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Post by steadyeddy on Jun 29, 2023 20:28:08 GMT
Chuck, Please accept my sincere apology. Despite who created this thread, I'm used to the first post in a thread being the topic. The first two posts in the thread appeared to be about your last M* posted portfolio, including MRRL and SDYL. Again, I'm new here, and I once again apologize for any misunderstanding about the topic. IMHO, any income investor who came across your income-oriented retirement program using four levered products would be "fascinated" with its result, not just FD and myself. bruce, is it worth relitigating the past portfolios? ElLobo has already said he only held that portfolio for a brief period. So, does it really matter?
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Post by mozart522 on Jun 29, 2023 20:36:48 GMT
ElLobo , what would your advice be for someone that wants to invest $500K into an income investing portfolio to draw monthly income? All disclaimers apply such as "this is not financial advice and is solely meant for educational purposes," etc etc Thanks. Gosh. Define the universe. Give three examples!
I would use SDY, the ETF that substantially tracks the highest yielding stocks in the S&P1500 which have paid an ever increasing dividend for at least the last 20 years. It currently yields 2.67%, compared to SPY, the SP500 index ETF, yielding 1.55%. You pick up an extra 1.12% yield, and also get a focus on stocks that have consistently raised their dividends over the last 20 years.
For bonds, I would use VWEHX, currently yielding 5.5%. The bond market index fund, VBMFX, is intermediate term, investment grade debt and yields 2.65%. The long term investment grade bond fund, VBLTX, yields 3.31%. VWEHX is below investment grade quality, short to intermediate term.
Using these two funds, your total portfolio yield will be between 2.67% (all stock, SDY) and 5.5% (all bonds, VWEHX). At a 50/50 allocation, the distribution yield of your portfolio is 4.085%, fairly close to the magical 4%!
(You didn't state your rate of withdrawal or whether it was real inflation adjusted or not.)
Have you considered SCHD, better returns than SDY since inception and strong screens to keep the it on track.
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Post by ElLobo on Jun 29, 2023 20:40:16 GMT
Gosh. Define the universe. Give three examples!
I would use SDY, the ETF that substantially tracks the highest yielding stocks in the S&P1500 which have paid an ever increasing dividend for at least the last 20 years. It currently yields 2.67%, compared to SPY, the SP500 index ETF, yielding 1.55%. You pick up an extra 1.12% yield, and also get a focus on stocks that have consistently raised their dividends over the last 20 years.
For bonds, I would use VWEHX, currently yielding 5.5%. The bond market index fund, VBMFX, is intermediate term, investment grade debt and yields 2.65%. The long term investment grade bond fund, VBLTX, yields 3.31%. VWEHX is below investment grade quality, short to intermediate term.
Using these two funds, your total portfolio yield will be between 2.67% (all stock, SDY) and 5.5% (all bonds, VWEHX). At a 50/50 allocation, the distribution yield of your portfolio is 4.085%, fairly close to the magical 4%!
(You didn't state your rate of withdrawal or whether it was real inflation adjusted or not.)
ElLobo , thanks for a quick response. VBMFX now absorbed by VBTLX and shows 4.31% 30-day SEC yield so much higher than the 2.65% primarily because the bonds got a nice haircut last year. I think you are also implying a 50/50 stock/bond portfolio? I am a year or two from retirement, thus the question - I would probably target a 4% withdrawal rate. You bring up an interesting point. I've quoted a 'distribution yield' of 2.75% for VBTLX. You quote a 30-day SEC yield of 4.31%, a difference of 1.56%. Without getting into a discussion of the similarities/differences between these two yields, they BOTH represent a projection of the future cash flow of the fund for retirement withdrawal planning.
There's a similar difference in VWEHX, with a distribution yield of 5.5%, 30-day yield of 6.92%. I've just always used Distribution Yield, right, wrong, or indifferent, since it is calculated based upon the previous 12 months distributions made by the fund, while the 30-day yield is, obviously, based upon 1 months distributions. Anyhow, are you familiar with the Portfolio Visualizer tool, www.portfoliovisualizer.com/? You can use it to see how these two funds performed, in the past, for different allocations and rates of withdrawal. You can also see how, statistically, they SHOULD perform, going forward!
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Post by ElLobo on Jun 29, 2023 20:54:19 GMT
Chuck, Please accept my sincere apology. Despite who created this thread, I'm used to the first post in a thread being the topic. The first two posts in the thread appeared to be about your last M* posted portfolio, including MRRL and SDYL. Again, I'm new here, and I once again apologize for any misunderstanding about the topic. IMHO, any income investor who came across your income-oriented retirement program using four levered products would be "fascinated" with its result, not just FD and myself. Apology accepted, and no problem.
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Post by ElLobo on Jun 29, 2023 21:00:08 GMT
Gosh. Define the universe. Give three examples!
I would use SDY, the ETF that substantially tracks the highest yielding stocks in the S&P1500 which have paid an ever increasing dividend for at least the last 20 years. It currently yields 2.67%, compared to SPY, the SP500 index ETF, yielding 1.55%. You pick up an extra 1.12% yield, and also get a focus on stocks that have consistently raised their dividends over the last 20 years.
For bonds, I would use VWEHX, currently yielding 5.5%. The bond market index fund, VBMFX, is intermediate term, investment grade debt and yields 2.65%. The long term investment grade bond fund, VBLTX, yields 3.31%. VWEHX is below investment grade quality, short to intermediate term.
Using these two funds, your total portfolio yield will be between 2.67% (all stock, SDY) and 5.5% (all bonds, VWEHX). At a 50/50 allocation, the distribution yield of your portfolio is 4.085%, fairly close to the magical 4%!
(You didn't state your rate of withdrawal or whether it was real inflation adjusted or not.)
Have you considered SCHD, better returns than SDY since inception and strong screens to keep the it on track. I haven't looked at these things for 3 years now. I am not familiar with SCHD, although it looks like a good candidate. My point is that the choice of particular funds is something personal. For an Income Investor, its the distribution yield that matters. No so for a TR investor, who probably looks at past returns!
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Post by archer on Jun 29, 2023 21:06:40 GMT
In keeping with my knack for overcomplicating things:
Looking at Portfolio Vis, SPY has a little better TR than SDY, with divs reinvested, and whether or not withdrawals are made. I'm not saying the better TR matters, so bare with me a bit longer.
PV doesn't allow NOT reinvesting divs if also entering a withdrawal rate.
So, while on the one hand, withdrawals or not, over the life of the newest of the 2 funds, one's PF will be a bit fatter according to PV. (Again, I'm not saying that matters)
With SPY, over time history has shown that with a 4% withdrawal rate, quantity of shares will be reduced, but they will be more valuable per share than SDY.
On the other hand, investing in SDY will have less share depletion but shares will not be as valuable.
Using the seed corn analogy, it looks like SDY can be compared to a corn field that gets a little larger every year with more plants, but the total number ears of corn are less than SPY's field that gets smaller every year but actually has more ears of corn every year. Both have provided enough corn needed and then some at 4%
Is there a scenario where this is reversed? Is there somehow more security with an increasingly larger but less productive field than an increasing stockpile of corn from a shrinking field?
I suppose one might fear a limit as to how small the field can shrink before the harvest per acre starts to decrease.
I've always been curious about the 2 approaches, but from a distance. My PF is for my heirs, and I expect to have only a 2% withdrawal rate at most. As to which one makes the most sense in and of itself, the best answer I can come up with is "It depends".
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Post by ElLobo on Jun 30, 2023 2:05:10 GMT
In keeping with my knack for overcomplicating things: Looking at Portfolio Vis, SPY has a little better TR than SDY, with divs reinvested, and whether or not withdrawals are made. I'm not saying the better TR matters, so bare with me a bit longer. PV doesn't allow NOT reinvesting divs if also entering a withdrawal rate. So, while on the one hand, withdrawals or not, over the life of the newest of the 2 funds, one's PF will be a bit fatter according to PV. (Again, I'm not saying that matters) With SPY, over time history has shown that with a 4% withdrawal rate, quantity of shares will be reduced, but they will be more valuable per share than SDY. On the other hand, investing in SDY will have less share depletion but shares will not be as valuable. Using the seed corn analogy, it looks like SDY can be compared to a corn field that gets a little larger every year with more plants, but the total number ears of corn are less than SPY's field that gets smaller every year but actually has more ears of corn every year. Both have provided enough corn needed and then some at 4% Is there a scenario where this is reversed? Is there somehow more security with an increasingly larger but less productive field than an increasing stockpile of corn from a shrinking field? I suppose one might fear a limit as to how small the field can shrink before the harvest per acre starts to decrease. I've always been curious about the 2 approaches, but from a distance. My PF is for my heirs, and I expect to have only a 2% withdrawal rate at most. As to which one makes the most sense in and of itself, the best answer I can come up with is "It depends". Overcomplicating indeed!
To me, it's very simple. Is there a net gain, or loss, of shares during the year whenever cash is being taken out of a retirement portfolio. If a net loss, you run the risk of selling that last share. If a net gain, you don't run that risk.
So if W is always less than Y, you are always adding shares and have a perpetual annuity on your hands. If W is greater than Y, you will eventually sell that last share. It's just a question of when.
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Post by richardsok on Jun 30, 2023 2:21:46 GMT
ElLobo , what would your advice be for someone that wants to invest $500K into an income investing portfolio to draw monthly income? All disclaimers apply such as "this is not financial advice and is solely meant for educational purposes," etc etc Thanks. Lobo's out bouncing his monster high yaller Jeep down arroyos just now, but I'll try my take. You picked a good time to dig into income assets, IMO. The Fed raising rates has slammed the bejesus out of preferred funds and etfs, not to mention individual preferreds. So for a pure longer term income play, I would look at deep discounted CEFs that are fully earning their distributions. I particularly like JPC, FLC and PSF. If you'll go back to read my previous posts, I've been specifying individual preferreds I've been accumulating one by one in the past month or so. For more longer term income play, my single favorite stock is ET, both the common and the preferred ETpE. I also like BTI and PBR (some political risk there) also PBRpA. In my "different drummer dept" I also like FINS, HEQT, PTA, SVOL, YYY, AFT, PHD, HIX, AGNC, PFFR, HFRO, ARCC, SPYI, SPHY, PDI, HGLB, and even a bit of leveraged SMHB -- but, except for individual preferreds, ET and PBR, I regard many as trading assets, not to B&H. Watching GOAU as it drops and drops -- no buys yet. I still trade a lot on technical signals, but (as posted before) am devoting a couple of buckets to pure income. No suggestions here, just chat. FWIW.
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Post by ElLobo on Jun 30, 2023 2:49:24 GMT
richardsok , "even a bit of leveraged SMHB -- but, except for individual preferreds, ET and PBR, I regard many as trading assets, not to B&H."
What about PFFL, as B&H?
"You picked a good time to dig into income assets, IMO."
I second that. We recently (early 2020) reached the end of the Great Bond Bull Market, where interest rates, sky high in the late 1970s, have continuously fallen over the ensuing 40 years, at all terms and qualities, to the point where the 30-year Treasury reached a yield of 1.25%, its all time lowest. Rates have nowhere to go but up, maybehaps the start of the Great Bond Bear Market! The VWEHX monthly distribution bottomed out in January, 2022, at 1.9 cents/share, I think its all time low. It has since started back up and is now at 2.5 cents/share. My guess is that most bond funds have experienced something similar.
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Post by steadyeddy on Jun 30, 2023 2:55:39 GMT
richardsok , thanks for chiming in. My inclination is toward ETFs or MFs - just coz I have enough Muni CEFs under water (with no idea if I ever make the paper loss back again). Attached is a price action compare of PFF (preferreds), ICVT (convertibles), the good ole BND, and long bond BLV... for the last 2 years I hold BND/BLV equivalents. Does it make sense to pick up some PFF/ICVT equivalents for income? Do they provide any diversification benefits?
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Post by richardsok on Jun 30, 2023 10:37:26 GMT
LOBO: I'm suspicious of PFFL and ALL 2x leveraged ETFs/ETNs for long term holds. Too many of them sound interesting but in fact seem to spiral into a perma-bear cycle, never to rally. I have looked hard at PFFL technicals and it's just too volatile for my trading signals to work effectively. So I say -- nix.
Eddy -- so you're going to limit us to just four ETFs? OK:
BND 2.8% yield BLV 4 % ICVT 2% PFF 6.8%
You tell me: which of these four give you a fighting chance against inflation? Their charts, as you see, all work in sympathy, so I don't see any diversification standout.
And let me take this oppty to re-pound the table to add a bit of ET for an income boost-- now out-earning its 10% yield with earnings projected to increase in '24 -- as 'steady-eddy' as one could wish for. For an extra layer of protection, there's the 8% preferred, (still trading under par) if you're a 'belt-AND-suspenders' kinda guy.
PS: Rotten luck about those muni CEFs.
Read my book.
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Post by steadyeddy on Jun 30, 2023 11:24:50 GMT
LOBO: I'm suspicious of PFFL and ALL 2x leveraged ETFs/ETNs for long term holds. Too many of them sound interesting but in fact seem to spiral into a perma-bear cycle, never to rally. I have looked hard at PFFL technicals and it's just too volatile for my trading signals to work effectively. So I say -- nix. Eddy -- so you're going to limit us to just four ETFs? OK: BND 2.8% yield BLV 4 % ICVT 2% PFF 6.8% You tell me: which of these four give you a fighting chance against inflation? Their charts, as you see, all work in sympathy, so I don't see any diversification standout. And let me take this oppty to re-pound the table to add a bit of ET for an income boost-- now out-earning its 10% yield with earnings projected to increase in '24 -- as 'steady-eddy' as one could wish for. For an extra layer of protection, there's the 8% preferred, (still trading under par) if you're a 'belt-AND-suspenders' kinda guy. PS: Rotten luck about those muni CEFs. Read my book. richardsok, thanks for the response. Appreciate the humor too re: ET as the 'steady-eddy'..
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Post by ElLobo on Jun 30, 2023 11:51:57 GMT
LOBO: I'm suspicious of PFFL and ALL 2x leveraged ETFs/ETNs for long term holds. Too many of them sound interesting but in fact seem to spiral into a perma-bear cycle, never to rally. I have looked hard at PFFL technicals and it's just too volatile for my trading signals to work effectively. So I say -- nix. Eddy -- so you're going to limit us to just four ETFs? OK: BND 2.8% yield BLV 4 % ICVT 2% PFF 6.8% You tell me: which of these four give you a fighting chance against inflation? Their charts, as you see, all work in sympathy, so I don't see any diversification standout. And let me take this oppty to re-pound the table to add a bit of ET for an income boost-- now out-earning its 10% yield with earnings projected to increase in '24 -- as 'steady-eddy' as one could wish for. For an extra layer of protection, there's the 8% preferred, (still trading under par) if you're a 'belt-AND-suspenders' kinda guy. PS: Rotten luck about those muni CEFs. Read my book. I mentioned PFFL, which I once held, since you mentioned SMHB, a 2X guy from the same family.
Whenever you chart out this distribution in Excel, you see it is volatile (I can't figure out how to post a chart, from Excel, into this thread!)
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Post by steadyeddy on Jun 30, 2023 20:04:42 GMT
richardsok , ElLobo , I have started a portfolio of 3 ETFs: ACWV, PFF and HYG in equal proportions as my income investing bucket. ACWV (global min volatility stock ETF) has 12 mo trailing yield of 2.15% PFF (preferreds ETF) 6.8% HYG (junk bonds ETF) 5.6% For now it is a small, negligible portion of the portfolio. I will keep monitoring it and adjusting it.
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Post by yakers on Jul 1, 2023 1:47:26 GMT
richardsok , ElLobo , I have started a portfolio of 3 ETFs: ACWV, PFF and HYG in equal proportions as my income investing bucket. ACWV (global min volatility stock ETF) has 12 mo trailing yield of 2.15% PFF (preferreds ETF) 6.8% HYG (junk bonds ETF) 5.6% For now it is a small, negligible portion of the portfolio. I will keep monitoring it and adjusting it. I like experiments, set aside some $ years ago to try trading. Wonder about the adjustments. With the 3 funds, do you expect each will perform about equally over time? Do you adjust by adding more to lowest performing fund epecting it to 'revert'? Do you add more to well performing fund to capture momentum? Maybe expect each to perform differently but fit into a portfolio balance?
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Post by steadyeddy on Jul 1, 2023 3:31:40 GMT
richardsok , ElLobo , I have started a portfolio of 3 ETFs: ACWV, PFF and HYG in equal proportions as my income investing bucket. ACWV (global min volatility stock ETF) has 12 mo trailing yield of 2.15% PFF (preferreds ETF) 6.8% HYG (junk bonds ETF) 5.6% For now it is a small, negligible portion of the portfolio. I will keep monitoring it and adjusting it. I like experiments, set aside some $ years ago to try trading. Wonder about the adjustments. With the 3 funds, do you expect each will perform about equally over time? Do you adjust by adding more to lowest performing fund epecting it to 'revert'? Do you add more to well performing fund to capture momentum? Maybe expect each to perform differently but fit into a portfolio balance? yakers, great questions. I am thinking of trying to add $ slowly and maintaining equal proportions. I will hold on to this portfolio for a few years and see how it goes.
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Post by steadyeddy on Jul 1, 2023 12:41:33 GMT
Taken from YBB's Barron's July 3rd 2023 summary - Part 2 ---------------------------------------------------------------------------------------------------
Pg 12, INCOME plays include:
Dividend Stocks VYM, SCHD, SCHY
Energy MLPs AMLP; CEF TYG
Utilities XLU
MBS OEF DLTNX; ETF JMBS
Real Estate VNQ
HY OEF TUHYX; ETF HYG
Preferreds PFF
Munis OEF VWITX
Convertibles CWB
Treasuries BIL, SHY, TLT; beware that T-Bill rates will drop -------------------------------------------------------------------
Can we have the opinions of the forum on these widgets for purchase at this time to provide reasonable income streams?
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