I am now the proud owner of a new high yield share portfolio.
Since the method for picking the portfolio’s shares was not exciting enough to prompt Simon Cowell call me up with an offer to turn it into the new X Factor, we’ll not go through it again.
Instead, please refer back to see which high yield shares [1] I bought and why.
This post will detail how much it cost to buy the 20 companies in my new HYP, and where I’m holding them.
In the future I’ll explain how I intend to manage the portfolio long-term, as well as what benchmarks we might use to judge its performance. Do subscribe [2] to keep on-board with progress.
An ideal home for my High Yield Portfolio
As mentioned last time, all the online tools I tested to track a paper portfolio were flawed in some way, especially when it came to dividends.
So I decided to do it the proper way with real money. Carlsberg don’t do model share portfolios, but if they did they’d probably do the same thing.
Readers, much as I love you, I did not want to sink my entire wealth into a new portfolio, least of all one that I won’t be able to sell for years. (Houses don’t just buy themselves, you know).
I therefore limited my invested funds to £5,000.
Now, that’s not exactly a token amount of money, but it’s too modest to withstand much share purchasing at £10 or more a pop with 20 of the blighters to buy. But happily there is a cheap way to buy shares that’s worth exploring if you don’t have a lot to invest: Halifax’s Sharebuilder service.
The great attraction of Sharebuilder is it enables you to buy shares for a mere £1.50 an order – a fraction of the normal dealing fees at rival online brokers.
I have had a Halifax Sharebuilder account for many years, having originally opened it to buy a portfolio for income. (Long-time readers may remember my pain at calculating capital gains [3] on the reinvested dividends. Not a mistake I will make again!)
Halifax enables you to run multiple accounts under the one roof, so it was a simple matter to allocate a new one for the Monevator HYP.
How to do the £1.50 share purchasing shimmy
The Sharebuilder service was conceived for people who want to transfer in perhaps £300 from their salary each month, and then build up a portfolio by regularly investing into a slate of shareholdings.
It’s a great idea in theory, and I’m all for encouraging wider share ownership. But in practice it can be costly if you invest too little per month, or if you spread yourself across too many holdings, even with just £1.50 trading fees.
For example, invest £300 across six different companies or ETFs every month, and you’ll pay £9 in dealing fees (£1.50 x 6), which is equivalent to 3% of your funds invested. That’s expensive.
But there’s a cunning plan! Rather than invest monthly, you can make a one-time investment of a larger lump sum, which is what I did. You can then turn this regularly reinvestment back off.
This is pretty much the equivalent of using the Sharebuilder like any other online broker, only it’s much cheaper. The snag is you can’t deal in real-time. Rather, you have to set up your trades the day before, and take whatever price you’re given in the market the next day.
In practice, when you’re buying a portfolio of blue chips at once, it doesn’t matter at all. Some will be higher priced on the day than you expected, and some lower, but it’s just random and nothing to worry about.
Of course, it doesn’t exactly make you feel like Gordon Gecko – more like your mum making out her Ocado grocery order. But we’re investing here, not playing Farmville for thrills, so that’s no bad thing.
Trading costs to buy my high yield shares
Faustian pacts with Mammon [4] aside, here’s what I paid to buy my model HYP:
Dealing fees: There are 20 companies in my new high yield portfolio, and I wanted to invest equal amounts into every one. This meant putting £250 into each company, for a cost of £1.50 each time.
Stamp Duty: I also had to pay the UK’s ridiculous stamp duty tax for each transaction. This is a flat 0.5%, which came to £1.24 for each purchase.
The bid/offer spread: Market makers pay for their daughters’ school fees by charging you a bit more for shares they sell you than they will pay to buy them off you (think of a currency exchange at the airport). This bid/offer spread [5] increases your costs, but for very big companies like those in the Monevator HYP, the spread is tiny. So tiny, in fact, that I can’t be bothered to work it out for each share – we’re talking a few pennies for each purchase.
In total, that’s £2.74 per share purchase for fees and stamp duty, plus a titchy bit more each time for the spread.
Multiply it up and you get to £54.80, or just over 1% of my £5,000, plus the price of a hamburger for that bid/offer business.
What I got for my money
Obviously I bought a different numbers of shares for each £247.26 lump sum I had left after fees to put into each company, depending on the share price.
Sharebuilder does the sums for you – you just say how much you want to invest.
For example, Vodafone had a share price of about 168p last Friday, so my £247.26 bought me nearly 148 shares in that company. In contrast, I’ve got barely 11 Royal Dutch Shell shares to my name.
I say ‘nearly’ and ‘barely’ because Halifax Sharebuilder allocates you fractional holdings of shares (behind the scenes, your shares are lumped together with other customers in a pool). As it happens, I have specifically got “11.244775” Shell shares.
In reality, this precise number doesn’t make any odds. I’m interested in tracking the value of my shares, not the fiddly number I happen to own – as well as the total dividends they pay out, of course.
But for the record, I’ll conclude this post with a snapshot of exactly what I got for my money, and what share price I paid for them:
| Company | Quantity | Cost per share |
| Aberdeen Asset Management | 106.9 | 233.8p |
| Admiral | 14.2 | 1,759.7p |
| AstraZeneca | 8.0 | 3,121.1p |
| Aviva | 56.4 | 443.4p |
| BAE Systems | 76.1 | 328.6p |
| Balfour Beatty | 75.6 | 330.6p |
| BHP Billiton | 10.4 | 2,397.4p |
| British Land | 41.8 | 597.5p |
| Centrica | 79.3 | 315.1p |
| Diageo | 20.1 | 1,245.5p |
| GlaxoSmithKline | 19.0 | 1,318.3p |
| Halma | 67.3 | 371.4p |
| HSBC | 30.0 | 657.3p |
| Pearson | 22.0 | 1,137.2p |
| Royal Dutch Shell | 11.2 | 2,223.3p |
| Scottish & Southern Energy | 18.9 | 1,351.0p |
| Tate | 40.8 | 612.1p |
| Tesco | 60.6 | 412.0p |
| Unilever | 12.6 | 1,986.6p |
| Vodafone | 147.9 | 169.0p |
Note: Shareholdings and prices rounded to one decimal place. Costs include all fees.
Incidentally, having spent 30 minutes copying a load of fiddly numbers by sight from my web browser into this post – and rounding them as I go – I see one advantage of using an online tool… it would have done this for me!
Luckily I don’t plan on doing a review of the value more than every six months or so. This is a steady portfolio for income, remember, not a DIY hedge fund [6]. 😉