Income Investing: Here's How Any Regular Investor Can Do It | Steven Bavaria
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- Опубликовано: 21 фев 2024
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One of the most frequent requests from Thoughtful Money viewers is for a discussion focused on investing for income. Well, that's what we're delivering here.
Steven Bavaria, author of the book 'The Income Factory: An Investor’s Guide to Consistent Lifetime Returns' joins us to share his framework for constructing a lower-risk portfolio of income-generating assets that include: high dividend stocks, senior bonds, high yield bonds, covered call funds, Master Limited Partnerships, closed-end funds, and more.
Follow Steven at seekingalpha.com/author/steve...
Or get his book here: www.amazon.com/Income-Factory...
#incomeinvesting #dividendstocks #fixedincome
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I want to thank you and your guests. I learn less and less with each episode. Please read on! That is high praise I promise!
My financial education has improved so much since I started this journey early in 2020. Many previously vital sources of knowledge I no longer need to refer to - they taught me what I needed. There is always more to learn - but it is less and less and fewer and further between. Adam, a big part of that has been your work and your guests' contributions. Thank you for aggregating all this knowledge, asking the questions we want to ask (even when we have not thought of them yet!).
I like how Steven is not afraid to call out actual tickers that fit his investing framework. That's what I call actionable.
And I like selecting according to my Values. Also, I put a little NonETF bitcoin in a cold wallet. Bitcoin grows as the dollar dies.
That's because compliance doesn't allow people to say tickers for a lot of commentators that have jobs in the industry.
Well said adam. There's only two things that really matter in life and that's whether you're sick or whether you're well because if your sick nothing else matters.
No kidding, that felt so foreign because everyone talks in abstract. Super awesome.
I became interested in closed end funds in 2016 and fully adopted this approach in 2017. At the time of my retirement in December 2019, I had refined my approach to selecting funds and allocating investments across 30 to 35 funds. In the past 2 years I have added BDCs. CAGR is 10.25% in the four years. During this period, I road out the dips in March 2020, October 2022 and most recently the drawdown in October 2023. The annual dividend returns have been in the range of 8% to 9% for this four year period. I'll never go back to investing for appreciation in price and will remain focused on income and compounding returns. Yes, I sleep well at night.
Imo, this has been one of the best Wealthion/Thoughtful Money episodes ever. The more theoretical episodes (which is most of them) are really good, but it's hard to beat this one for being actionable. Building an "income factory" has been the backbone of my investment strategy, but I didn't know it was known by that term. This discussion has given me some ways to further refine this strategy and given me some specific promising securities to look into that I didn't already own. Thanks so much!
Agreed, not so high level that one doesn’t know how to apply it.
I found this to be one of the worst interviews.
Investing in CEFs is a bad idea - that is based on empirical historical performance. If you think I am unduly maligning the “Income Factory” proposition of creating one’s own pension, gather up the tickers of your favorite CEFs, BDCs, MLPs, etc. Then go to portfolio visualizer and punch in those tickers. Recommend using AGG, VWINX and FRIFX as benchmark comparisons. -- And oh, since Bavaria is advocating using these income products as “pensions”, make sure to select “no” on the “Dividend Reinvest” choice… After all, the point of a “pension” is to have spending money.
In virtually all cases that I see the “Income factory” type securities have inferior CAGRs to more conventional income-focused OEFs (VWINX, FRIFX) and even AGG. The lower returns might be tolerable IF they behaved with less volatility. But no, the “Income Factory” type investments are typically 50%-100% more volatile (analyzing standard deviation & drawdowns) than the conventional OEFs. Generally, you would have done better NOT buying these Income Factory type securities, and instead just buy VWINX.
The numbers are what they are.
OTOH trading CEFs might make sense (for a small part of one’s portfolio). By that, I mean buying “falling knives” when pessimism is severe. That condition does not exist in Feb 2024. Then selling the CEFs if they (hopefully) recover in price.
Listen carefully to what Bavaria says - and do the OPPOSITE!
I initially adopted this strategy after 2009 for a portion of my retirement portfolio to offset zero interest rates. I mostly use closed-end funds. It’s a long term process. Own a variety of fund types as they will have different discount / premium cycles and dynamics. Make sure to buy extra shares on broad market dips (see March 2020). That discount is a gift that keeps giving. I occasionally sell some of a fund when it reaches a large premium to NAV and buy more of a fund trading at a discount. In the aggregate, I make decent capital gains in addition to the generous dividends. For me it’s been a fun long-term investment project.
Diversify a little into NonETF bitcoin? $100 and compare in 2 months. Learn to #coldWallet and #OrangePill . #hodl currency that appreciates in Value.
I've done the same with CEF's after 09 too.
Are there any tax implications that cause headaches at tax time? I've heard some of these funds issue ROC which requires you to adjust your tax basis? Doesn't it start to get hard to figure out especially if you are trading shares based on NAV?
@Chris-dw6cu I'm researching a tax professional and getting started Now for next year. Bith of my exchanges offer tax strategies. See if yours does?
I would love to have him back SPECIFICALLY to speak about his thoughts around fund expenses/fees and taxes, which would be my biggest areas of concern to address for this type of strategy.
I just stopped your program and went to Amazon and bought the book and the audio book as well. Been listening to your podcast for a very short time, and I love it. This program may just be what I have been looking for. I was the person who was making. 05% on my money in a savings account. To conservative. I like boring like 7% on my money. Thank you for this discussion. I am almost 70 years old. But not to old to learn. Thank you my friend. Be Blessed 🙌
Good video. Would be great to have him on again and do an actual income factory for different levels of capital accumulation, or by age. That would be awesome.
This is exactly the strategy that got me hooked on investing. Very insightful to have someone so knowledgeable to articulate it
YES....have Steven back in the future! Great! Thanks
LOVED the horse race analogy - credit = just need to finish. Equity = need to place. That was a helpful way to think about it.
Best interview ever as I just retired and adopted a similar strategy a few years ago.. The thing you need to do is just readjust your thinking and as the man says as long as they keep paying the dividend that was the plan all along and even when the positions drop the money keeps rolling in and you are accomplishing what you want and your investments will eventually come around if they don't actually go out of business.. Getting more info to us that are retiring is great... Thanks a lot.. ..
Steven was awesome. Please have him back.
Absolutely great interview with Steven Barvaria! What a clear, concise, and very helpful articulation of a topic that I don't hear enough about as a pre-retiree with 4 years to go. Please have him back on the show, and thank you for everything you do to educate investors!
Good job Adam and Steven! I just felt my paradigm shift. It would be good to have Steven back some time in the future.
This is my style. During the 2022 downturn my portfolio went down on paper. However I was constantly receiving a 10% income stream. My balance has now recovered and still receiving the income.
Well done
Been watching Wealthion/TM for almost a year now. This is in my top 3 favorite episodes. Excellent all around to the very end.
Refreshing to see an optimistic topic that’s not all doom and gloom. An investment approach I would never have considered. Great interview as usual Adam
Closed end funds and REITs have been the backbone of my portfolio. We are all investing in the markets for income one day. Create your own pension with growth. It is a winning strategy even though you have to consider taxes on dividends especially if you are still working a job. Thanks to buying more and more shares like a nutcase during the COVID crash an the interest rate shock to the markets, I am able to enjoy life today.
Do these funds cause any headaches at tax time? I've heard some of these funds issue ROC which requires you to constantly adjust your cost basis? Sounds like it could be a big headteache?
Love Adam’s work and guests
More of these kind of videos please Adam! Long term subscriber...
Really good stuff for retirees who have build up a portfolio thru growth, and now want to convert to income.
One of your best interviews ..this gentleman is not selling anything other than his knowledge to help other people ,very refreshing, but no surprise considering your new platform.
Thank you!
Just finished the book - 5 stars - awesome strategy.
Thanks for a great show…I fell into a similar strategy when I transitioned to retirement a few years ago and as I developed my own approach I found Steve Bavaria one of very few people discussing this philosophy. I’m very happy with the results of this approach for myself. Most investment commentators don’t give high-income focused approaches much credence but I’ve considered the many criticisms I’ve heard of this approach and based on my experiences it actually works fine and much less stress than growth oriented investing. I compare my high income portfolio to a traditional 60/40 and find its performance over time providing higher total return and lower risk (as standard deviation) than a standard 60/40.
Awesome guest. Love this guy.
Great topic. I enjoyed these topics like SS , Medicare, treasury direct, end of life planning.
This was a FANTASTIC interview! Thanks to both Adam & Steven. I've been investing in exactly this same manner with great success and enjoyment. I'm now a subscriber to this channel.
EXCELLENT interview Adam! Thanks!
Love him and his wonderful book changed my investing life.
Adam you are doing a great job with the new channel. This show is a must see for me.
I love this alternative strategy. It is very refreshing to think in terms of steady income as opposed to finding the next momentum trade. Capital appreciation depends on the market recognizing undervalued stocks and for a decade or more now with automated index investing, all the benefits accrue to the top 7 or so stocks. I was a little disappointed that this interview did not address income factory strategies to minimize income taxes which are higher for dividends than capital gains and to hedge against inflation the specter of which is rising due to the increasing need for Fed liquidity as was discussed in another recent episode. Thank you for the great research you bring to light. Thoughful Money is quite the boon to retail investors.
This is my preferred style of investing. Ever since stock dividends went to around 1.5% I have purchased income securities. REITs, MLPs, and high div stocks have done well. They give you enough income to take retirement withdrawals and still re-invest some income.
This is a video that you want to bookmark to review again. Very actionable and educational.
Download it!
Adam just keeps giving. HI FROM THE UK
I am a passive investor by nature, and this makes complete sense to me and I’m only 20 minutes into the video. Honestly wish I’d known this a long time ago. Better late than never but geez…
I am a big fan of covered called etf’s with 10% dividends.
This interview towers over your last one. Thanks
Very much enjoyed this guest and the subject matter. Took notes and learned alot!
Took notes.
Thank you Adam.
This was a great guest. I’ll be listening to it again.
Rob, there is another RUclipsr who focuses on High Yield investments - very thorough review of each type and specific instruments to consider - gives pros/cons of each, who might benefit, who might not, and how it might perform in various market/interest environments. He does not believe in leverage. Armchair Income is the channel. Would be a great guest!
Thank you very much...
Thank you. Fantastic information. 😊
Excellent.
Great interview, Adam. Thank you!
Thank you Adam for providing some guests that are focussed on solutions to the income challenge!
Read his book 6 months ago and loved it. A combo of Bdc’, Reits, and a few select Cefs and you can average 8-9% dividends and just drip them and watch portfolio grow. Thanks for the inspiring video.
Adam and Steven, well done. I’ll watch this one again. Thank you for your information. All the best!
Love ❤ this! Mr Bavaria was a key inspiration to my investment philosophy, and early retirement. 😊👍🏼
Good job Adam !!!
Thank you
Excellent info! Thank you, Adam!
I have been doing this for a little while now and its helping me recover for a few bad positions at the start of the dip. I plan to do more but with the income stream currently I can see this is a decent strategy. But I will look for the book. Might be an interesting read. These are good guests. We are all this together. Thanks for the ticker symbols so we can research a little. This is always nice since there are billions of funds now and hard to narrow the focus.
Thanks for this interview. Very informative.
Adam, I loved this talk with Steven Bavaria! Thank you to both of you!
I think this has to be my favorite episode so far! This is my third time listening as I type this comment, there are so many actionable points in this discussion.
Adam I subscribe to your channel and listen every week. This is the best ever. I like how he talks about real numbers. I can research this more with a professional fund manager. Thank you so much
Such a great episode!
Literally just found his book today! Thanks for the great content!
There was so much great information in here, it feels like a lot to process. I think my questions now are:
1. How to get started
2. Allocation (including balancing risk/return)
This is one of the best interviews you have done, just because it feels like something I could get started researching right now. Thanks!
Exactly this. Should one dollar cost average into each fund/etf? Wait and buy when a fund/etf share price is low compared to its 5-year average? Buy on a large market correction (see charts of his suggested funds for March 2020). Maybe it doesn't matter - just buy at any price and hold (and don't ever look again at the share price)? Get Steven back for more!
@@ronpatton8427buy one share of everything you’re interested in and then start watching… try to build each position up to an arbitrary monthly income threshold, think $50 to $100 monthly
I’m Canadian - and I’ve utilized your method for a few years now - my tools consist of high yield bank stocks plus - high yield ETF (cover calls) positioned in financials and utilities - in Canada 🇨🇦 - and compounding my monthly income - north of 10% yield… thank you Stephen for your very sound advice 😅
what a great guy! Just bought his book
Excellent info for a new retiree. Thank you.
Excellent discussion
great show ! loved to get suggestions (safer ones) like this ,
I appreciated this interview of Bavaria. Lots of ideas to consider. Especially relevant in this uncertain economic environment.
An intelligent,sober and wise/sensible method of investment which is unique
Adam, this is your best interview ever! Good actionable information!
Thank you so much for this interview Adam. This is exactly the strategy I've been trying to execute but did not know the framework of or how to define it or build it till this interview. Great help and appreciate it very much!
Sorry my punctuation was terrible.
Thank you Steven
Thank you so much for sharing this video. It's a wealth of knowledge. I am sharing it with my family. Blessings
My favorite episode so far
Terrific thought process and results. Thank you!
Wow! Excellent, Eye-opening interview! I took copious notes and ordered the Income Factory today!
Me too! Also purchased the audio book.
I loved this interview! I have always had an inkling that investing in debt was a good strategy but I never knew how to do it. I'm already retired and I like this idea!
Great video. Thank you!!
Thoughtful Health is a great idea Adam . Health and wealth really are people’s highest priorities!
Love this. Thanks Adam!
Great interview
Good interview. Agree with almost all, for a investor of a certain age.
Adam, I learned a ton from your Sachs Realty interview. You are a very knowledgeable guy. Thanks PS you should share your thoughts on any subject more often.
This is a great video. I will be watching it again to catch the details I missed.
this episode really was thoughtful money..thank you ever so much ( not to disparage any other episode☺)
Best of the Best here. I actually took 3 pages of notes from this podcast.
I listened on the drive and don’t remember any of the ticker symbols. If u wrote some, could u share? Thnx.
Great video! I wish someone would do serious academic research on safe withdrawal rates with this style of investing. I’m sure it would blow the 4% rule out of the water.
Economic investigator Frank G Melbourne Australia is still following this informative content 😊
WOW ! Adam great interview so much useful windows on investing Cheers Frank talk about Nailing It ! as a 70 year old and still working I ❤ the content !
Excellent interview, thank you!
Wow, I was impressed by Steven, then got his book. Highly recommend. This is what I needed and I will follow his advice. Thank you Adam, you have helped me with this video and past ones. Great content. Goal 10 % income collection from my portfolio 😊
Very good interview! Bring it back for sure !
This guy is good! Thanks Adam and Steven.
Thanks!
Thank you very much!!
Great video
Great video! Im still learning about all the investing options out there, and this just gave me some homework to do. Thanks for the excellent content.
Nice!
This generally how I invest. My favorite is UTG. But I think it wise to hold individual treasures a a base to build on.
I dug this enuff to buy his book.
Wonderful interview. I appreciated hearing him describe his "growth through investing in fixed income assets" approach. What wasn't discussed is the extreme level of volatility that many of the assets classes described in his approach represent.
Yes, volatility and fund fees.... Very expensive products mentioned. Very interesting investments but certainly not for everyone.
And long term bond volatility! Many learned that hard lesson only recently.
The volatility doesn't matter so much if you stick to the approach abs reinvest divs. I think you are referring to the recent market crash - but keep in mind in this environment basically everything crashed including long term treasuries precious metals etc. The only safe things to hold have been mega cap indexes because that's what the fed is propping up despite the fact those companies are in huge bubbles
@@Chris-dw6cu Yeah, you make good points. I'm going to rethink the strategy, I had written it off. Thank you for the reply
Yaaaaaaq boy. I gotta watch this twice.
Great episode. Interesting, intriguing, and actionable. Liked it a lot and shared with my son. Keep up the great work!
Great interview Adam 👍 love income investing!