Registered:
11/11/12
Seen:
14th Oct

Comments
174
Articles
8

Occupation: Financial writer


Investment Strategy
I trade... extremely rarely
I tend to buy... according to my system
I hold for... years
Diversification is ... essential to reduce risk

My original investment strategy that I evolved after very early failures from following press tips was a version of deep value that I called PYAD. This was my acro for the four filters of low P/E; high Yield; Assets in the form of Tangible Book/Price > 1; Debt free, ie. holding net cash.

My principal aim in this was firstly to minimise the downside before I considered any trading upside to a share. I knew it wouldn't work in every case, there was bound to be the odd failure, but I reckoned that overall it would perform well. I was right and it did, producing handsome returns over the years. I sometimes took big risks by betting the farm on a single play. Not something I'd advise others to do.

Around 2000 I developed the non-trading High Yield Portfolio equity approach for income investors. This was a branch from my value trading ideas and in particular the high yield element of that and it is what I follow principally with my own substantial equity investments today.

Initially the HYP was aimed at retired or other people needing income with a lump sum to invest but I soon realised that it could suit everyone from birth onwards since it could be built up by regular contributions as well as lump sums. Those not yet in need of the dividends simply reinvest them so as to boost the eventual income. It is so straightforward, enabling seamless and cost free switching from reinvesting dividends to withdrawing them whenever the time arose.

Why the controversial no-trading rule? Having observed many small investors over the years, I believe that too many of them hinder their performance by poor trading results and that a buy and hold approach will provide superior returns. It also has the side benefit of not having to watch share prices constantly, reduces administration and avoids having to make decisions.

I didn't invent high yield share investing, it is a very old idea. My contribution was to devise a set of simple rules for portfolio construction and maintenance in order to minimise risks and administration. Chief amongst these is portfolio diversification, the most basic rule of all.



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