The DIY Income Investor portfolio is based on cash, high-yield dividend shares and high-yield fixed-income securities, like corporate bonds, preference shares and PIBS. For this comparison, the performance of the cash component is excluded.
Recently corporate bonds have been performing strongly. Citywire has published a comprehensive summary of the performance of a range of high-yield bond funds over three years.
Over three years the European high-yield bond fund sector has been the star performing bond sector. However, given the recent default in Greece - and potential problems in Spain, Portugal and Italy, this is clearly the high-risk end of the bonds market. Moreover, interest in European high yield has waned recently, with a shift to US high yield.
There is a direct correlation between higher yield and a lower credit rating and hence higher risk of default. And like the equity market, high yield is vulnerable to changes in sentiment - linked to the business results and fundamentals of the companies they represent.
By comparison, the total return on the DIY Income Investor portfolio performance has been:
- FY 2009/10: 57.2%
- FY 2010/11: 5.7%
- FY 2011/12: 5.9%
This total to a total returns gain of around 76% over the last three financial years. This turns out to be a respectable performance by comparison with the high-yield bond funds above - and was partially due to a big rebound by the equity market in FY 2009/10.
Citywire also provides data for funds over other time periods and for other asset types. If you look at these you will see that the DIY Income Investor portfolio has not performed quite adequately by comparison over 1 and 3 years for both bonds and equities. In particular, over one year many equity funds lost money. As for the 'mixed asset' funds - forget it: the DIY Income Investor portfolio romps home comfortably in the lead over both 1 and 3 years.
Add back the not-insubstantial fees that these 'professionals' charge and the DIY Income Investor approach seems to have worked pretty well.
How is your DIY portfolio doing?
I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.