I won't try to deny it - 2015 has not been a good one for the DIY Income Investor portfolio, which is currently down about 6% since January.
However, one thing I have learned about investing is that sometimes there are bad years. So, while I'm ready to modify my investment approach, I'm not going to panic. I'm going to carry on using high yield as an indicator of potential value (as well as income). And the latest purchase is about as high a yield as you can find.
A major reason for the poor performance of the portfolio this year is the focus on mining and worldwide Exchange Traded Funds (ETFs), particularly those based in Emerging Markets.
The world economy seems to have fallen into a bit of a slump, with dramatic falls in the prices of raw materials, including oil, iron ore and coal. The big question is: will this be a temporary state of events or is it a New World Order?
I think it's temporary. With increased aspirations for better living standards around the world, I can't imagine that there won't be a recovery in due course. And that recovery will be predicated on raw materials.
That's not to say that the prices of raw materials will recover soon - it may take months or even years. Given that, the key secondary question for a DIY Income Investor is: in the meantime, how secure is the income (i.e. the dividend)?
The latest purchase is BHP Billiton (LSE:BLT), the mining giant formed by the merger of Australia's Broken Hill Proprietary with South African miner Billiton. BHP Billiton is the model for a modern geographically diversified resources company, producing iron ore, copper, diamonds, aluminium, oil and natural gas, though it is base metals that remain the core of the business.
Not only do they have the highest yield in the mining sector (around 10%!) but here's what they say (in their 2015 Annual Report) about the dividend, going forward: "We have a progressive dividend policy that seeks to steadilyincrease or at least to maintain the dividend in US dollars at each half-yearly payment." There's lots and lots more information in the Annual Report - enough to let me know that they probably know what they are doing.
Mr Market doesn't like them - hence the reduced share price and huge yield. Perhaps Mr Market thinks that the miners won't be able to afford their generous dividends. That's always possible, of course, so anyone thinking about buying any of the high-yield miners should think twice. On the other hand, Mr Market might be overly depressed at the moment.
[Purchase price: £8.11 - and yes, I've already taken a hit on these, unfortunately]
I am not a financial adviser 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.