Income Investing From a Tiny Portfolio: My Sleeve‑Based Structure + Screenshots

[RetiredHappy]

Again, as I posted above is to get out of income investing since you are not needing the income for the next decade. Put all your money in an index fund like VOO. My bet is that SS won't be cut. After a decade, VOO will grow alot more than dabbling / dribbling the $50K into a bunch of dividend funds.

 

[disneysteve]

So far I have gotten very little (but some) of actual use to help me with my plan to make those moves

Here's my final post to this thread, which just summarizes what I and others have already said.

You are investing for income when you don't need income from your investments for 10 years and more likely never because SS isn't going to disappear.

You have an incredibly complicated portfolio which you haven't been monitoring or managing adequately because you only look at it every 6 months. And even then, you haven't taken appropriate action because you've focused on income but not value so you've disregarded substantial losses as long as the dividends kept coming.

You've asked what we would do in your situation and we've told you. We would sell it all and put the money in growth, namely a total market index ETF like VTI or an S&P 500 ETF like VOO. You'll have way more money in 10 years than if you continue to do what you've been doing. If you actually need income at that point, you'll have a lot more to work with to generate that income.

Good luck.

 

[trukfixer]

Of course had you put all the $44K into VTI you would have $69K. So your great cashflow is being eaten by NAV decline.

But then of course, past performance is no guarantee of future results. That is the trap I used to fall into multiple times - I'd look back at an otherwise solid fund's performance, and put money into it, only to have it subsequently decline and it was no longer a "great buy" - So, I quit trying to "pick a winner" - It's all too easy to look at a given ticker and say "If I had $x into this then, I'd have $XX now, I missed that boat, lemme jump on it"

Secondly, while I don't NEED the income immediately, I don't KNOW that I'm not going to need it in the near future. As it is, living on solely social security with no other means of income, my budget is extremely tight, if something were to happen (emergency repairs, etc. that I'd have to cover with credit card) my budget could not absorb the increase credit card bills nor pay down the larger balance. "But then you just sell some stock", you say - but there goes my growth! It's not like I have a big portfolio that could absorb "eating" a $10,000 emergency expense - Could YOU stomach having to sell off one-fifth of your portfolio to cover some expense?
I get that most folks on here have sizable, comfortable portfolios, but again , I suspect most folks on here have not experienced what it is like living "rural poor", and if they did , they've forgotten. It's a completely different world.... so I don't get too put off by the "just buy VTI" folks - they just don't get what it is like to be in my situation, since they've never experienced it.

 

[Out-to-Lunch]

"But then you just sell some stock", you say - but there goes my growth!

You have espoused this viewpoint several times. I think that this analysis is flawed.

Scenario A: You have $10,000 in a income-producing fund with a 10% yield. After one year, you have $10,000 in the security and $1,000 cash. You spend the cash, and still have $10,000 in the fund, which continues to yield 10% for future income.

Scenario B: You have $10,000 in a growth-oriented fund with a 10% growth rate. After one year, you have $11,000 in the security. You sell $1,000 to raise cash, then spend the cash, and still have $10,000 in the fund, which may continue to grow for future total return.

Why do you keep saying that selling some shares of a growth-oriented security kills the opportunity for future growth?

 

[COcheesehead]

I guess I misunderstood the OP. I thought they wanted income now. So if that is not the case, I would look to some of the funds we discuss elsewhere that outpace the market indexes and have a lower standard deviation/beta. That would provide the growth AND some downside protection if we go into another 10 period of no growth. It’s at that point that I would flip the switch to an income producing investment.

Even with a nominal return, the pile would grow by over 50%.

 

[trukfixer]

You have espoused this viewpoint several times. I think that this analysis is flawed.

Scenario A: You have $10,000 in a income-producing fund with a 10% yield. After one year, you have $10,000 in the security and $1,000 cash. You spend the cash, and still have $10,000 in the fund, which continues to yield 10% for future income.

Scenario B: You have $10,000 in a growth-oriented fund with a 10% growth rate. After one year, you have $11,000 in the security. You sell $1,000 to raise cash, then spend the cash, and still have $10,000 in the fund, which may continue to grow for future total return.

Why do you keep saying that selling some shares of a growth-oriented security kills the opportunity for future growth?

You still aren't "getting" it - MY point is the hypothetical situation that if you had an emergency that you had to sell 20% of your entire combined portfolios to meet that emergency expense, how do you "put back" that 20% drawdown without changing your day to day financial budget?

I am saying , if I had an event where I'd need $10K immediately (which is really not even out of the question) - that represents 20% of my total portfolio - and my day to day financial budget is tight enough that I could NOT repay that 20% in any short term time frame - In my scenario with income producing portfolio , I can draw on margin (as opposed to expensive credit card debt) and let the income producing assets repay the margin without touching the base principal, and without having to bust my daily household budget to pay off a loan/credit card, and I still have the same income producing principal.

TO someone with a $500K portfolio , a $10K emergency expense is a drop in the bucket (a big one maybe) , but to someone like me with a $50K portfolio , that same $10K is a massive spill.

 

[flipstress]

You still aren't "getting" it - MY point is the hypothetical situation that if you had an emergency that you had to sell 20% of your entire combined portfolios to meet that emergency expense, how do you "put back" that 20% drawdown without changing your day to day financial budget?

I am saying , if I had an event where I'd need $10K immediately (which is really not even out of the question) - that represents 20% of my total portfolio - and my day to day financial budget is tight enough that I could NOT repay that 20% in any short term time frame - In my scenario with income producing portfolio , I can draw on margin (as opposed to expensive credit card debt) and let the income producing assets repay the margin without touching the base principal, and without having to bust my daily household budget to pay off a loan/credit card, and I still have the same income producing principal.

TO someone with a $500K portfolio , a $10K emergency expense is a drop in the bucket (a big one maybe) , but to someone like me with a $50K portfolio , that same $10K is a massive spill.

I'm in no way expert at investing, but perhaps your investable portfolio would only then be $40K, and you may have to just bite the bullet of being prudent and keep $10K in ultra-safe instruments like money market funds, short-term treasuries, etc., as your emergency fund.

 

[Flieger]

The OP has made up his mind that this is the right decision for him, so no amount of "explanation" is going to matter.

Flieger

 

[Out-to-Lunch]

You still aren't "getting" it -

I suppose you are right -- I was not "getting it" because I don't think that margin loans are the universal answer to solvency.

 

[trukfixer]

The OP has made up his mind that this is the right decision for him, so no amount of "explanation" is going to matter.

Flieger

That is about the size of it - MY whole reason for coming to these forums was more to see if I can glean some pointers to *income investing* specifically , that I can apply to what is currently working *for me* (and I have gotten a few takeaways already - notably more frequent evaluations, a better understanding of what I'm looking at with expense ratios, and even some decent additional tickers that had never come up on my own screens, to improve what I currently have that match up with my current system.)

Point is I'm fairly comfortable with what I have, I'm happy to have folks insisting that I should be in growth, but I'm still seeing that it simply does not apply to my situations and scenarios... I've come to see that while there *are* a few (not too many) that do income investing similar to mine, many of them already have additional primary portfolios, IRA's, and other retirement assets that influence their thinking and reasoning. There's likely very few here that experienced "rural poor" upbringings on household incomes that for "us" rural lower middle class was "livable" but someone in urban or suburban areas would not even be able to survive on.

I'm not arguing that my way is the right way, it's just that it is my way because of my specific situation - I know it is hard to imagine making a "good living" when your hourly wage was $5.25 an hour back in 1990, but to *us* that was a pretty decent job for our rural area. Took me 10 years to save up $1500 in savings account only to have it wiped out overnight on a hospital bill (even with insurance).. and that's living on a frugal budget.. Then disability arrives, no job I can work, so Bootstrapped a small business on a shoestring and my parents' garage, only to have THAT wiped out in 2020, too... I'm in better shape financially than I have been most of my entire adult life, and I'm trying to plan against potential future catastrophic events in a way that isn't going to wipe out my income producing base - an income that if I need it, I already have it, and if I don't need it, I can use it to build more income.

 

[target2019]

Some threads are more difficult, I suppose.

 

[dobig]

There's absolutely nothing wrong with being purely an income investor. Many here do just that. The problem is buying crappy income funds in a death spiral and procrastinating selling them off. This junk is more of a risk to you than some unforseen $10k expense.

 

[dobig]

If I had to take a guess the OP likes how high he's got his yearly income and is hesitant to sell the high yield junk because it will bring his yield down. If only they realized this is what's holding them back and they'd actually have more income in the future if they moved the money from the basement dwellers to the higher quality funds they already own and reinvested the divvies. I see some decent funds in there like GPIQ, HTD, PFFA, PDI, YYY, JFR, JEPI, JEPQ. If you want to go all income get rid of your poor performers and move it to your better quality.

Not sure how to get thru to him - 'give up a little bit today for a lot more tomorrow'.

 

[Sunset]

I'm not an income investor, when I tried to be I bought some great looking stock, and it paid great dividends for a few years, then the price of the stock went down, but it still paid the great dividend, so I kept it.

Then it stopped paying the dividend, which killed the price and a year later it slid a couple of bucks down to zero and declared it was bankrupt.

Lost money on that even after considering all the years of great dividends.

 

[richardsok]

Truk --- No, we weren't unanimous claiming you had to be in growth. Some say it is viable to focus on income if you prefer, but (and here we ARE unanimous!) YOU HAVE TO DUMP YOUR LOSERS EARLY! It is the oldest rule on Wall Street and you're defying it: "cut your losers early and let your winners run!" That's Investing 101, Truk. And checking a portfolio with 40 positions only two or three times a year doesn't cut it. Not even close.

What I find curious is that you start by acknowledging your past choices have been disappointing, yet you don't seem open to well meaning and successful investors trying to help you. You keep insisting your pathway is preferable to the many intelligent suggestions you're getting.

Here's something to think on (or maybe just ignore!) You stand a good chance of your current portfolio laying even worse losses on you in the coming months!. All signs point to an increase in interest rates driven by inflation numbers -- which WILL damage all kinds of your income / bond/interest funds except very short term and variable rate paper.

Yeah, I could be wrong. Heck, 20 or 30 experienced investors on this forum could all be wrong and you the only correct one. Could be.

But don't bet the farm on it.

 

[joejetski]

That is about the size of it - MY whole reason for coming to these forums was more to see if I can glean some pointers to *income investing* specifically , that I can apply to what is currently working *for me* (and I have gotten a few takeaways already - notably more frequent evaluations, a better understanding of what I'm looking at with expense ratios, and even some decent additional tickers that had never come up on my own screens, to improve what I currently have that match up with my current system.)

Point is I'm fairly comfortable with what I have, I'm happy to have folks insisting that I should be in growth, but I'm still seeing that it simply does not apply to my situations and scenarios... I've come to see that while there *are* a few (not too many) that do income investing similar to mine, many of them already have additional primary portfolios, IRA's, and other retirement assets that influence their thinking and reasoning. There's likely very few here that experienced "rural poor" upbringings on household incomes that for "us" rural lower middle class was "livable" but someone in urban or suburban areas would not even be able to survive on.

I'm not arguing that my way is the right way, it's just that it is my way because of my specific situation - I know it is hard to imagine making a "good living" when your hourly wage was $5.25 an hour back in 1990, but to *us* that was a pretty decent job for our rural area. Took me 10 years to save up $1500 in savings account only to have it wiped out overnight on a hospital bill (even with insurance).. and that's living on a frugal budget.. Then disability arrives, no job I can work, so Bootstrapped a small business on a shoestring and my parents' garage, only to have THAT wiped out in 2020, too... I'm in better shape financially than I have been most of my entire adult life, and I'm trying to plan against potential future catastrophic events in a way that isn't going to wipe out my income producing base - an income that if I need it, I already have it, and if I don't need it, I can use it to build more income.

Here’s a thought, a way to simplify but still get the income you need (eventually). Use CC NEOS funds with a small cash emergency fund. GOOGLE NEOS funds. I own the funds across my portfolio (TIRA, Roth, and taxable). SPYI and QQQI, S&P 500 and NASDAQ. Simple indexing with a covered call overlay. With 55k, you could do 20k each fund a 15k emergency fund. $40k @ 12.5% is about $5k first year, but reinvest and it will compound faster. Not advice, do your own due diligence, but I really like these funds in my portfolio so far.

 

[trukfixer]

Truk --- No, we weren't unanimous claiming you had to be in growth. Some say it is viable to focus on income if you prefer, but (and here we ARE unanimous!) YOU HAVE TO DUMP YOUR LOSERS EARLY! It is the oldest rule on Wall Street and you're defying it: "cut your losers early and let your winners run!" That's Investing 101, Truk. And checking a portfolio with 40 positions only two or three times a year doesn't cut it. Not even close.

What I find curious is that you start by acknowledging your past choices have been disappointing, yet you don't seem open to well meaning and successful investors trying to help you. You keep insisting your pathway is preferable to the many intelligent suggestions you're getting.

Here's something to think on (or maybe just ignore!) You stand a good chance of your current portfolio laying even worse losses on you in the coming months!. All signs point to an increase in interest rates driven by inflation numbers -- which WILL damage all kinds of your income / bond/interest funds except very short term and variable rate paper.

Yeah, I could be wrong. Heck, 20 or 30 experienced investors on this forum could all be wrong and you the only correct one. Could be.

But don't bet the farm on it.

I hear you on cutting losers early — that’s something I’m actively tightening up.

My issue wasn’t disagreement with the principle, it was figuring out how to define what a ‘loser’ looks like in income‑focused vehicles where drawdowns behave differently. (ROC may reduce NAV, which causes price to drop, so just because it has lost market value is not always a bad thing.)

I’m adjusting my process so I’m reviewing sleeves monthly and setting alerts to catch trend breaks earlier. That solves the timing problem without abandoning the income‑first structure that fits my situation.

In particular, OXLC (which I already admitted that stupidly I'd been DCA'ing into when it was dropping) , OXSQ, VVR are three that , in hindsight I wish I had been tracking more closely - *looking back* I can see where I could have spotted they were an inevitable problem and were never going to recover any where near to even "breakeven", even net of dividends... so I COULD HAVE exited them much sooner.. I was just taking too long between reviewing.

So, I've learned from those and incorporating those lessons into now-ongoing review process of the rest. I'm not saying my way is the right way - I'm saying I'm trying to learn from *income first* investors things that may help me better manage *MY* income focused portfolio - and all the "just buy VTI" type of responses are essentially just "noise" to me. They ain't wrong, but their way ain't my way.

 

[Al18]

Unless I have a lot of background knowledge of the company, what the company makes and how the stock has performed over the long term (years), I tend to follow analyst recommendations. More often than not, the analysts are correct about the short term outlook (months). Typically the only time the analysts are wrong is if the company is not accurately reporting the financial results.

 

[Koolau]

But then of course, past performance is no guarantee of future results. That is the trap I used to fall into multiple times - I'd look back at an otherwise solid fund's performance, and put money into it, only to have it subsequently decline and it was no longer a "great buy" - So, I quit trying to "pick a winner" - It's all too easy to look at a given ticker and say "If I had $x into this then, I'd have $XX now, I missed that boat, lemme jump on it"

Secondly, while I don't NEED the income immediately, I don't KNOW that I'm not going to need it in the near future. As it is, living on solely social security with no other means of income, my budget is extremely tight, if something were to happen (emergency repairs, etc. that I'd have to cover with credit card) my budget could not absorb the increase credit card bills nor pay down the larger balance. "But then you just sell some stock", you say - but there goes my growth! It's not like I have a big portfolio that could absorb "eating" a $10,000 emergency expense - Could YOU stomach having to sell off one-fifth of your portfolio to cover some expense?
I get that most folks on here have sizable, comfortable portfolios, but again , I suspect most folks on here have not experienced what it is like living "rural poor", and if they did , they've forgotten. It's a completely different world.... so I don't get too put off by the "just buy VTI" folks - they just don't get what it is like to be in my situation, since they've never experienced it.

Respectfully and with (I hope) some modesty and delicacy, you may have to accept that you really do not have enough in your portfolio to insure portfolio survival. You've suggested the problem when a $10K repair or emergency is 1/5 of your portfolio. With that in mind, I suppose the unpleasant truth may be that you need some more income from (dare I say it here in the Early Retirement Forum) "W*RK."

It might not take a lot. Some gig w*rk or even an odd j*b or two.

I'm so sorry to dump this on you. This is what I would do in your situation, so I feel required to suggest it. I hope you accept the suggestion in the spirit I offer it. All the best to you.

 

[Doolish1]

I would predict these high dividend junky funds to eat themselves from the inside out and leave you dead in the water.

 

[livingalmostlarge]

i'd buy voo and let it roll then sell shares as it happens.