this works in a serious bear market. Long-time readers will recall that most HYP's, including Pyad's own ones, failed critical tests during the 2007-2011 bear markets. Whilst HYP1 owes much of its relative success to the good fortune of starting right when the dot.cm crash started, which of course boosted HY and value shares, at least relative to LY growth shares and therefore the index.



Perhaps the only example we have of that is TJH's portfolio, and I believe many of us have used this as a starting point for discussion about how to prepare for the next bear. i.e. - how much reserve cash to keep, what percentage one should re-invest.

It's a shame we don't have more examples to work from, but at least we have one well recorded case.

Broadly speaking, assume a 50% drop in income gradually clawing back over 7 years, and you hopefully won't go far wrong. As regards reinvestment: pay out no more than 80% of dividends for your pension (much less if one can afford it) and reinvest the rest.

That's it in a very big nutshell.


Arb.

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Re: HYP Income unit performance

#268875

Postby kempiejon » December 3rd, 2019, 5:41 pm

Broadly speaking, assume a 50% drop in income gradually clawing back over 7 years, and you hopefully won't go far wrong. As regards reinvestment: pay out no more than 80% of dividends for your pension (much less if one can afford it) and reinvest the rest.


I recon 3 years income in cash would ride out that sort of drop and claw back. I'm planning on spending most of my income early on when I switch to spending and having a surplus to re-invest as I get older and other pensions come in. We can of course always rein back spending if times get hard.

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Re: HYP Income unit performance

#269066

Postby funduffer » December 4th, 2019, 4:31 pm

Arborbridge wrote:Ian,

Do doubt your explanation is correct, but it makes it sound quite complex, especially for newcomers :(

In my case I think of it this way:

Accumulation Units.

All dividends stay inside the account "box", without additional unitisation. When a sale or purchase is made nothing happens! Simple. One only has to create new units if there isn't sufficient cash inside the box. Alternatively, if too much cash builds up, one might like to surrender units to reduce cash.
Otherwise, there's nothing to do except calculate the unit price once in a while.

Income Units.

Dividends are completely ignored - yippee - they flutter off to various places.

Only when buying or selling shares does one create or surrender units, with the price ruling on the day (I take the price as being that at the previous day's close).
New cash for the purchase might come from one's back pocket or dividends that float about, but who cares? Until one needs cash for a purchase, creation of units isn't needed. For sales, the opposite applies and units are surrendered and you go down the pub - or whatever.

I believe we are essentially doing the same thing, but expressing it differently.

Arb.

I do what Arb does on income units, because I spend some of the dividends and reinvest the rest, but sometimes into another portfolio. So income units for me are really the best way I can keep track. I.e. Take all the cash out, add new units when I buy new HYP shares.

When I re-invest, I have the HYPTUSS open at the same time as I make the purchase. As I hit the Buy button, I also hit the Get Prices button in HYPTUSS. When the purchase is complete I use these latest HYPTUSS prices to update my income unit price, before adding the new units from the re-investment at this new price. However, I doubt using seconds' old prices compared to those from the day before makes much difference, unless the market goes mad the day you re-invest.

FD

tjh290633
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Re: HYP Income unit performance

#269215

Postby tjh290633 » December 5th, 2019, 9:43 am

My approach to income units is slightly different. The dividends accumulate within the units until the last working day of each month, then they are used to "buy" more income units. If I withdraw cash, then that is usually still in the fund and I "sell" the required number of income units. I use the unit price on that last working day of the month to do the calculations.

I don't think that there is any "right" way of doing this. One could do it once a quarter, half yearly or annually. All are equally as valid as my monthly method or that used by Arb.

TJH

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Re: HYP Income unit performance

#269236

Postby Bagger46 » December 5th, 2019, 10:26 am

The right way of doing it, is to do it on the nail, so that you introduce as little error in possible, by using the best possible available latest value of units.

It is also much better to dissociate divis coming in from cash taken out, as two separate operations. The advantage of doing this, among others, is that Inc units, that element of divi per inc per unit, and acc units can then be automatically calculated on the same 'ledger' spreadsheet entry, just along the portfolio event(which itself might or might not trigger a unitisation computation) is recorded, without lifting a finger. We also calculate running portfolio XIRR on the same line, a macro button does that.

I have unitised since the early 80s, we ran quite a few workshops at the time, attended by plenty if very experienced investors, many highly numerate, which settled how best to do it, and we settled for doing it that way. Over the years that must be hundreds of investors, who obviously have never used either TMF or LMF. The portfolio system I use, which I had a small hand in refining, was developed by OZYU, my late father in law, and currently 24 of us, family and close friends, are using it, with 31 portfolios, all unitised identically, that way we can compare our respective data properly. Each one can see all 31 portfolios, many of which are decades old. The portfolios cover a wide range of aims (it is interesting to note, HYPers might not agree of course, that TR returns, as a scatter chart, show clearly an inverse tendency vs portfolio yield). It helps us, imho, to try improve performance, but is particularly useful for the youngsters, since 6 of these portfolios are less that 7 years old, which I consider portfolio infancy.

By the way, nowadays people call them income units, the City chap, I was told he was from HTR, who introduced the method to our (then) investment club called them capital units, I always thought it was a more appropriate name.

Any good method should work without any change whatsoever if the investor withdraws all, part or no divi cash, or whatever he or she does.

Bagger

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Re: HYP Income unit performance

#269246

Postby MDW1954 » December 5th, 2019, 10:44 am

Bagger,

Although we have corresponded via PM following OZYU's death, allow me to extend a belated welcome to the boards! I am sure that you have a lot to contribute.

As you will know, OZYU was held in high regard by many of us, and I was saddened to learn of his passing.

MDW1954

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Re: HYP Income unit performance

#269261

Postby monabri » December 5th, 2019, 11:21 am

Oh dear.. I'm sorry to hear that news. :(

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Re: HYP Income unit performance

#269318

Postby Bagger46 » December 5th, 2019, 2:38 pm

MDW1954 wrote:Bagger,

Although we have corresponded via PM following OZYU's death, allow me to extend a belated welcome to the boards! I am sure that you have a lot to contribute.

As you will know, OZYU was held in high regard by many of us, and I was saddened to learn of his passing.

MDW1954


Thanks for your kind thoughts. We miss him so much because, as a person, he had so much to offer to all who came in contact with him. Our annual 'gathering of the clan' near year end just won't be so enjoyable this year. His contribution to the early development of AI and Cybernetics, way in advance of what both hardware and software were capable of in those days, I suppose, was his best professional achievement. He ended up installing systems he designed decades before, waiting for suitable and reliable tools to implement.

A bit of light relief, one of the last investment discussions we had was something like this, from him: "why on earth did I stay so long invested in Kier!".

So younger investors should thus take note, even great investors, (and OZYU certainly was that in my book, looking at his long term results, and what he left his grandchildren partially as a result), mess up badly sometimes. In the long run it matters little. Learn from it, move on, if you can't move on and it continues to nag you, you should not invest in the markets. Nobody will go through a long investing experience without serious setbacks, if they have not experienced such setbacks, simple, they have not been at this, at times crazy, game long enough, imho.

Bagger

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Re: HYP Income unit performance

#269451

Postby ADrunkenMarcus » December 6th, 2019, 7:35 am

Bagger46,

I didn't know OZYU had passed away. I'm very sorry to hear this. We corresponded via PM and when I set up my own unitisation for two portfolios. He was very knowledgeable and generous with his time.

Best wishes

Mark.

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Re: HYP Income unit performance

#269491

Postby Arborbridge » December 6th, 2019, 9:58 am

Sorry to hear OZYU has died. We swapped a few private messages, and he was an interesting fellow.

It seems his legacy lives on in several ways, which is heartening to hear.


Arb.


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