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Old 12-04-2019, 08:21 AM   #1
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Looking for income

Two of my bonds have matured so I'm sitting on $70k. I was earning about 6% on each. I'd like to try to replace that income as close as possible. How would you do it? Current bonds are earning around 4% I think. I've considered buying individual dividend stocks such as Exxon (5%), IBM (5.2%), Ford (6.7%) etc. Also thought about an income mutual fund, or a bond fund.

My AA is currently pretty close to where it needs to be, and this amount wouldn't swing it too much either way. Are individual stocks too risky for this?

What are your thoughts, which way would you go?
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Old 12-04-2019, 08:58 AM   #2
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Well, according to Buffet every company in the US is overvalued right now... but then again, where else will you put your dough? I always thought people hoped for 3-4% from bonds, so anything extra would be a bonus.

In terms of where you get income... MSFT, AAPL? Both of these companies should return double digits next year...but that's just what the crystal ball told me.
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Old 12-04-2019, 10:41 AM   #3
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What is your mix of stocks and bonds?

Going from bonds to stocks to get "income" isn't a great plan. Tax drag and the stocks could drop 50% or more.

Do you want the $70k to be relatively safe? Individual Muni bonds would give you the best income, but there is risk there too.

Total Return > Income
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Old 12-04-2019, 10:51 AM   #4
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What was the term and credit risk of the 6% bonds that matured? If you want 4%, you'll need to buy just above investment grade or go longer. How long were you planning to go?

Also, check out the preferred stock thread... http://www.early-retirement.org/foru...77428-235.html
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Old 12-04-2019, 11:17 AM   #5
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I use ETFs in the categories of long-term and high yield corporate bonds, preferred stocks, and high yield stocks. Until recently, I exclusively bought individual corporate and muni bonds, so I do understand the dilemma of having to reinvest at lower coupons. With the exception of the long term corporate bond ETF, most of my ETFs have a dividend yield between 4% and 6%.
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Old 12-04-2019, 12:03 PM   #6
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Look at some of the pharmaceutical, and energy penny stocks in NASDAQ for who has future potential, but be careful.

https://www.marketbeat.com/market-da...ntage-gainers/
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Old 12-04-2019, 02:57 PM   #7
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I don’t reach for high yields. I just pull my annual income from the portfolio without concern about dividends or interest. I sell whatever is highest to meet my annual withdrawal and rebalance to my target AA.
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Old 12-04-2019, 03:12 PM   #8
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You might want to look at closed end bond funds. They are risky, but if held long term can provide reliable cash flow. Pimco is the king.
I own PFN, PTY and PCI - all yielding in the 9%-10% range paid monthly.
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Old 12-04-2019, 03:42 PM   #9
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You might want to look at closed end bond funds. They are risky, but if held long term can provide reliable cash flow. Pimco is the king.
I own PFN, PTY and PCI - all yielding in the 9%-10% range paid monthly.
I'm in Pimco's PIMIX, which is lagging the field in total return at the moment. NAV has taken a hit but the monthly dividend of $0.0555 has remained pretty consistent. Pimco's website lists the current distribution yield at 5.46%, which looks accurate to me.

One problem for the OP -- PIMIX requires an initial $100K investment. PIMIX's little brother is PONAX, which boasts a distribution yield of $5.07%. A lot of people on this forum would blanch at the expense ratio of either fund, though, as it hovers around 1%.

Edit: Schwab lists the PONAX ER at 1.45%. I believe other custodians charge a front-end load, though.
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Old 12-04-2019, 03:59 PM   #10
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... I was earning about 6% on each. I'd like to try to replace that income as close as possible.
Wouldn't we all?

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Originally Posted by Raymond01 View Post
How would you do it?
I probably wouldn't try. High yield walks hand in hand with high risk, including risks I would not be interested in trying to understand.

Those who do understand the risks are the ones who have effectively established the yield based on their bids for whatever product you're considering. With about 10,000 mutual funds and a huge number of pension and other private funds you can be pretty sure that pricing inefficiencies do not exist. Luck exists, though. With respect, do you feel lucky?
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Old 12-04-2019, 05:53 PM   #11
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How about real estate debt investing? Accredited investors only & high risk, but you might get your 6% interest! Check: https://www.peerstreet.com/
I have 47 loans. The weighted average interest of all my loans is 7.8%. However, some loans are late or in default. So, the weighted interest of the performing loans is 6.3%. YMMV!!!
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Old 12-04-2019, 06:01 PM   #12
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You can buy PIMIX at Vanguard for $25K vs the $100K minimum required elsewhere.

ETA - looks like ER is currently 1.05%. Crazy high for an "Institutional" class fund, but I own it as well as it's tough to beat the yield, TR and long term consistency.
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Old 12-04-2019, 07:36 PM   #13
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Uhaul Investment Club. 5.5-5.75% for 12-15,years pays interest and a portion of principal quarterly
Disclosure: I am not an investor but I might consider it.
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Old 12-04-2019, 09:22 PM   #14
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For income I currently like: RDS/B paying 6.6%, NTR paying 3.9%, and XOM paying 5.1%. Jmho
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Old 12-04-2019, 10:42 PM   #15
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I don’t reach for high yields. I just pull my annual income from the portfolio without concern about dividends or interest. I sell whatever is highest to meet my annual withdrawal and rebalance to my target AA.
is there a strategy to pull money out ? like right before rebalance, small portion each month or lump sump, when market is high or don't pull it out when market is low.
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Old 12-05-2019, 01:25 AM   #16
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Two of my bonds have matured so I'm sitting on $70k. I was earning about 6% on each. I'd like to try to replace that income as close as possible. How would you do it? Current bonds are earning around 4% I think. I've considered buying individual dividend stocks such as Exxon (5%), IBM (5.2%), Ford (6.7%) etc. Also thought about an income mutual fund, or a bond fund.

My AA is currently pretty close to where it needs to be, and this amount wouldn't swing it too much either way. Are individual stocks too risky for this?

What are your thoughts, which way would you go?
Try Worthy

https://worthybonds.com/?r=uhJAQ

They sell asset backed loans and in return give you 5% I've used then for 6 months now and it's been great huge bonus is it compounds daily..... that was huge for me most dividend stocks only payout quarterly and my bond funds pay out monthly and real estate is monthly... but worthy gives you your interest everyday.
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Old 12-05-2019, 05:18 AM   #17
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The only way to get 6% fixed income in the current environment is to take on more risk. Your choice.
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Old 12-05-2019, 06:53 AM   #18
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Worthy looks interesting. May take 30 days to get your money, so definitely for non critical funds. For only $70k, I’d certainly consider throwing it there.
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Old 12-05-2019, 07:20 AM   #19
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If you can live with mid 4% range, both VWEHX (High Yield Bond) and FNMIX (Fidelity New Markets Income) have ~4.5% yields.

6% yield in this rate environment is unlikely, IMHO without a ton of risk to principal.

Another potential strategy is VWIAX. Wellesley pretty consistently has a TR of ~6% and has done so for a heck of a long time (1, 3, 5, 10 and 15 year TR averages are all north of 6%). Albeit, you're selling appreciated shares to get to 6% as yield is now < 3%, but it's one of the least risk approaches I can think of to withdrawing 6% with reasonable confidence that your overall account value will sustain that..

Note that Wellesley has had a couple of years of down performance, though..I believe the worst was ~-10%. But overall average returns of 6+% should make this a somewhat viable approach..
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Old 12-05-2019, 07:30 AM   #20
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Plot FNMIX against PFN. What do you get? Sub par returns, sub par yield. Sometimes risk is rewarded. I would rather have a 10% yield vs 4.5% and weather a little volatility.
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