IMPORTANT ANNOUNCEMENTS: Thanks for watching today's video! I look forward to seeing you in the comments below. Please make sure to share with the community what you think about The Income Investor by Steven Bavaria. HELPFUL RESOURCES: My friend Greg, a high-yield investor, inspired me to read The Income Investor! Following are my recent interviews with Greg (celebrating his early retirement): Part One: ruclips.net/video/x7oOnanKwCE/видео.html Part Two: ruclips.net/video/cd8FdR0UWGg/видео.html And, here's my interview with Greg from a while back, before he retired: ruclips.net/video/3Wbl8zQLSuA/видео.html Here's my recent video about 10 higher-yielding dividend stocks that I’m adding to right now: ruclips.net/video/YOcJoU4iECo/видео.html Here's another recent video about a higher-yielder I’m buying: ruclips.net/video/zeLdmfnWGrE/видео.html Here's my video about XYLD, which I sold: ruclips.net/video/EGVPu0cNGp0/видео.html CHECK OUT MY PATREON (I'm Taking Corner Patreon To The Next Level This Year): I'm sharing exclusive bonus content over on Patreon! I offer two tiers: Backyard Patreon and Corner Patreon. My Backyard Patrons see my stock trades, each accompanied by a blog post write-up. They also have access to 50 historical Patreon-exclusive videos. In addition to all Backyard Patron perks, my Corner Patrons also have access to my complete dividend stock portfolio (% allocation to each position) AND my complete bond portfolio (% allocation to each position). They additionally enjoy exclusive portfolio update videos, Corner Patreon virtual meet-ups, book clubs, and more. Head on over to Patreon to join today: www.patreon.com/ppcian PPC IAN TWITTER: I'm always sharing fun updates on Twitter. Here's my dividend investing Twitter: twitter.com/ianlopuch PPC IAN INSTAGRAM: I'm sharing some great content over on Instagram. Check out my Instagram stories. I'm @ianlopuch: instagram.com/ianlopuch/ COOL DIVIDEND INVESTING MERCH: I offer some really amazing dividend investing merch that is sure to make you look and feel great. Each purchase supports my RUclips channel: teespring.com/stores/ppcian Thanks so much, everyone, for your support. I hope you enjoy the video today! (Disclosure and Disclaimer: Please see video description for disclosures and disclaimers.)
I live off dividends on etfs, certainly it can improve your wealth if you reinvest them to buy more shares, creating a snowball effect that allows your investments to compound over time. It's one of the most passive and effective ways to build an income stream. well managed steady growth for me.
I am so big on stocks and it has worked well for me, but I also like to have a well balanced, low-cost set of ETFs that keeps the money in my pocket. How effective is your efts approach returns on the long run with this lot?
Just curious, have you considered the possibility of cashing out some of those dividends for paying off your monthly expenses, instead of re-investing them? Bcos I need a lot as rent, inflation alone eat up almost all of what I make.
tbh I keep compounding, adhering to well established patterns from a professional, even as a rookie, can bring tremendous value! I’ve trimmed, added also and now my average growth has increased 88% in the past year while participating behind a top performer. effectively remits over 100k annually and increasing.
Cheers I'm looking to start a position in SCHD, JEPQ with dividends of existing stocks. It's going into an IRA and I'm really looking for growth over time. I will be reinvesting dividends like you, so my position size will grow.okay if I ask for referral from you. I mean your top performer
I read the Income Factory and feel your critique and points are spot on. It’s important to note that most of funds Stephen mentions are down in price over the long haul, they’re not even flat. I took his strategy and picked BDCs, Reits, CLOs that are up and to the right in price return and total return. MAIN, BST, JAAA, GLAD. Little bit less yield but the price isn’t on the trajectory toward zero.
I actually just read this book last month. It’s such a good and important read. Understanding how the math works and also breaking the mold of the 4% rule is the only way to invest. This book is a MUST READ for any dividend investor. I can’t recommend it enough.
I love seeing how much you've grown over the years adjusting your strategy. I remember back when I first joined the channel, when you have thunder ten thousands of drivers, videos explaining why you don't like buying ETFs and you prefer buying individual stocks. Remember that being a discussion for quite some time. Now here we are, roughly four years later and you're showing us the fools ETFs you nvested in. Love it!
Thanks for your longtime support, my friend! Since the early days! I am ALWAYS learning/improving. Definitely staying humble, with an open mind to learn. Wishing you an amazing 2023! Hope we get to connect at a meet-up sometime this year!
I continue to evolve as an investor with experience and new information. It was after reading this book and due diligence that I invested into Ares Capital (ARCC) and Main Street Capital (MAIN). Small(ish) portion of our overall net worth, so it’s a great way to get my feet wet and gain more experience for better or worse. Enjoyed this as always, Ian.👊
I am pretty interested in this style of investing. I have been building my income factory light with a mix of covered call ETFs, BDCs, REITs, and MLPs. I also have some "lower" yielding holdings that have a small amount of growth potential. One of things that keeps me from buying in to some of the funds suggested in the book was the expense ratios. They are all mostly over 1% and I feel like there are better high yield options with small / no expense ratios. Thanks for the great video Ian, I have watched this a few times now and have also listened to Steve's book a few times.
Great video! I ordered and read the book. Made some moves in my portfolio from a yield of 4.3% to 5.7%. IFL its really made difference, its a Dripping currently.
This is your first video that I saw and I am amazed! I subbed right away and can't wait to go through your other content. A very objective and open minded review, perfectly laying out pros, cons and it gave me a very thorough perspective on the topic. Thanks!
I’ve built a Income Factory based portfolio + individual bonds, preferred and baby bonds locking in 7-10%. I will compound the income as I watch the asset prices increase as inflation/Fed rates decline over the next year. All this is in an IRA and Roth. When completed will be 40% of my portfolio. Rest is in DGI, REITs, midstream and a handful of tech. For the 10 yrs before COVID, DGI may have edged out IF as dividend growth + capital appreciation, when added to 2-4% dividends may have topped 7-10% compounded but for the past 2 yrs and maybe for years going forward we may be stuck with flat equity markets and an IF portfolio may shine. Since no one can predict the future, diversification of investment strategy creates more ways to win.
Ian, I always love seeing you're enthusiasm & love for dividends!!! My man! 👍 Glad I gotta finally watch this whole video! I'd say I look at my DGI portfolio as retired future income later as well! Love all the love & hustle, goodness I need this energy to continue on videos too. I've somewhat lost the frequency due to new job & career changes from separation of Active duty Military. A lot of new changes, stressor, anxiety, and a little depression due to being alone a lot even more now. Gotta learn even more about myself & keeping my faith! I love helping others too, just gonna have to pivot & get moving again!.. -John
Another fantastic video, thank you. By the way, MO is one of my top five holdings in my mostly dividend paying portfolio. Looking to retire in the next three to five years in my mid to late fifties. 🙃
I've recently added I-bonds and T-bill ladders to my portfolio on top of my dividend holdings. I will definitely give this book a read. Always open to new ways to capture yield.
37:00 Ian - This really resonated with me when you were talking about having a contingency plan... Tech layoffs have been insane.. It is so great to have a dividend and side hustle contingency plan if the unthinkable happens with your active income. Really enjoyed your video!
Thank you, Jake, for your very kind words. Wishing you HUGE success in 2023. Dividend stocks / passive income investments are so reassuring during uncertain times. Wishing you a great one, my friend!
Great video ! I finished Bavaria's book last week, and loved it. We've dedicated our two Roth accounts with a reproduction of his high yield portfolio, and, because most of his recommendations are monthly payers, are starting to see the benefits already. What I like are his funds are distributed across instruments and sectors, giving good diversification.
That is awesome! Thank you for sharing! Gotta love the ten year plan. That is so motivating to hear. Wishing you HUGE success against your retirement goals!
Have you looked into EOG or ARCC, both two dividend stocks I came across with INSANE dividend yields and given our economic conditions could perform very well this year..
Nice to see another investors perspective. I agree these type of investments can and should be brought to a portfolio to bring up portfolios overall yield while also catching those increases. Life's all about balance in the end
Thanks for your kind words! Definitely like your point on balance. I've got stocks like UVV, and I've got stocks like SBUX, my largest position. They definitely all balance each other out. (Disc: I'm long UVV and SBUX)
LOL. Bought Tesla at low and enjoying all the gains today. I am half and half. IRAs are in growth since they are locked away and dividend focused in the taxable accounts for access to income.
I went ahead and bought the Steven Bavaria book on Ebay this morning. The logic behind his style is antithetical to what all the great investors like Buffet, Lynch, and Jack Bogle teach. But there's no "correct" way to become wealthy -- as long as it is legal! 😂
You can also look internationally for high dividends, especially in emerging markets. Some companies are tradign cheaply around 10 PE or lower, and they are paying ( depending on the earnings for example 85% of their earnings, so once can be higher, once lower), but with that parameters current yield is sometimes huge straight away.
Seems like Canadian stocks are a good way to get high yields, but with good degree of safety -- a lot of people buy their banking stocks and midstream pipe companies. I own Enbridge, myself.
Great read. Thanks for the awesome video. It is interesting to hear your take on it. You nailed it. Risk tolerance is key in these kinds of investments. I never could have started my journey with these types of investments but as I have developed the mindset of abundance and got the snowball rolling, it's easier to explore some of these other options. I love these options as a tool for sector rotation. Going short the market doesn't suit me but these high yield options move in different cycles to the market and provide opportunity when my universe of stocks isn't on sale. Thanks again for the great content. Keep it up!
“Income factory” is a great analogy. But I prefer Ian’s comparison of investing to being CEO of your own business. Thank you Ian for another great video, I look forward to reading the book. I am a very appreciative of Greg’s insight and inspiration as well.
I agree that bonds are getting more attractive. Until recently, I had zero bonds but now have some though I stick to only those maturing in around 6 months or so. Although I think one can make money from longer duration bonds if interest rates fall, I stay away due to inflation concerns (negative real yields).
Bst eos cii are a couple cefs I hold that do well with capital appreciation. Yields might not be as high as some the author talks about, but I will be using these for income in a couple years. Also have jepi jepq and the yld funds. My portfolio is def an income producer, but still gains in appreciation over time.
@@ppcian I love your page your break down is what pushed me into this more I wanted to read this book I walked to barnes and noble and it was not avail so amazon to the rescue. I don't have tons of money to invest but I have slowly built myself to 5 figures and now really want to snow ball my divs, I have some etfs for growth but I think people in my shoes should income invest so they see the money flow and stay with it
Amazing video dear Ian. Thankyou once again for sharing great knowledge as always Truly grateful for your valuable time and sincere efforts for all of us passive income community. God bless you always 🙏
Thank you for such an informative, interesting and well-balanced discussion of this issue. You make some very good videos! My two cents for whatever it is worth. 1. I think this depends on what your interests are. If you are younger and can delay gratification, growth is your friend. But, if your older or you just need income now because you have decided on some kind of early retirement (Often at a relatively low income point), these type of high yielding investments are very enticing. 2. But, my objective is to have multi-generational wealth (I want my children to inherit my portfolio) and I have come to the opinion that dividend ETFs are the way to go because I may have some idea what is a good investment now but I can't predict the future. As you said, I will never sell these equities. So, while I love McDonald's today; their might be a better choice fifty years from now. Now, I could try to sell my McD's and buy something new but I might not time it well, and if McD's is fading and some other stock is rising, it may be real hard to pull it off. But, if you have an ETF that is always redistributing for the top 100 dividend stocks or whatever their goal is, then it is all done for you, for me today, and for my kids tomorrow, and my grandchildren after that...all the way down the line as long as we have ETFs and a stock market. 3. So, I put these type of ETFs at my core, and I still try to buy a few stocks I really like, and have kept some stupid buys hoping they turn around, and even some income producing investments such as discussed here because I can't only think about the future, I have some now interest as well. But because of my goals, I have turned to dividend ETFs. Now, why dividend ETFs, instead of growth ETFs? That is also something people can consider. I choose dividend ETFs because I need to balance income in retirement with my desire to have something for my children to inherit and some of these dividend ETFs don't fare all that bad in terns of growth. I also have bought some growth stocks as well. I do think in today's current bear market, dividend stocks and income producing investments like discussed here have done well because even if prices decline, you still have income coming in. You do have risks of the economy going belly up and these investments going bankrupt but I think you would have similar (not the same) risks with equities though I do understand that dividend aristocrats that people buy and hold forever your JNJ, PG, KO, Pep etc...don't usually go down in value the way other stocks do. And if you held for a long time and you have a nice income stream coming in, that is definitely something positive to consider. But, it takes a long time to get there, and you may have to weather some storms in between, and these income producing investments get you there faster, though with greater tax liability. But, that tax liability is not that high if you don't have outside income or little outside income. It could even be zero or near zero you are trying to live on a modest means.
Thank you for your incredible thoughtful and detailed comment. I very much enjoyed reading it and I can completely understand your points! Wishing you a great one!
Yes as long as you continue investing piece of your income to increase holdings and compound income. The longer time period and more you buy, the higher yield.
Yes it's basically the only sure strategy for early retirement. And you know exactly what you need to do : Just get enough passive income to meet your monthly expenses. Most, hoping to retire early, try to get rich quick on high flying stocks and lose everything because no one teaches them about "income factory" investing. This topic is ignored by the media for a reason : wall street can't profit off it
@@Coda1850 Total return matters not just stock growth in income investing. Many of these investments do better in a bear market. Also remember where dividends come from, they come out of the share price they don't just appear out of thin air.
I like individual corporate bonds and treasuries. That way I control the sale. I can hold to maturity and not be subject to the bond ETFs value collapsing. Plus, because the market collapsed last year, there is a very good chance when the bond market comes back and yields go down, I will be able to trade out of my bonds for a huge capital gain…decision point, do I hold till maturity and enjoy the cash flow, or if for example the capital gain is equal to 4-6 yrs income, do I take that gain and pivot back to dividends. I should add that some of my corporate bonds are on the top of the “junk”, bond Spectrum…BB, etc. But I am getting 8-9% yield. Eg, I bought Goodyear tire bonds at a big discount, and could already lock in an 8% gain if I chose to sell now. But like I said above, I would want to see at least the gain be equivalent to 4-6 yrs worth of income before I traded the cash flow for a capital gain.
Fabulous insights. Thanks for sharing. For my longer-term Treasuries, I'm buying individual Notes/Bonds for this very reason - having the ability to hold to maturity. I'm taking a hybrid strategy with some of the other bonds, however, for the instant diversification and ease-of-management. Do completely understand what you are doing, however, and it makes complete sense! Neat on the Goodyear Tire bonds!
I’ve been an “Income Factory” investor for some years, especially after studying this investment philosophy and learning that the z overall stock market return has historically averaged 8 percent; so why not find solid (especially monthly) investment grade funds of several different types, to have cash flow for living expenses or reinvestment. Even with occasional dividend cuts, the total returns are superior to cds. etc. This investment style is certainly also correlated to age status of course.
Ian can u make a video on your current holding and your thoughts again on investing in taxable portfolio and Roth IRA or 401k before taxes through company just your thoughts and why u do what u do in that realm of portfolio use thank u
I think that'd high yield helps lessen the risk. Because your exit strategy is faster. Reducing your overall risk. Waiting 10 years for the same result is equally risky.
Covered call funds that do at the money calls like XYLD are not going to appreciate in value over time. You were right to sell given your stance on that.
I read this book and I get the math. However, many of the funds suggested in the Income Factory portfolio have lost a lot of value over time. Couple this with very high management fees and the increase in yield becomes negligible. (This doesn't even take taxes into count). Am I missing something?
If you have years of investing ahead of you, I have found buying and holding great quality companies that grow their dividends is the best way to create the snowball of income that we are all hoping to enjoy. Current portfolio - 43 dividend stocks - (no Bonds, no Mutual Funds, no ETFs, no CEFs, no senior debt). Holding period...the rest of my life! Thanks for the review.
My core stocks remain SBUX, JNJ, PEP, and MCD. From a business fundamentals standpoint, they have held up quite well. The businesses seem to be growing/thriving. Share prices are down, but I look at it as a blessing. Since I only invest for income, I have an opportunity to add more / reinvest at better prices. I do not care about capital appreciation, but I’m only speaking to my unique, personal situation. Wishing you a great one! (Disc: I’m long SBUX, JNJ, PEP, and MCD)
Better than xyld is Jepi, jepq, and Divo. These are my favorite covered call ETFs. They do appreciate in price with the market, but not as fast as say the spy.
If I was in my 60s, maybe I would accept eroding principal because I likely only have 15-20yrs of life remaining. Any younger and erosion of principal seems dangerous.
As long as the income keeps coming in at a steady predictable rate and you never sell for a loss, does the underlying asset price really matter? I don't hold anything he was talking about that has lost price at that rate, but I do hold the 3 yld funds. They make up 21% of my portfolio. Their payouts do fluctuate a little but every month they keep rolling in getting me closer to FIRE.
@@kingconstructo I have held stocks like NS which had a high yield, but the stock would go down making the yield look even bigger, then they would cut the dividend to bring yield back to say 9%…then the price/earnings come down and the would cut the dividend again. So essentially the current yield is 9% if you buy at the current price, but at the original higher price the yield on cost is more like 4%. So in that case, it was a yield trap. Not sure if the YLDs payout will follow the price down like NS did. Or if buying in now will set you up for some capital appreciation since the price is down so far from 2022.
Vanguard has some money market funds which maintain a stable value of $1.00 per share. Vanguard Cash Reserves Federal Money market yields 4.28%. Vanguard Treasury money market 4.15%. Vanguard Municipal money market fund 2.47%
Thank you Ian ! May you and your family have a healthy, happy, peaceful and prosperous 2023 ! I hope you will find time to exercise like you want to exercise including swimming lots of laps and running ! Maybe your son and daughter might attend a YMCA summer camp ! Hope you are becoming comfortable with and enjoying Boise and your new home ! God bless !
I am retiring later this year, so I mostly own bonds and preferred stocks for the income, but I kick it up a notch with some high yielders, they are about 10% of my portfolio. The ones I own now are OXLC - (15% yield,) WDI (10% yield), MCN (9% yield )and GGN( 9.35% yield). Don't overlook preferred stocks, I have some from really solid companies that yield 7% to 9%. I do not buy bond funds, they are NOT bonds, they are funds, huge differences. A bond fund can be down 20% or more and stay there for years, an individual bond when held to maturity will pay back 100% of the issue price.
100% SCHD until you’re close enough to retirement to build a position in JEPI small enough to keep the distribution under the standard deduction amount. $25K of JEPI and $75K of SCHD income would produce $100K of tax-free income on day 1 retirement. Slowly sell off JEPI and buy more SCHD as the income naturally grows and social security eventually kicks in to reduce taxes paid during SS years. Combine this approach with a paid-for house and you’re living like a king without the government shaking you down and stealing a larger portion of your wealth.
One thing I don't understand about bond ETFs. If the goal of a bond is to preserve the principal, why not just buy the actual bond and not an ETF of bonds? As you mentioned at the beginning of the video, the price of that bond ETF plummeted... so, there is a real risk to lose the principal invested. Why not just stocks or stocks ETFs?
My largest bond position is in Treasuries. I buy those directly, so I can hold to maturity and avoid risk of principal loss. Regarding the corporates (and overall bond market), what has happened is very rare (according to recent history). While I could buy corporates directly, I decided to diversify my risk since there is some credit risk there (vs. next to none with government). I am taking calculated risk that most of the rate increases are priced in, and that the Fed will eventually pivot. Of course, my thesis could be wrong. On a go-forward basis, I am expecting consistent income + some possible capital appreciation as the bond market recovers. Again, I could be wrong. I do not expect further drops of the magnitude we have experienced, that is for sure. Gets complex in my decisioning, but ultimately I valued the diversification over holding a smaller subset of bonds to maturity. Wishing you a great one. (Disc: I'm long Treasuries and VCLT)
@@ppcian The fall in bond prices is mathematically predictable. We were in a 40 year bond bull with the general trend of falling interest rates since 1982. Interest rates were artificially low (suppressed by central banks around the world) and finally allowed to rise. Rates are still lower than the historical average over decades and centuries. The big question for the future is the direction of interest rates. Falling rates, good to own bonds. Stable rates, the yield is what you get. If interest rates rise then bond prices will fall - it's just math. My personal belief is that I expect a general trend of rising rates for a decade or more. I hope I'm wrong, but my dividend stock portfolio should be fine either way.
Portfolio 1 $10,000 $8,101 -7.59% Since inception of WDI in 2021 dividends reinvested, OXLC - (15% yield,) WDI (10% yield), MCN (9% yield )and GGN( 9.35% yield) Total returns count, dividend yield not all its cracked up to be.
If you don't have more than a million dollars in a taxable account, then any tax benefit from municipal bonds is minimal because your effective tax rate would be very low. Because taxable bonds are taxed at ordinary income tax rates, this gives dividend stocks an advantage because they are taxed at long term capital gains rates. It is possible to have a portfolio of only dividend paying stocks (not any funds with an option layer) and pay 0% in income tax.
@@baitcaster7260 Yes, an option but I was mainly responding to Ian's investments in a taxable account. For me, I prefer to defer taxes than pay them now. I believe Roth's are overhyped and the benefits of traditional deferred tax retirement accounts are miss understood. People fail to understand two things: (1) when you pay less taxes, you have more to invest and compound to retirement and (2) you are most likely to spend less in retirement, thus your withdrawals needed will most likely be the required minimum distribution (RMD), which would be taxed at a lower effective tax rate than if you did a Roth during your professional working life.
I like the core stocks you are talking in you videos. But while you are talking a lot about risks you seem to be ignoring the single stock risk as you are concentrating a big part of your money on just four core stocks. Wouldn't it be better to invest your money in 30, 50 or 100 (or even 200) more or less equally weighed positions from a risk point of view?
If you look at history you’ll see the Fed pivots too late, every time!!! I’ve been through this twice now, the old rule of buying at deep discount never goes out of style. Right now much of the “golden standard” dividend stocks are still over priced. Holding cash for a few months is also a strategy, just keep this in mind. Every time you see the market rally the Fed doesn’t like that. The Fed pivots AFTER poor employment numbers went too far. History is a guide here. I’m just saying, lots of hedge funds are hoarding cash for a reason. Don’t forget to grow some cash for a couple months. It can put you years ahead as far as yields go. 👍 I recently bought $10k in Amazon stock at $88 and besides that my cash pile is growing. I haven’t been buying anything. High yield comes from different strategies not just buying a high yield. A great value gets that high yield and also grows that high yield at very low risk. That book doesn’t mention that. 2nd quarter 2023 will tell everyone how these rate hikes have effected great companies. Peace. 🙏
Absolutely FABULOUS comment. I agree completely on having the discipline to stockpile cash. (Although, in practice I do not always have that discipline, as I'm almost always buying.) And, I agree completely that having "high yield" can come from buying great assets at a discount. Wishing you a great one!
Your approach relies on timing market which almost no one can do successfully long term. The income factory approach is set it abs forget it. No need to be a wizard who buys AMZN at the very bottom and sells at the very top. Congrats if you can do that but I can't do it and don't know anyone who can
I read this book as well. All of the approaches in his book have badly underperformed the market and with higher volatility. There’s really no evidence to support this type of income strategy. 100% SCHD would have produced higher returns with less volatility and lower tax drag. Even a managed fund like DIVO would be a better idea if you’re reaching for higher yield but want to have a shot at capturing the majority of market returns. Keep it simple and stick with high quality, proven index funds like SCHD, VOO, etc. and follow the 4-5% rule. The “income factory” approach as presented in this book is really a “wealth loss” factory compared to the available broad market index alternatives.
At a 6% premium for a CEF? The secret is already out and smart money has already been in for a while. Sure, rates will eventually fall, but it seems like everyone is pricing in end-of-year pivot.
Yes, indeed! Please keep in mind that the bonds are a subset of what I do. The vast majority of my strategy is focused around dividend stocks that pay qualified dividends. That said, fixed income plays a growing role for me, and one drawback is the tax implications.
When a total return of an income focused investment is lower, pretending it's ok doesn't change the fact one has made a bad decision. Total return is king.
I just looked at all these etfs. They are all down alot in the past 5years to max time they were open.. The div yield is high but the overall stock etf price is down. Your losing money holding onto these etfs. There are better etfs that have high div and etf stock price are going up. I do not recommend you follow this guys advice.
SCHO does not yield 4.33%. the 30 day SEC numbers are often wrong or misleading. Even if we took the last dividend, $0.1165 for the month and multiplied that by 12 months we would have an annual income stream of $1.398. $1.398 / $48.49 (price shown on your graphic @5:35) gives us a yield of 2.88%. You should avoid SEC 30 day yields as a view might see that and think that 4.33% would be a great adder for their portfolio but then find out the yield is significantly less, like 33% lower. The issue is the same with VCLT and MUB as well. Those yields are highly over stated. @12:15 Those funds have NOT held on to their value over time especially if you account for inflation. Make sure that when you scroll to the graph you check the box 'Inflation Adjusted'. www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=false&showYield=true&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VCLT&allocation1_1=100&symbol2=MUB&allocation2_2=100&symbol3=SCHO&allocation3_3=100 Over time their income has also been going down and the loss of income shown in the chart is even worse when you consider inflation. It feels like you are seeking things out for comfort and not actually looking at the selections you made. So many equities are better than those even with volatility or periods of time with depreciated pricing as you can get a rising stream of income that beats inflation while you wait for prices to recover. Plus, even after taxes, selecting stocks that yield more than those funds you spoke to is really easy...assuming you actually look at the SEC yield and then simply run the numbers for the past year even picking the most recent highest dividend payments (excluding any capital gains payments or extra december dividend). You said your risk tolerance is low but at the same time you bought into three funds that have done nothing but lose value over the last 12 years along with falling income streams even before accounting for inflation.
Thanks for your comment! Please keep in mind that the vast majority of what I do involves investing in dividend-paying stocks. Those stocks have done exceptionally well, but many at this time are a bit expensive and I think it could take some time for fundamentals to catch up with valuations. That said, I keep buying anyways because that's what I do. Over the last year, largely because I had a lump sum of money come my way (home sale) AND because fixed income market has presented some great opportunities, I have diversified into high-quality bonds (with Treasuries leading the pack). I did so for a few reasons. 1) Risk Tolerance: I do not want to put all my money at risk, but also want some sort of return. A lot of this money is considered "intermediate-term" cash savings/emergency money, so I don't risk dipping into my dividend stocks should cash be needed. 2) Time Diversification: I do not feel comfortable deploying too much into equities all at the same time. With some of my Treasury Notes, for example, I may choose to deploy the proceeds into my dividend stocks upon maturity. 3) Immediate income: While not crazy huge, I feel comfortable using my bond interest to pay bills (I already am). 4) The fixed income market is presenting an interesting opportunity. While the funds I own such as VCLT, MUB, and SCHO don't look good over the last 10 years, I'm not buying for the last 10 years, I'm buying for NOW. 5) I am MUCH more concerned with preservation of capital and modest income for this part of the portfolio vs. beating inflation. I do realize, my personal situation is VERY different than many others, so that needs to be taken into account. Thanks for sharing on the 30 Day SEC Yield. In 1 year, I'll report back how much interest I actually received and then I can compare vs. my forecast. Wishing you a great one! (Disc: I'm long Treasuries, VCLT, MUB, and SCHO)
@@ppcian Thanks for clarifying. I would look into things like floating rate notes over those funds. If your brokerage firm or CFP (if you use one) has access to things like bank notes that is another option that are a better option. Best of luck and God speed!
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Hi Ian, would make a video about DRIP strategy vs picking Dividend Stocks that we like/own and buying more stocks only when they are undervalued?
Hi Ian, would make a video about DRIP strategy vs picking Dividend Stocks that we like/own and buying more stocks only when they are undervalued?
Check out BST covercall out perform sp500 since inception
I live off dividends on etfs, certainly it can improve your wealth if you reinvest them to buy more shares, creating a snowball effect that allows your investments to compound over time. It's one of the most passive and effective ways to build an income stream. well managed steady growth for me.
I am so big on stocks and it has worked well for me, but I also like to have a well balanced, low-cost set of ETFs that keeps the money in my pocket. How effective is your efts approach returns on the long run with this lot?
Just curious, have you considered the possibility of cashing out some of those dividends for paying off your monthly expenses, instead of re-investing them? Bcos I need a lot as rent, inflation alone eat up almost all of what I make.
tbh I keep compounding, adhering to well established patterns from a professional, even as a rookie, can bring tremendous value! I’ve trimmed, added also and now my average growth has increased 88% in the past year while participating behind a top performer. effectively remits over 100k annually and increasing.
Cheers I'm looking to start a position in SCHD, JEPQ with dividends of existing stocks. It's going into an IRA and I'm really looking for growth over time. I will be reinvesting dividends like you, so my position size will grow.okay if I ask for referral from you. I mean your top performer
@@shaquaan a lot of people let their dividends ride for the long-term given its solid returns effects overtime.
I’m so glad Ian is reading this. A lot of people say a lot of bad things about CEFs. They are so perfect for the dividend investor
I have found it’s always good to keep an open mind! There are many great ways to achieve automated income. Wishing you a great one!
@@ppcian Thanks Ian, You're the best, FYI you have always been an inspiration to me and my Dividend journey.
I read the Income Factory and feel your critique and points are spot on. It’s important to note that most of funds Stephen mentions are down in price over the long haul, they’re not even flat. I took his strategy and picked BDCs, Reits, CLOs that are up and to the right in price return and total return. MAIN, BST, JAAA, GLAD. Little bit less yield but the price isn’t on the trajectory toward zero.
I actually just read this book last month. It’s such a good and important read. Understanding how the math works and also breaking the mold of the 4% rule is the only way to invest. This book is a MUST READ for any dividend investor. I can’t recommend it enough.
Thank you so much for your kind words! Great point that it's a "must read". I do agree!
I started this approach in September, around $120 in dividend cashflow a month. I just ordered this book 3 days ago lol!
That is awesome! Thank you for sharing! Wishing you tremendous success!
I love seeing how much you've grown over the years adjusting your strategy. I remember back when I first joined the channel, when you have thunder ten thousands of drivers, videos explaining why you don't like buying ETFs and you prefer buying individual stocks. Remember that being a discussion for quite some time. Now here we are, roughly four years later and you're showing us the fools ETFs you nvested in. Love it!
Thanks for your longtime support, my friend! Since the early days! I am ALWAYS learning/improving. Definitely staying humble, with an open mind to learn. Wishing you an amazing 2023! Hope we get to connect at a meet-up sometime this year!
I bought MO because of you a few years ago. I'm loving it!
I continue to evolve as an investor with experience and new information.
It was after reading this book and due diligence that I invested into Ares Capital (ARCC) and Main Street Capital (MAIN).
Small(ish) portion of our overall net worth, so it’s a great way to get my feet wet and gain more experience for better or worse.
Enjoyed this as always, Ian.👊
That is awesome, my friend!!! Thank you for sharing! Wishing you all the greatest. Always appreciate your comments.
I love the high yield stocks. My highest yielding stock is L&G here in the UK. My yoc is about 8%.
Right on! Thank you for sharing! Wishing you a great one!
I am pretty interested in this style of investing. I have been building my income factory light with a mix of covered call ETFs, BDCs, REITs, and MLPs. I also have some "lower" yielding holdings that have a small amount of growth potential. One of things that keeps me from buying in to some of the funds suggested in the book was the expense ratios. They are all mostly over 1% and I feel like there are better high yield options with small / no expense ratios. Thanks for the great video Ian, I have watched this a few times now and have also listened to Steve's book a few times.
Great video! I ordered and read the book. Made some moves in my portfolio from a yield of 4.3% to 5.7%. IFL its really made difference, its a Dripping currently.
This is your first video that I saw and I am amazed! I subbed right away and can't wait to go through your other content. A very objective and open minded review, perfectly laying out pros, cons and it gave me a very thorough perspective on the topic. Thanks!
Thanks for your very kind words. Thanks for subscribing. I truly appreciate it!
I’ve built a Income Factory based portfolio + individual bonds, preferred and baby bonds locking in 7-10%. I will compound the income as I watch the asset prices increase as inflation/Fed rates decline over the next year. All this is in an IRA and Roth. When completed will be 40% of my portfolio. Rest is in DGI, REITs, midstream and a handful of tech.
For the 10 yrs before COVID, DGI may have edged out IF as dividend growth + capital appreciation, when added to 2-4% dividends may have topped 7-10% compounded but for the past 2 yrs and maybe for years going forward we may be stuck with flat equity markets and an IF portfolio may shine.
Since no one can predict the future, diversification of investment strategy creates more ways to win.
Great comment! Thank you for sharing!
Ian,
I always love seeing you're enthusiasm & love for dividends!!! My man! 👍 Glad I gotta finally watch this whole video! I'd say I look at my DGI portfolio as retired future income later as well! Love all the love & hustle, goodness I need this energy to continue on videos too. I've somewhat lost the frequency due to new job & career changes from separation of Active duty Military. A lot of new changes, stressor, anxiety, and a little depression due to being alone a lot even more now. Gotta learn even more about myself & keeping my faith! I love helping others too, just gonna have to pivot & get moving again!.. -John
Ian, I've been watching your videos for the past 5 years. Thank you very much for all the information you put out there!
Your kind words truly mean a lot! Thank you for being here all these years. I am very appreciative!
Another fantastic video, thank you. By the way, MO is one of my top five holdings in my mostly dividend paying portfolio. Looking to retire in the next three to five years in my mid to late fifties. 🙃
Thank you for your very kind words. And, WAY TO GO on retiring in 3-5 years. You are getting very close! (Disc: I'm long MO)
I've recently added I-bonds and T-bill ladders to my portfolio on top of my dividend holdings.
I will definitely give this book a read. Always open to new ways to capture yield.
Awesome video Ian! I too am a $VCLT long term holder! I love this ETF!
Your book review is very good. Thanks
Thank you for your kind words!
37:00 Ian - This really resonated with me when you were talking about having a contingency plan... Tech layoffs have been insane.. It is so great to have a dividend and side hustle contingency plan if the unthinkable happens with your active income. Really enjoyed your video!
Thank you, Jake, for your very kind words. Wishing you HUGE success in 2023. Dividend stocks / passive income investments are so reassuring during uncertain times. Wishing you a great one, my friend!
Great video.
Great analysis of the Income Factory.
Thank You
Thanks for your kind words!
Great video ! I finished Bavaria's book last week, and loved it. We've dedicated our two Roth accounts with a reproduction of his high yield portfolio, and, because most of his recommendations are monthly payers, are starting to see the benefits already. What I like are his funds are distributed across instruments and sectors, giving good diversification.
This is so awesome! Thank you for sharing. Wishing you tremendous success!
Love your philosophy on investing. Amazing videos, worth the hours!
Your interviews are exceptional
Thank you for your very kind words!!!
@@ppcian well deserved Ian! So valuable for someone in my mid twenties, looking to invest in this strange economy. Yield now is for the win!
👊🏾😎👍🏼
Thanks for sharing. I restarted my Income Factory three weeks ago. Buy and hold for reinvestment. Ten year plan. Currently earning 9.9% annually
That is awesome! Thank you for sharing! Gotta love the ten year plan. That is so motivating to hear. Wishing you HUGE success against your retirement goals!
Have you looked into EOG or ARCC, both two dividend stocks I came across with INSANE dividend yields and given our economic conditions could perform very well this year..
ARCC is a BDC.
Thank you for your hard work Ian
I greatly appreciate your kind words!
Nice to see another investors perspective. I agree these type of investments can and should be brought to a portfolio to bring up portfolios overall yield while also catching those increases. Life's all about balance in the end
Thanks for your kind words! Definitely like your point on balance. I've got stocks like UVV, and I've got stocks like SBUX, my largest position. They definitely all balance each other out. (Disc: I'm long UVV and SBUX)
Always a gem with you Ian! Love the videos :)
Thank you for your very kind words!
LOL. Bought Tesla at low and enjoying all the gains today. I am half and half. IRAs are in growth since they are locked away and dividend focused in the taxable accounts for access to income.
Loving this long video while I clean the house
So awesome! Thank you for tuning in! I like tuning into RUclips videos when cleaning the house too.
I went ahead and bought the Steven Bavaria book on Ebay this morning. The logic behind his style is antithetical to what all the great investors like Buffet, Lynch, and Jack Bogle teach. But there's no "correct" way to become wealthy -- as long as it is legal! 😂
Does the author talk alot about reits?
I really like your point about no "correct" way! There are so many ways to reach FIRE, and everyone will find their own path.
@@walnutinvesting689 I haven't received my copy, yet, so you're better off asking Ian.
Just downloaded on Audible. Thanks!
Big ups Ian…thanks of all the information these past years.
Big ups! Thanks for all of your support!!!
You can also look internationally for high dividends, especially in emerging markets. Some companies are tradign cheaply around 10 PE or lower, and they are paying ( depending on the earnings for example 85% of their earnings, so once can be higher, once lower), but with that parameters current yield is sometimes huge straight away.
Thanks for sharing! Wishing you a great one!
Seems like Canadian stocks are a good way to get high yields, but with good degree of safety -- a lot of people buy their banking stocks and midstream pipe companies. I own Enbridge, myself.
Great read. Thanks for the awesome video. It is interesting to hear your take on it. You nailed it. Risk tolerance is key in these kinds of investments. I never could have started my journey with these types of investments but as I have developed the mindset of abundance and got the snowball rolling, it's easier to explore some of these other options. I love these options as a tool for sector rotation. Going short the market doesn't suit me but these high yield options move in different cycles to the market and provide opportunity when my universe of stocks isn't on sale. Thanks again for the great content. Keep it up!
“Income factory” is a great analogy. But I prefer Ian’s comparison of investing to being CEO of your own business. Thank you Ian for another great video, I look forward to reading the book. I am a very appreciative of Greg’s insight and inspiration as well.
I have a split approach half growth half high yield eg, best of both worlds.
I agree that bonds are getting more attractive. Until recently, I had zero bonds but now have some though I stick to only those maturing in around 6 months or so. Although I think one can make money from longer duration bonds if interest rates fall, I stay away due to inflation concerns (negative real yields).
Thank you for sharing, Philip! Always appreciate your comments and support!
Bst eos cii are a couple cefs I hold that do well with capital appreciation. Yields might not be as high as some the author talks about, but I will be using these for income in a couple years. Also have jepi jepq and the yld funds. My portfolio is def an income producer, but still gains in appreciation over time.
Thank you for sharing!
I just ordered Income Factory
Right on! It's a great read! Please report back what you think.
@@ppcian I love your page your break down is what pushed me into this more I wanted to read this book I walked to barnes and noble and it was not avail so amazon to the rescue. I don't have tons of money to invest but I have slowly built myself to 5 figures and now really want to snow ball my divs, I have some etfs for growth but I think people in my shoes should income invest so they see the money flow and stay with it
Amazing video dear Ian. Thankyou once again for sharing great knowledge as always
Truly grateful for your valuable time and sincere efforts for all of us passive income community. God bless you always 🙏
You are one cool guy…Much Respect
Very much appreciate your kind words. Thank you!
one for the road here....
Appreciate your longtime support, my friend!
Thank you for such an informative, interesting and well-balanced discussion of this issue. You make some very good videos!
My two cents for whatever it is worth.
1. I think this depends on what your interests are. If you are younger and can delay gratification, growth is your friend. But, if your older or you just need income now because you have decided on some kind of early retirement (Often at a relatively low income point), these type of high yielding investments are very enticing.
2. But, my objective is to have multi-generational wealth (I want my children to inherit my portfolio) and I have come to the opinion that dividend ETFs are the way to go because I may have some idea what is a good investment now but I can't predict the future. As you said, I will never sell these equities. So, while I love McDonald's today; their might be a better choice fifty years from now. Now, I could try to sell my McD's and buy something new but I might not time it well, and if McD's is fading and some other stock is rising, it may be real hard to pull it off. But, if you have an ETF that is always redistributing for the top 100 dividend stocks or whatever their goal is, then it is all done for you, for me today, and for my kids tomorrow, and my grandchildren after that...all the way down the line as long as we have ETFs and a stock market.
3. So, I put these type of ETFs at my core, and I still try to buy a few stocks I really like, and have kept some stupid buys hoping they turn around, and even some income producing investments such as discussed here because I can't only think about the future, I have some now interest as well. But because of my goals, I have turned to dividend ETFs. Now, why dividend ETFs, instead of growth ETFs? That is also something people can consider. I choose dividend ETFs because I need to balance income in retirement with my desire to have something for my children to inherit and some of these dividend ETFs don't fare all that bad in terns of growth. I also have bought some growth stocks as well.
I do think in today's current bear market, dividend stocks and income producing investments like discussed here have done well because even if prices decline, you still have income coming in. You do have risks of the economy going belly up and these investments going bankrupt but I think you would have similar (not the same) risks with equities though I do understand that dividend aristocrats that people buy and hold forever your JNJ, PG, KO, Pep etc...don't usually go down in value the way other stocks do. And if you held for a long time and you have a nice income stream coming in, that is definitely something positive to consider. But, it takes a long time to get there, and you may have to weather some storms in between, and these income producing investments get you there faster, though with greater tax liability. But, that tax liability is not that high if you don't have outside income or little outside income. It could even be zero or near zero you are trying to live on a modest means.
Thank you for your incredible thoughtful and detailed comment. I very much enjoyed reading it and I can completely understand your points! Wishing you a great one!
I’m about to turn 35 but want to retire early, would this be a good strategy for me?
Yes as long as you continue investing piece of your income to increase holdings and compound income. The longer time period and more you buy, the higher yield.
Yes it's basically the only sure strategy for early retirement. And you know exactly what you need to do : Just get enough passive income to meet your monthly expenses. Most, hoping to retire early, try to get rich quick on high flying stocks and lose everything because no one teaches them about "income factory" investing. This topic is ignored by the media for a reason : wall street can't profit off it
I am a retiree with low monthly income, thus I am forced to be in the income factory camp. ha ha
A sinking share price is actually a benefit in the Income Factory method because you get to buy and drip more shares each and every month.
Losses are good. Lol, sure. Hey, if you want to give me $1 & you're good with getting $0.80 back lmk.
@@Coda1850 Total return matters not just stock growth in income investing. Many of these investments do better in a bear market. Also remember where dividends come from, they come out of the share price they don't just appear out of thin air.
I like individual corporate bonds and treasuries. That way I control the sale. I can hold to maturity and not be subject to the bond ETFs value collapsing. Plus, because the market collapsed last year, there is a very good chance when the bond market comes back and yields go down, I will be able to trade out of my bonds for a huge capital gain…decision point, do I hold till maturity and enjoy the cash flow, or if for example the capital gain is equal to 4-6 yrs income, do I take that gain and pivot back to dividends.
I should add that some of my corporate bonds are on the top of the “junk”, bond Spectrum…BB, etc. But I am getting 8-9% yield. Eg, I bought Goodyear tire bonds at a big discount, and could already lock in an 8% gain if I chose to sell now. But like I said above, I would want to see at least the gain be equivalent to 4-6 yrs worth of income before I traded the cash flow for a capital gain.
Fabulous insights. Thanks for sharing. For my longer-term Treasuries, I'm buying individual Notes/Bonds for this very reason - having the ability to hold to maturity. I'm taking a hybrid strategy with some of the other bonds, however, for the instant diversification and ease-of-management. Do completely understand what you are doing, however, and it makes complete sense! Neat on the Goodyear Tire bonds!
Thank you!
I’ve been an “Income Factory” investor for some years, especially after studying this investment philosophy and learning that the z overall stock market return has historically averaged 8 percent; so why not find solid (especially monthly) investment grade funds of several different types, to have cash flow for living expenses or reinvestment. Even with occasional dividend cuts, the total returns are superior to cds. etc. This investment style is certainly also correlated to age status of course.
Ian can u make a video on your current holding and your thoughts again on investing in taxable portfolio and Roth IRA or 401k before taxes through company just your thoughts and why u do what u do in that realm of portfolio use thank u
Thank you Ian.
Thanks for your longtime support!!!
Ian, the new interest investor... 😁👍
.
Thank you so much for subscribing!!! 🙏
I think that'd high yield helps lessen the risk. Because your exit strategy is faster. Reducing your overall risk. Waiting 10 years for the same result is equally risky.
Great point, one the author brought up in the book! Wishing you a great one!
Covered call funds that do at the money calls like XYLD are not going to appreciate in value over time. You were right to sell given your stance on that.
Thanks for sharing! Thanks for your longtime support, too!
I read this book and I get the math.
However, many of the funds suggested in the Income Factory portfolio have lost a lot of value over time. Couple this with very high management fees and the increase in yield becomes negligible. (This doesn't even take taxes into count).
Am I missing something?
If you have years of investing ahead of you, I have found buying and holding great quality companies that grow their dividends is the best way to create the snowball of income that we are all hoping to enjoy. Current portfolio - 43 dividend stocks - (no Bonds, no Mutual Funds, no ETFs, no CEFs, no senior debt). Holding period...the rest of my life! Thanks for the review.
Sam, always appreciate your comments and insights. Thank you so much for sharing, my friend. Wishing you a great one!
Have you altered your core 4 since this video? They have not held up well in the last year.
My core stocks remain SBUX, JNJ, PEP, and MCD. From a business fundamentals standpoint, they have held up quite well. The businesses seem to be growing/thriving. Share prices are down, but I look at it as a blessing. Since I only invest for income, I have an opportunity to add more / reinvest at better prices. I do not care about capital appreciation, but I’m only speaking to my unique, personal situation. Wishing you a great one! (Disc: I’m long SBUX, JNJ, PEP, and MCD)
Better than xyld is Jepi, jepq, and Divo. These are my favorite covered call ETFs. They do appreciate in price with the market, but not as fast as say the spy.
Thank you for sharing!
Did we ever discuss MMM
If I was in my 60s, maybe I would accept eroding principal because I likely only have 15-20yrs of life remaining. Any younger and erosion of principal seems dangerous.
That’s a really interesting point I hadn’t thought of before that’s always been my biggest fear
As long as the income keeps coming in at a steady predictable rate and you never sell for a loss, does the underlying asset price really matter? I don't hold anything he was talking about that has lost price at that rate, but I do hold the 3 yld funds. They make up 21% of my portfolio. Their payouts do fluctuate a little but every month they keep rolling in getting me closer to FIRE.
Thank you for sharing. That is a good point! Very much an "annuity" mindset.
@@kingconstructo I have held stocks like NS which had a high yield, but the stock would go down making the yield look even bigger, then they would cut the dividend to bring yield back to say 9%…then the price/earnings come down and the would cut the dividend again. So essentially the current yield is 9% if you buy at the current price, but at the original higher price the yield on cost is more like 4%. So in that case, it was a yield trap. Not sure if the YLDs payout will follow the price down like NS did. Or if buying in now will set you up for some capital appreciation since the price is down so far from 2022.
I'm 70% in JEPI and JEPQ...love the monthly cash flow!
What you think VFC?
Great mutual funds Ian !
Thanks, Michael, for your longtime support! Always appreciate your comments!
great vid
I really appreciate it. Thank you so much!
Vanguard has some money market funds which maintain a stable value of $1.00 per share. Vanguard Cash Reserves Federal Money market yields 4.28%. Vanguard Treasury money market 4.15%. Vanguard Municipal money market fund 2.47%
Thanks for sharing, Michael! Fabulous yield in that money market! Wishing you an amazing 2023!
Thank you Ian ! May you and your family have a healthy, happy, peaceful and prosperous 2023 ! I hope you will find time to exercise like you want to exercise including swimming lots of laps and running ! Maybe your son and daughter might attend a YMCA summer camp ! Hope you are becoming comfortable with and enjoying Boise and your new home ! God bless !
Why not use TLTW - covered call options on the fixed income .. you get safety and high yield
Do you like SBR?
I am retiring later this year, so I mostly own bonds and preferred stocks for the income, but I kick it up a notch with some high yielders, they are about 10% of my portfolio. The ones I own now are OXLC - (15% yield,) WDI (10% yield), MCN (9% yield )and GGN( 9.35% yield). Don't overlook preferred stocks, I have some from really solid companies that yield 7% to 9%. I do not buy bond funds, they are NOT bonds, they are funds, huge differences. A bond fund can be down 20% or more and stay there for years, an individual bond when held to maturity will pay back 100% of the issue price.
Fabulous insights! Thank you so much for sharing! And, huge congrats on your upcoming retirement!!!
So do you mean TLT investors may never recoup their losses on their investment?
Thug investing continues in 2023
Thank you for your longtime support, my friend! Thug Life Investing can never stop! Hope you have an amazing 2023!
100% SCHD until you’re close enough to retirement to build a position in JEPI small enough to keep the distribution under the standard deduction amount.
$25K of JEPI and $75K of SCHD income would produce $100K of tax-free income on day 1 retirement. Slowly sell off JEPI and buy more SCHD as the income naturally grows and social security eventually kicks in to reduce taxes paid during SS years.
Combine this approach with a paid-for house and you’re living like a king without the government shaking you down and stealing a larger portion of your wealth.
Awesome comment! Thank you for sharing!
One thing I don't understand about bond ETFs. If the goal of a bond is to preserve the principal, why not just buy the actual bond and not an ETF of bonds?
As you mentioned at the beginning of the video, the price of that bond ETF plummeted... so, there is a real risk to lose the principal invested.
Why not just stocks or stocks ETFs?
My largest bond position is in Treasuries. I buy those directly, so I can hold to maturity and avoid risk of principal loss. Regarding the corporates (and overall bond market), what has happened is very rare (according to recent history). While I could buy corporates directly, I decided to diversify my risk since there is some credit risk there (vs. next to none with government). I am taking calculated risk that most of the rate increases are priced in, and that the Fed will eventually pivot. Of course, my thesis could be wrong. On a go-forward basis, I am expecting consistent income + some possible capital appreciation as the bond market recovers. Again, I could be wrong. I do not expect further drops of the magnitude we have experienced, that is for sure. Gets complex in my decisioning, but ultimately I valued the diversification over holding a smaller subset of bonds to maturity. Wishing you a great one. (Disc: I'm long Treasuries and VCLT)
@@ppcian Thanks for the sharing your thoughts and for taking the time to give such detailed reply. I really appreciate it.
@@ppcian The fall in bond prices is mathematically predictable. We were in a 40 year bond bull with the general trend of falling interest rates since 1982. Interest rates were artificially low (suppressed by central banks around the world) and finally allowed to rise. Rates are still lower than the historical average over decades and centuries. The big question for the future is the direction of interest rates. Falling rates, good to own bonds. Stable rates, the yield is what you get. If interest rates rise then bond prices will fall - it's just math. My personal belief is that I expect a general trend of rising rates for a decade or more. I hope I'm wrong, but my dividend stock portfolio should be fine either way.
VCLT, MUB, SCHO have had negative returns since 2010 Portfolio 1 $10,000 $9,790 -0.16% equal weighted with dividends reinvested. Since 2020 Portfolio 1 $10,000 $8,896 -2.77%
Portfolio 1 $10,000 $8,101 -7.59% Since inception of WDI in 2021 dividends reinvested, OXLC - (15% yield,) WDI (10% yield), MCN (9% yield )and GGN( 9.35% yield) Total returns count, dividend yield not all its cracked up to be.
How much have you made in dividends since inception? Are you reinvesting the dividends?
If you don't have more than a million dollars in a taxable account, then any tax benefit from municipal bonds is minimal because your effective tax rate would be very low. Because taxable bonds are taxed at ordinary income tax rates, this gives dividend stocks an advantage because they are taxed at long term capital gains rates. It is possible to have a portfolio of only dividend paying stocks (not any funds with an option layer) and pay 0% in income tax.
How about in a roth
@@baitcaster7260 Yes, an option but I was mainly responding to Ian's investments in a taxable account. For me, I prefer to defer taxes than pay them now. I believe Roth's are overhyped and the benefits of traditional deferred tax retirement accounts are miss understood. People fail to understand two things: (1) when you pay less taxes, you have more to invest and compound to retirement and (2) you are most likely to spend less in retirement, thus your withdrawals needed will most likely be the required minimum distribution (RMD), which would be taxed at a lower effective tax rate than if you did a Roth during your professional working life.
Those are some Great Points You Bring Up.
I like the core stocks you are talking in you videos. But while you are talking a lot about risks you seem to be ignoring the single stock risk as you are concentrating a big part of your money on just four core stocks. Wouldn't it be better to invest your money in 30, 50 or 100 (or even 200) more or less equally weighed positions from a risk point of view?
Ian you check MDT they've been raising their dividend 20 years straight
Look forward to taking a look! Wishing you a great one!
BKLN is a good senior loan fund.
Thank you for sharing! Added to my watchlist!
PPCIAN YEAR 2073 🎉 FOR THE WIN !😅
Thanks for your very kind words! Wishing you a great weekend!
If you look at history you’ll see the Fed pivots too late, every time!!!
I’ve been through this twice now, the old rule of buying at deep discount never goes out of style. Right now much of the “golden standard” dividend stocks are still over priced. Holding cash for a few months is also a strategy, just keep this in mind. Every time you see the market rally the Fed doesn’t like that. The Fed pivots AFTER poor employment numbers went too far. History is a guide here.
I’m just saying, lots of hedge funds are hoarding cash for a reason. Don’t forget to grow some cash for a couple months. It can put you years ahead as far as yields go. 👍
I recently bought $10k in Amazon stock at $88 and besides that my cash pile is growing. I haven’t been buying anything. High yield comes from different strategies not just buying a high yield. A great value gets that high yield and also grows that high yield at very low risk. That book doesn’t mention that.
2nd quarter 2023 will tell everyone how these rate hikes have effected great companies. Peace. 🙏
Absolutely FABULOUS comment. I agree completely on having the discipline to stockpile cash. (Although, in practice I do not always have that discipline, as I'm almost always buying.) And, I agree completely that having "high yield" can come from buying great assets at a discount. Wishing you a great one!
Your approach relies on timing market which almost no one can do successfully long term. The income factory approach is set it abs forget it. No need to be a wizard who buys AMZN at the very bottom and sells at the very top. Congrats if you can do that but I can't do it and don't know anyone who can
Interest rates going up will cause income ETFs to lose value.
8-10 percent isn't massive. Good Etfs returned 30-40% last year. Inflation is higher. Keep that in mind. You can also live off capital gains.
And I have a 20% rule 😅
I read this book as well. All of the approaches in his book have badly underperformed the market and with higher volatility. There’s really no evidence to support this type of income strategy.
100% SCHD would have produced higher returns with less volatility and lower tax drag. Even a managed fund like DIVO would be a better idea if you’re reaching for higher yield but want to have a shot at capturing the majority of market returns.
Keep it simple and stick with high quality, proven index funds like SCHD, VOO, etc. and follow the 4-5% rule. The “income factory” approach as presented in this book is really a “wealth loss” factory compared to the available broad market index alternatives.
At a 6% premium for a CEF? The secret is already out and smart money has already been in for a while. Sure, rates will eventually fall, but it seems like everyone is pricing in end-of-year pivot.
The US government loves your yearly donations with this fund allocation
Yes, indeed! Please keep in mind that the bonds are a subset of what I do. The vast majority of my strategy is focused around dividend stocks that pay qualified dividends. That said, fixed income plays a growing role for me, and one drawback is the tax implications.
@@ppcian if your tax rate is high enough consider vteb
Interest rate hikes are not over. Not a good time to put money in long term bonds.
When a total return of an income focused investment is lower, pretending it's ok doesn't change the fact one has made a bad decision. Total return is king.
Tobacco ? Not very ethical !
SCHD and chill ✅… Income Factory yield farming ❌
Check out JEPI and JEPQ, they range from 7-15%. Also this offer some growth, not much but at least no erosion of capital
Thank you for sharing!
Vanguard Long-Term Corporate VCLT ETF $10,000 $10,134 0.09% since inception dividends reinvested
“My humble opinion” drinking game. I can’t keep up. Going to pass out from too many shots of crown royal.!!!!!
Hahahha
LOL wishing you a great one!
I just looked at all these etfs. They are all down alot in the past 5years to max time they were open.. The div yield is high but the overall stock etf price is down. Your losing money holding onto these etfs. There are better etfs that have high div and etf stock price are going up. I do not recommend you follow this guys advice.
SCHO does not yield 4.33%.
the 30 day SEC numbers are often wrong or misleading.
Even if we took the last dividend, $0.1165 for the month and multiplied that by 12 months we would have an annual income stream of $1.398.
$1.398 / $48.49 (price shown on your graphic @5:35) gives us a yield of 2.88%.
You should avoid SEC 30 day yields as a view might see that and think that 4.33% would be a great adder for their portfolio but then find out the yield is significantly less, like 33% lower.
The issue is the same with VCLT and MUB as well. Those yields are highly over stated.
@12:15
Those funds have NOT held on to their value over time especially if you account for inflation.
Make sure that when you scroll to the graph you check the box 'Inflation Adjusted'.
www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=false&showYield=true&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VCLT&allocation1_1=100&symbol2=MUB&allocation2_2=100&symbol3=SCHO&allocation3_3=100
Over time their income has also been going down and the loss of income shown in the chart is even worse when you consider inflation.
It feels like you are seeking things out for comfort and not actually looking at the selections you made. So many equities are better than those even with volatility or periods of time with depreciated pricing as you can get a rising stream of income that beats inflation while you wait for prices to recover. Plus, even after taxes, selecting stocks that yield more than those funds you spoke to is really easy...assuming you actually look at the SEC yield and then simply run the numbers for the past year even picking the most recent highest dividend payments (excluding any capital gains payments or extra december dividend).
You said your risk tolerance is low but at the same time you bought into three funds that have done nothing but lose value over the last 12 years along with falling income streams even before accounting for inflation.
Thanks for your comment! Please keep in mind that the vast majority of what I do involves investing in dividend-paying stocks. Those stocks have done exceptionally well, but many at this time are a bit expensive and I think it could take some time for fundamentals to catch up with valuations. That said, I keep buying anyways because that's what I do. Over the last year, largely because I had a lump sum of money come my way (home sale) AND because fixed income market has presented some great opportunities, I have diversified into high-quality bonds (with Treasuries leading the pack). I did so for a few reasons. 1) Risk Tolerance: I do not want to put all my money at risk, but also want some sort of return. A lot of this money is considered "intermediate-term" cash savings/emergency money, so I don't risk dipping into my dividend stocks should cash be needed. 2) Time Diversification: I do not feel comfortable deploying too much into equities all at the same time. With some of my Treasury Notes, for example, I may choose to deploy the proceeds into my dividend stocks upon maturity. 3) Immediate income: While not crazy huge, I feel comfortable using my bond interest to pay bills (I already am). 4) The fixed income market is presenting an interesting opportunity. While the funds I own such as VCLT, MUB, and SCHO don't look good over the last 10 years, I'm not buying for the last 10 years, I'm buying for NOW. 5) I am MUCH more concerned with preservation of capital and modest income for this part of the portfolio vs. beating inflation. I do realize, my personal situation is VERY different than many others, so that needs to be taken into account. Thanks for sharing on the 30 Day SEC Yield. In 1 year, I'll report back how much interest I actually received and then I can compare vs. my forecast. Wishing you a great one! (Disc: I'm long Treasuries, VCLT, MUB, and SCHO)
@@ppcian
Thanks for clarifying.
I would look into things like floating rate notes over those funds.
If your brokerage firm or CFP (if you use one) has access to things like bank notes that is another option that are a better option.
Best of luck and God speed!
@@mjs28s Thank you for sharing! Very much appreciate! Wishing you all the greatest too!
SCHD and chill ✅… Income Factory yield farming ❌