Income Investing Results

[pb4uski]

^^^ More volatile and less safe than Allstate and Citigroup?

 

[C-man23]

Yes, the probability factor (from Fidelity's Active Trader Pro's Trade Armor window) is key to avoid having options called. Out of curiosity I did a review of 2025 options trading activity for covered call options trades and covered call rolls. I have completed 2,251 contracts, but I only had to do 413 total trades because many trades are for more than 100 shares. My total net YTD options income is $113,547 ir about $50 per contract. Because my average work time for each trade is less than five minutes, I have spent less than 40 hours to earn the $113K. That is better than my best hourly rate when I was a CIO for a printer parts and supplies company before I retired.
It should be noted that I started with a very small account balance but it is amazing what the "Rule of 72" can do if you stick to the process. That is one of the reasons I don't own bonds or bond funds.

Thanks for the info, Wayne! Love the data points you put out there.

 

[Waynew]

If you are new to income investing you might benefit from seeing what is possible if you have a plan and set a goal for growing income. Here are my results in a table and graphed to show the real power of dividend growth investing. I started measuring dividend income in 1999 when I was 48 years old. I got serious about dividend growth as a focus in 2014. My traditional IRA balance in 1999 was about $300K. Focusing on dividends did not hurt the growth of our investments, and I have done some significant withdrawals in the last five years.

 

[Flieger]

If you are new to income investing you might benefit from seeing what is possible if you have a plan and set a goal for growing income. Here are my results in a table and graphed to show the real power of dividend growth investing. I started measuring dividend income in 1999 when I was 48 years old. I got serious about dividend growth as a focus in 2014. My traditional IRA balance in 1999 was about $300K. Focusing on dividends did not hurt the growth of our investments, and I have done some significant withdrawals in the last five years.
View attachment 55553

Nice growth of Div's Wayne! Good to see the impacts of 2001 and 2002, along with 2008 and 2009.

Flieger

 

[RobLJ]

Over the last year, I've increased the bond allocation to 35% but cash is another 10%+, which is paying decently.
What I've discovered is that along with SS, the cash from dividends and interest in our tax-favored and taxable brokerage now covers expenses plus a 20% or so margin, no matter what stocks do. I'll keep pulling the rest from stock fund sales, starting with capital gains and stock dividends, up to the 22% tax rate beginning (or pull even more if stocks do really well).

We've only spent much over what SS + income will generate last year, going to Scotland and Hawaii (with oldest son's family) to celebrate our 40th and to celebrate Christmas with the grandkids. Flew first class to Scotland, so last year was an outlier.

It's not quite as nerve-wracking now to figure out which stock funds to sell to fund withdrawals.

The taxable brokerage is full of muni CEFs and SPAXX, so I'll probably start moving the excess withdrawals from tax-advanged to add to a US stock and an international index in the brokerage, since these generate minimal dividends and capital gains. I still have 3% more of cash to move to international bonds next week and maybe the next week.
So I guess the growth segment of the portfolio is the 55% stock funds, which is less crucial. I probably will shift some of that to some buy/write stock CEFs in my wife's account, which would double the income of a relatively small dividend stock fund I have (currently about 3% of total portfolio).
It's been a slow process over the last 18-20 months and at one point I had almost 20% cash before identifying the bond funds and CEFs. I took advantage of the recovery the last few weeks to sell more of the stock mutual funds and didn't do anything when they were down bigly.

 

[robls]

If you are new to income investing you might benefit from seeing what is possible if you have a plan and set a goal for growing income. Here are my results in a table and graphed to show the real power of dividend growth investing. I started measuring dividend income in 1999 when I was 48 years old. I got serious about dividend growth as a focus in 2014. My traditional IRA balance in 1999 was about $300K. Focusing on dividends did not hurt the growth of our investments, and I have done some significant withdrawals in the last five years.
View attachment 55553

Waynew could you please explain what you did when you refined your strategy in 2014?
And could you give a more detailed explanation of your covered call strategy, how far OTM do you sell, how many days to expiration, do you buy back when you are up 50%, etc... Thanks. Rob

 

[Flieger]

So, this morning I find myself still struggling. I am looking at Div's YTD vs. "paper" losses of investments YTD at an ~1:2 ratio and my old thinking says WTH are you doing. It gets more complicated as I think about it though.

I have to remember that if my investments were a mix of S&P500 and NASDAQ centric, my "paper" losses would be greater (according to analysis). Also, I would have to potentially sell and "realize" some of those losses for my retirement "paycheck" which are included in the above ~1:2 ratio....

It's hard to switch your thinking, or at least open up your mind after 20-20 years of one thought process.

Flieger

 

[Waynew]

Waynew could you please explain what you did when you refined your strategy in 2014?
And could you give a more detailed explanation of your covered call strategy, how far OTM do you sell, how many days to expiration, do you buy back when you are up 50%, etc... Thanks. Rob

1. The strategy refinement was to be more disciplined in selecting individual stocks and ETFs with clear dividend growth in mind. If a stock did not pay a dividend, then it had to be a good candidate for covered call options trades to create a "synthetic" dividend. I also got far more interested in BDCs that offer both great dividends and have a 10-year total return that was better than the S&P 500 - understanding the risk of that approach and being willing to ignore market volatility and insanity. I also want to focus on stocks that have weekly options rather than monthly, although I own both and trade both.
2. I talk about how I do my options trade elsewhere, so I won't take the time to write out all of how and what I do in this response. Suffice it to say that I have not afraid to roll options up and/or down as the market goes up and down. Thus far 2025 YTD none of my options have been called. I try to stay OTM and try to keep most expirations within 30 days or less. There are exceptions like AVGO and IBM. I use Fidelity's Active Trader Pro to trade options and always look at the "Probability" factor and try to keep that under 30% for the holdings I don't want called.
Suggestion: Check out my profile by clicking on my picture if you want more information.
Here are my YTD results updated for transactions I did this week.

 

[COcheesehead]

So, this morning I find myself still struggling. I am looking at Div's YTD vs. "paper" losses of investments YTD at an ~1:2 ratio and my old thinking says WTH are you doing. It gets more complicated as I think about it though.

I have to remember that if my investments were a mix of S&P500 and NASDAQ centric, my "paper" losses would be greater (according to analysis). Also, I would have to potentially sell and "realize" some of those losses for my retirement "paycheck" which are included in the above ~1:2 ratio....

It's hard to switch your thinking, or at least open up your mind after 20-20 years of one thought process.

Flieger

With today’s update, my portfolio sits at right about where it was in February of this year. 1.6% below our all time portfolio high, but our income is up 14% from the beginning of the year and 45% from the beginning of 2024. Keep plugging away.
As an income investor the dips are opportunities to add more income.

 

[robls]

1. The strategy refinement was to be more disciplined in selecting individual stocks and ETFs with clear dividend growth in mind. If a stock did not pay a dividend, then it had to be a good candidate for covered call options trades to create a "synthetic" dividend. I also got far more interested in BDCs that offer both great dividends and have a 10-year total return that was better than the S&P 500 - understanding the risk of that approach and being willing to ignore market volatility and insanity. I also want to focus on stocks that have weekly options rather than monthly, although I own both and trade both.
2. I talk about how I do my options trade elsewhere, so I won't take the time to write out all of how and what I do in this response. Suffice it to say that I have not afraid to roll options up and/or down as the market goes up and down. Thus far 2025 YTD none of my options have been called. I try to stay OTM and try to keep most expirations within 30 days or less. There are exceptions like AVGO and IBM. I use Fidelity's Active Trader Pro to trade options and always look at the "Probability" factor and try to keep that under 30% for the holdings I don't want called.
Suggestion: Check out my profile by clicking on my picture if you want more information.
Here are my YTD results updated for transactions I did this week.
View attachment 55627

Thanks for the detailed response. Will check out your site. Long-time Fidelity customer myself. Have been using them for my covered calls. Have made $1,700 YTD without having any called away.

 

[Flieger]

Heading out the door for the PGA Championship, but here is where things stand midway through the month. A lot can change in the last 3.5 hours (for the Cost Basis), but hopefully positively!

Flieger

 

[surprising]

1. The strategy refinement was to be more disciplined in selecting individual stocks and ETFs with clear dividend growth in mind. If a stock did not pay a dividend, then it had to be a good candidate for covered call options trades to create a "synthetic" dividend. I also got far more interested in BDCs that offer both great dividends and have a 10-year total return that was better than the S&P 500 - understanding the risk of that approach and being willing to ignore market volatility and insanity. I also want to focus on stocks that have weekly options rather than monthly, although I own both and trade both.
2. I talk about how I do my options trade elsewhere, so I won't take the time to write out all of how and what I do in this response. Suffice it to say that I have not afraid to roll options up and/or down as the market goes up and down. Thus far 2025 YTD none of my options have been called. I try to stay OTM and try to keep most expirations within 30 days or less. There are exceptions like AVGO and IBM. I use Fidelity's Active Trader Pro to trade options and always look at the "Probability" factor and try to keep that under 30% for the holdings I don't want called.
Suggestion: Check out my profile by clicking on my picture if you want more information.
Here are my YTD results updated for transactions I did this week.
View attachment 55627

I've dreamed of supplementing my dividend income with covered calls on the stocks I own and don't want to sell. However, I've struggled with the execution. I found it takes a lot of mental time and stress to watch and make sure the options don't get called. Getting called would be worst case scenario because I'd end up selling stock I didn't need to and incurring cap gains for no reason. I want to earn 10% yearly on my stock portfolio in covered calls, which is <1% gain every month. 1% can be something like $200 of covered call income for a given stock, and then I look at the risk/reward. Am I willing to risk incurring cap gains tax on $20K worth of stock (say $1-2K at 15%) to make $200? And then do it again and again every month? Perhaps we can have a covered call strategy discussion thread on here.

 

[Waynew]

I've dreamed of supplementing my dividend income with covered calls on the stocks I own and don't want to sell. However, I've struggled with the execution. I found it takes a lot of mental time and stress to watch and make sure the options don't get called. Getting called would be worst case scenario because I'd end up selling stock I didn't need to and incurring cap gains for no reason. I want to earn 10% yearly on my stock portfolio in covered calls, which is <1% gain every month. 1% can be something like $200 of covered call income for a given stock, and then I look at the risk/reward. Am I willing to risk incurring cap gains tax on $20K worth of stock (say $1-2K at 15%) to make $200? And then do it again and again every month? Perhaps we can have a covered call strategy discussion thread on here.

1. To keep the time to a minimum, I set price alerts on the positions with contracts. If the contract is for $85, then the alert can be for $85 or some amount slightly below that amount. Then, if I get an alert, I know I can sign on and do a covered call roll up to a higher price and later expiration date.
2. Most of my options trades are in my traditional and ROTH IRA, so there are no income tax or capital gains repercussions from options trading. That simplifies my decision-making process.
YTD all of my contracts had expired without losing any shares. It is simple and doesn't take much time. Today, for example, I washed the car, mowed the lawn, did some other chores and traded one option during a break. 3. This week I made $10,899 in covered call options income. YTD I am now at $128K. That will buy a lot of groceries. Actually, it is fuel for our charitable giving.

 

[Texas Proud]

I need to go to you site to see what you are doing...

I bought a few stocks that were on a list you provided and was surprised options were monthly... and others where you just did not get that much..

I decided to buy 100 shares of XOM and my option paid a whopping $20..

 

[robls]

I've dreamed of supplementing my dividend income with covered calls on the stocks I own and don't want to sell. However, I've struggled with the execution. I found it takes a lot of mental time and stress to watch and make sure the options don't get called. Getting called would be worst case scenario because I'd end up selling stock I didn't need to and incurring cap gains for no reason. I want to earn 10% yearly on my stock portfolio in covered calls, which is <1% gain every month. 1% can be something like $200 of covered call income for a given stock, and then I look at the risk/reward. Am I willing to risk incurring cap gains tax on $20K worth of stock (say $1-2K at 15%) to make $200? And then do it again and again every month? Perhaps we can have a covered call strategy discussion thread on here.

All my covered calls are done in my Roth IRA.

 

[Flyfish1]

Probably should start a separate post but...
I'd love to have my income portfolio inherited as an intact entity when I pass. I imagine the kids would simply hire a Financial Advisor who would then blow it up and put it in a few mutual funds. Anyone give any thought to this and how to make a dividend portfolio an inherited item? I have two kids and they could potentially split an income stream worth several hundred thousand per year.

 

[Waynew]

Probably should start a separate post but...
I'd love to have my income portfolio inherited as an intact entity when I pass. I imagine the kids would simply hire a Financial Advisor who would then blow it up and put it in a few mutual funds. Anyone give any thought to this and how to make a dividend portfolio an inherited item? I have two kids and they could potentially split an income stream worth several hundred thousand per year.

I think it involves education. Both our son and daughter (son-in-law) have learned quite a bit on their own, but I also share with them why I invest the way that I do and why selling the investments and replacing them with other more expensive solutions would be counterproductive.
I have also done the same for our six grandchildren. The vehicle for that was giving each of them a UTMA account, funded initially with $2K each. Also, as each reached their teen years, we gave them a gift to fund their own Fidelity Youth brokerage accounts. Five of the six are already teens and probably know more about investing than 99% of their peers.
I say that because I taught a two-lesson class at a local private high school (seniors) and learned how little they knew. I had a survey they completed before I taught the class and it was most illuminating as to their lack of understanding of the basics.
I'm not certain about the mechanics of dividing the assets, but I suspect that it will be similar to what happened when my mom passed away and her three children received their portions. I'm equally uncertain as to what my brother and sister did with their portions, but I have a suspicion that they did not know what to do with their portions. The problem? Education.

 

[Texas Proud]

Probably should start a separate post but...
I'd love to have my income portfolio inherited as an intact entity when I pass. I imagine the kids would simply hire a Financial Advisor who would then blow it up and put it in a few mutual funds. Anyone give any thought to this and how to make a dividend portfolio an inherited item? I have two kids and they could potentially split an income stream worth several hundred thousand per year.

I would just tell them to leave it alone when you pass... to only reinvest income or when something matures... hopefully they will listen to you..

BUT, it will be their money then so as one of my sister's would say 'why are you trying to control their life?'...

 

[dickoncapecod]

Probably should start a separate post but...
I'd love to have my income portfolio inherited as an intact entity when I pass. I imagine the kids would simply hire a Financial Advisor who would then blow it up and put it in a few mutual funds. Anyone give any thought to this and how to make a dividend portfolio an inherited item? I have two kids and they could potentially split an income stream worth several hundred thousand per year.

I have worked hard to make sure my daughter understands the value and, in our case, necessity of keeping my portfolio generally intact. She and her husband are heavy in equity allocations, and she understands the concept of balancing with my income portfolio. If I pre-decease my wife, who is in ungodly expensive custodial ALZ care, my portfolio cash flows are very important. One thing that caught my daughter's attention: when I croak, even if my wife still requires care, she can retire -- if she wishes --- on excess cash flows. Aside from that, I won't know or care what goes on!
Regards, Dick

 

[pb4uski]

Probably should start a separate post but...
I'd love to have my income portfolio inherited as an intact entity when I pass. I imagine the kids would simply hire a Financial Advisor who would then blow it up and put it in a few mutual funds. Anyone give any thought to this and how to make a dividend portfolio an inherited item? I have two kids and they could potentially split an income stream worth several hundred thousand per year.

The only thing that I can think of off the cuff is put the portfolio in a trust with instructions on how it is to be invested and how distributions are to be made to beneficiaries. You could perhaps include provisions of what the trust is NOT to invest in which would handcuff any FA from stupidity.

 

[Flyfish1]

Agree with all of you. Great idea educating the kids over time. All assets are in a Revocable Living Trust at present but there are no specific directions as to how the assets are handled except that they pass to the beneficiaries. Guess it's time to call the Estate Attorney and talk about clarifying some things.

 

[dickoncapecod]

Agree with all of you. Great idea educating the kids over time. All assets are in a Revocable Living Trust at present but there are no specific directions as to how the assets are handled except that they pass to the beneficiaries. Guess it's time to call the Estate Attorney and talk about clarifying some things.

Hi....FWIW, I thought the education of heirs idea was best simply because rigid instructions may not prove beneficial years after they plant me. It's just possible that my 50-ish junior executive daughter might be smart enough to handle her finances!
Regards, Dick

 

[dobig]

I get it. Gambling can lead one to make poor decisions. If you do the math on gambling you don't gamble. Gamblers, for the most part, never consider the math. The same is true of those who buy lottery tickets.

However, doing the math on covered call options leads to a different result. I'm not saying options trading is for everyone, especially for people who don't do the math, but I've learned that doing the math reduces my desire to gamble.

Everyone I have taught my covered call option process has had success. At least that is what they tell me. One of them is even our pastor, and his strongest skill set isn't investing. However, he has one very strong skill set: he knows how to ask good questions to get understanding. Good questions are fundamental for success in options trading.

Finally watched a short video on selling covered calls. Sort of dumbfounded by how simple it is but I feel like I'm still missing something. Is the worst case scenario that your calls expire worthless (meaning you're out nothing?) but you pick up the call premium which is paid as soon as you execute the trade?

I was always under the impression if you did calls or puts you had to hit your strike price or your options expired worthless and you were out the entire amount paid for the contract.


Seems like it's basically free money to do 5 - 10% over the current price calls one month out. If your shares are called you get the up front premium along with the 5 - 10% gain. If nothing happens or the stock even goes down you still get paid the premium and aren't out any money beyond the drop in value of your shares that would have happened regardless.

 

[Koolau]

The only thing that I can think of off the cuff is put the portfolio in a trust with instructions on how it is to be invested and how distributions are to be made to beneficiaries. You could perhaps include provisions of what the trust is NOT to invest in which would handcuff any FA from stupidity.

I'm considering a trust, but have no idea where to start. My only experience with a trust has put me off of them. Anyone know how to "leave" a trust? IOW is there a way to "reach out from the grave to make a difference?"

 

[Texas Proud]

Hi....FWIW, I thought the education of heirs idea was best simply because rigid instructions may not prove beneficial years after they plant me. It's just possible that my 50-ish junior executive daughter might be smart enough to handle her finances!
Regards, Dick

I would not make that assumption for everybody who is highly educated...

I have a niece who is a lawyer and got a job with a city... she had the option to get into a really good pension plan but she thought she was just there for a year or so... well, 5 years later she is still there and cannot get in... a horrible decision.. my sister just did not teach her kids anything... OH, another decision I find bonkers is that she makes minimum payments on her student loans... just does not care how much interest she is paying...

I have heard horror stories from others out there that have advanced degrees or jobs...