Monday, 4 July 2016

More of the Same (Portfolio Buy)

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A lovely summer and the DIY Income Investor portfolio is up 19% (total return, including income and capital gain) so far in 2016. What's not to like?

I'm getting lazier than ever and with two ISA contributions to invest (in different family accounts, of course), I'm going to keep it as simple as possible.

As regular readers will know, I invest in dividend shares and fixed-income securities, using yield as a primary signal - although I try to be careful not to buy something that will turn into a financial 'basket case'.

With money to invest I usually look at the balance in the portfolio between dividend shares and fixed-income (I aim for roughly 50:50). Then I look at the highest current yields and see if any of the more attractive individual investments are under-represented.

This time one security stood out like a proverbial 'sore thimb': my highest-yielding holding. When something is yielding 12.7% you have to be extremely wary. This high yield is a sign that Mr Market is scared stiff of what might happen.

Yet what is this security? One of that 'safest' propositions, one would have thought - a Building Society. However Manchester Building Society is in all sorts of trouble and recently lost their Interim Chief Executive.

The security I hold is a fixed-income PIBS paying 8% (LSE:MBSR) - but the depressed market price produces that high current yield. I bought some earlier in the year.

It is a gamble, of course. I am hoping that the Building Society will be rescued by a larger one; and that the PIBS are repurchased by them at more that I paid (or even better - but less likely - that the high yield is continued). The original prospectus provides the legal basis for any option going forward - but recent experience for similar securities in trouble has been that there seems to be a great deal of leeway in interpretation.

Anyway - that took care of one whole ISA contribution.

I have an idea for the other ISA, too.

[Purchase price: £63.99 (for 100)]

PS By the way, there is an interesting article on UK retail bonds in the Telegraph. Nothing that really gets me excited but some useful yields on fairly safe retail bonds.


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.

3 comments:

  1. Hello DIY Income Investor, how did you find this MSBR, are you using a special screener ? Do you keep some cash or are you fully invested ?

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    Replies
    1. Hi - See the info on the Toolbox page.

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  2. I think the PIBS paying 8% on the LSE is * MBSR * - I think you've noted MSBR in error.

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