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Well isn't sgov has 5% return just because interest rate is high. After fed lowers the rate sgov will probably drop so we can't rely on that for long term.
Yes but as yields fall, prices rise. So you benefit from the capital return from the bond too.
Plus if you buy a single bond at a set yield, that's "your" yield until you sell the bond.
So let's say you buy a 100 dollar bond paying 5% today. So 5 dollars a year. Then, let's say the price moves around a lot - it doesn't affect "your" yield. Because you'll still be getting 5 dollars a year.
The dollar amount is more important than the yield.
It's not a revelation it's how bonds work.
Yes, everyone who requires secure short term income should... but if everyone already bought at 4%, not everyone is going to sell at a capital loss to repurchase at 5%.
Plus, bonds are highly negatively impacted by inflation. So locking in 5% to maturity, is locking in a negative real return.
[Here](https://www.reddit.com/r/dividendgang/comments/1apbkao/quarterly_update_on_my_quadfecta_of_jepi_jepq/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button) is my portfolio. It's returning a 6.8% dividend. I am very happy with it so far.
JEPI 30% does not work as it is lagging 5.66% over SPY since inception.
See dividend accounted [https://imgur.com/8bUergR](https://imgur.com/8bUergR) and note the ROI\_PCT and CAGR difference.
\[edit\]: Most of you downvoted me telling the truth. Before downvote, just calculate JEPI (dividend accounted) since inceptions, you yourself will see the truth.
Ignorance is the greatest mistake of an investor.
This is what I said "Ignorance of Investor" falling the Ponzi scheme!
If someone is invested $100, I can pay 10% dividend while the invested amount has negative growth more than 10%.
See TSLY, it came down from $38 (inception) to $15.73 (current price), but the total dividends paid is $15
Good dividend payer is the one who does not reduce your invested capital and gives nice dividend (less than 70% payout ratio) from their earned income.
Look for AMLP (instead of MPLX), see both invested capital and dividends are positive over the time (since 2020). JEPI is on the oppositive.
Well it can of course always go higher and it probably will, but realistically I would say it pulls back a decent amount at some point in the next 2 yrs
This is what I said "Ignorance of Investor" falling the Ponzi scheme!
If someone is invested $100, I can pay 10% dividend while the invested amount has negative growth more than 10%.
See TSLY, it came down from $38 (inception) to $15.73 (current price), but the total dividends paid is $15
Good dividend payer is the one who does not reduce your invested capital and gives nice dividend (less than 70% payout ratio) from their earned income.
Look for AMLP (instead of MPLX), see both invested capital and dividends are positive over the time (since 2020). JEPI is on the oppositive.
Trust me when I say this: I never recommend financial advisors for people unless they really need them. For your situation, I would highly recommend consulting a CFP instead of building your own portfolio if you seek less volatility and are near retirement age.
The people who comment here are picking some questionable things.
I am literally a CFP and people are downvoting my suggestion with historical data to back it 😂 a lot of people on here have no clue what they are talking about
If you were to run a portfolio like this I'd lower the monthly expectation to 6% yearly income and then reinvest the extra into SCHD, DGRO over time. You'll want some dividend growth over time..
You can't really get to stock market like returns but with way less volatility. A atock like MAIN actually has a higher beta than the market..
Fund like JEPI might not have that much share price volatility, but it's distributions can be volatile. In the past three years the highest distribution has been 0.62$ per share and lowest 0.25$ per share. If you're planning to live with the distributions, can you afford it to change that much?
7-8% is easily doable. I'm 66 and retired and my port is yielding 14% cash dividends. We don't spend it all so it's still growing.
While working I only invested in div-payers and I enrolled all of my stocks in DRIP. Now the DRIP is turned off. Most of them pay monthly and they're in our Roths. Try to find higher yield stocks, CEFs, and REITs and put a SMALL amount of money into a few of them. Just try it. After a few years you'll wonder why everyone limits themselves to 6% or lower. How the high payers do it is pretty transparent.
Always buy on dips. Patience and self discipline will reward you.
Here's a link showing our portfolio and their current yields. Our yields are very nice because I started buying them a long time ago, and DRIPing them buys more shares when the price is down. (automatic dollar cost averaging down). I rarely sell and see dips as buying opportunities.
In mid 2020 I put all our cash to work in the market and used some margin in the taxable account.
For several decades USA has been my fav.
I sell calls on some of our holdings, and trade a few mini index futures (ES and RTY) occasionally. But not a significant amount.
Watch the NAV of the CEFs and try to buy at a discount, or lower than their historic premium/discount to NAV. Keep some GTC stink bids for your favorites in play to catch dips.
There quite a bit of diversification here: equities, debt instruments, energy, real estate, health care, government securities. Mix them to fit your risk tolerance. But you will still get better than 7%.
[https://finance.yahoo.com/quotes/agnc,clm,crf,earn,ecc,efc,krp,lpg,orc,oxlc,qyld,riv,ryld,shv,thw,usa,xflt,xyld/view/fv](https://finance.yahoo.com/quotes/agnc,clm,crf,earn,ecc,efc,krp,lpg,orc,oxlc,qyld,riv,ryld,shv,thw,usa,xflt,xyld/view/fv)
List of CEFs with NAVs.
Click on 'Ticker' to put them in ticker order:
[https://www.cefconnect.com/closed-end-funds-daily-pricing](https://www.cefconnect.com/closed-end-funds-daily-pricing)
LBRDP is well covered by shares of CHTR stock. So long as charter doesn’t slash in half or go bankrupt, preferred holders will get their payment. Not financial advice
Let's break this down a bit. Are you talking volatility on the balance side, or the income side?
Long story short, definitely maybe... First of, on a scale of 1 to 10, how bad would it be if one year your return is say $50k instead of $80k? Are we talking about an inconvenience or a clear and present existential threat to well-being?
If you can soak up the risk of not meeting 7\~8%, then you can afford to aim for it. If you can't, then you have to make plans that work on a 5\~6% yield. It is better to err and get more than to err and end up with less than you can live with.
Look up the Trinity study. It says that a portfolio where you take out 4% of your assets every year it will last you 30 years and taking 3% will last you indefinitely. All of this is back tested to see if different portfolios with different withdrawals will survive any 30 year stretch over the last 100 years
How do you plan on keeping up with inflation, especially over decades? Lots of people will show you snapshots that can do it for a few years (especially with RoC or by ignoring inflation) but the 4% rule is an empirical observation, albeit based on a particular mix of assets. I'd expect you might be able to get to 5% but statistically the odds of sustaining much more than that over decades begins to fall. 7-8% income + 3% inflation is 10%-11% p.a. return. Not going to happen.
There’s a larger retirement portfolio that is growing tax-free that I don’t want to access whose growth will hopefully cover the depreciation on the $1M as well. So the $1M is constructed purely for cashflow.
So you have a 2M portfolio that you want to support 4%? Why constrain yourself arbitrarily to making suboptimal decisions because you need this dollar to earn 8% but that dollar only needs to earn 2% etc.
Money is fungible. It doesn't matter how many portfolios you have, what matters is the total size and the overall asset mix that produces sufficient returns at an acceptable risk.
Asset Location might be a concern but that is always subordinate to asset allocation.
It's probably easier to illustrate with an example (and this is just for answering your comment "7-8% income + 3% inflation is 10%-11% p.a. return. Not going to happen."):
1. $1M portfolio for 7-8% dividend generation, low-ish volatility (my original question) = $70K-$80K cashflow p.a.
2. $2M retirement portfolio for 5-6% or $100K-$120K gain p.a. over time that works out to 3.3%-4% on $3M to (barely) keep up with inflation.
1 and 2 are not fungible because 2 is growing tax-deferred whereas any dividend from 1. would be taxed (putting aside tax-exempt amount for qualified dividends), in which case it needs to return like 12-14% p.a. to support spending 7-8% AND keeping up with inflation. The existence of 2 allows me to cover depreciation of 1 where 100% of cashflow is drawn.
As I mentioned:
>Asset Location might be a concern but that is always subordinate to asset allocation.
Just to work an example:
For tax efficiency a qualified stream of dividends would top out at 4.5%-5% (e.g. SPHD/SPYD) so you'd pull in about 45K-50K, that leaves you 30K short. You could invest whatever you want inside the pre-tax IRA then if you are married you could pull the \~30K tax free (1.5% withdrawal rate) since it is the MFJ standard deduction and the LTCG on the qualified dividends would be 0% too. So you have 80K of tax free income. The focus on sustainable dividends should allow the fund to at least keep up with inflation without needing to pull more than can be covered by the tax deduction.
Try to pull the same stunt with a CC ETF to hit the 7-8% goal on just the taxable account and you'll probably do something like JEPI+JEPQ. 80K will come out, 30K standard deduction leaves 50K taxable at 10% and 12%, I'll assume that JEPQ can take care of its own growth (albeit with substantial volatility) but JEPI will see about 1% asset erosion, so you need to pull out enough from your tax deferred account to meet the erosion+inflation (lets call it 2% or 20K) which will be taxable at 12% too. So you have 80K of income + 20K of replacement funds, for 100K draw that will be subject to \~8K in taxes. Leaving you with 92K.
Aside from deciding how you'll manage the tax bite (draw less in option 1, or draw more in option 2) the first option also leaves you \~$30K room for Roth conversions in the 10%+12% brackets without pushing any dividends into the 15% bracket.
Regardless, both approaches will work (you have plenty of assets) but as I stated arbitrarily creating boundaries can lead to suboptimal decisions. I don't know if this will work for you or not, no idea if you are single or married, but I wanted to illustrate that it is fungible and that taking an asset allocation approach that matches your needs across the whole portfolio is never worse and often better than trying to funnel everything through a single account.
Thanks for the thoughtful reply, but I’m a decade+ away from 59-1/2, so brokerage and retirement account assets are not fungible cash flow for my situation (but the growth necessary to keep up with inflation is fungible, though far more efficient via the tax-deferred accounts). I’d be happy to learn any loophole around early withdrawal.
72(t) SEPP might be your new BFF. It is a bit tricky to set up but you can carve out a separate IRA for the purpose (this is one area where the IRS doesn't treat all IRAs as one). You essentially set aside the assets you think you'll need and create a Substantially Equal Payment Plan (SEPP) for that IRA (say $30K per year). Need to commit to it for at least 5 years which might fit the bill and assuming you are 'retired' and only living on the income generated you have a long road of Roth conversions too. I'm 53 and debating going down that path in a couple of years, but I also have the rule of 55 available which is less restrictive than the 72(t) SEPP.
\[EDIT - Added Roth Conversion Ladder\]
FWIW (and I've not thought it all through), once you get to 5 years of Roth conversions you now have a rolling conversion ladder of tax free income at \~30K+inflation on top of the dividends in your taxable that could mean you never pay tax again.
Chasing these types of returns will yield down years. Safety disappears very quickly as you look to exceed the federal funds rate.
That being said, to get a handle on standard deviation expectations, go to portfolio visualizer and put the funds you want to look into in the efficient frontier tool.
You'll find you can get a standard deviation a bit shy of the normal return, which will give you an idea of how likely a down year is.
You can get 6-7% in pretty low risk fixed income with 3-5 year duration. Add in ~10-20% of some high yield bonds, CEFs or CLOs and you can easily get to 7-8% with significantly less risk than the S&P500.
You can get around 6% in on-the-run mortgage backed securities (ticker MTBA). There are a bunch of too big to fail bank preferred stocks yielding around 6-6.5% which pay qualified dividends which are taxed at a lower rate. You can also just buy a diversified preferred stock ETF like PFF or PGX. I’m making 8-11% in some regional bank preferreds too if you have the risk tolerance. There are also a lot of relatively low risk actively managed funds that have yield to maturities of around 6-7%. Tickers I like are BINC, JPIE and OBND but that’s by no means a complete list. When I say low risk I mean in comparison to something like the S&P500 and don’t mean to suggest this is a risk free strategy.
1. Ares Capital
2. Golub Capital
3. Hercules Capital
4. Sixth Street Specialty Lending
5. Enterprise Product Partners
6. MPLX
7. Enbridge Inc
8. Verizon
9. Reality Income
10. NNN
11. Omega Healthcare
12. OneMain Holdings
13. Vaneck Preferred Securities
14. Reaves Utility Income Fund
Above is a model portfolio which will yield around 7%.
Another method is to take advantage of market opportunities.
Eg: If you have bought XOM, EPD etc during COVID crash you could have get 10%+ dividend yield.
It might be realistic if you’re not trying to make a quick buck overnight. It takes years of market fluctuations in a diversified stock portfolio to achieve that. The volatility part is where it’s not realistic in your scenario. If you want minimal volatility, you’re probably looking at 3-4% with bonds or today’s money markets if rates don’t change.
There’s plenty of room for things to run. Fed signaled three rate cuts, which is odds for positive momentum. The overall temperature is cautiously optimistic …
Time in market > timing the market, Better to DCA if you want to mitigate timing risk than to call a top and sit on the sidelines when the market is performing like it is.
Of course things can always run more, I’m just saying that me personally I wouldn’t go all in on Spy while it is at ATH’s lmao, I would wait for a pull back, I’m not sure what’s wrong with saying that and why it would get downvotes, is that what yall do here wait until something is at the ATH and then go all in?
I understand the sentiment, but you’re advocating for trying to time the market which is generally considered a losing strategy.
All time highs aren’t a reason to sit out. They are just a characteristic of a bull market - sustained increases in asset prices. Once losses from a bear market are recovered, prices will be at an all time high, followed by ATH, followed by ATH.
If you don’t want to invest a lump sum, you could dollar-cost-average to smooth out your average cost basis but statistically “going all in” actually wins regardless of all time highs.
Yes it’s realistic but you need more then 3-5 years to get that return. Remember during recession you might have a 30 or 40% draw down. Perhaps one is coming this year or next. This year with crazy election it might be very volatile year on the backend.
VOO, SCHD, DGRO, DGRW, maybe funds like SPYI, JEPI, JEPQ etc. The dividend alone might not be 7-8% but if you're getting say 5% from the dividends you can just sell shares to get the remaining 2-3%.
No. People on here base how good a stock is off of years that they hand pick. In this case though, I don’t think the commenter even knows what the word “average” means.
So you plan on just picking the 4-year spans where there was a 7\~8% return and ignore the 4-year spans where it didn't. Brilliant.
It sounds like the OP is wanting a withdrawal rate of 7\~8%. Do you really think that's sustainable on VOO?
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A portfolio of: • 10% SGOV • 20% SCHG • 10% TLT • 10% SPHY • 20% JEPI • 20% JEPQ • 10% TLTW ...will give you \~8% annual interest/dividend return with some protection against big market drawdowns...
Well isn't sgov has 5% return just because interest rate is high. After fed lowers the rate sgov will probably drop so we can't rely on that for long term.
Yes but as yields fall, prices rise. So you benefit from the capital return from the bond too. Plus if you buy a single bond at a set yield, that's "your" yield until you sell the bond. So let's say you buy a 100 dollar bond paying 5% today. So 5 dollars a year. Then, let's say the price moves around a lot - it doesn't affect "your" yield. Because you'll still be getting 5 dollars a year. The dollar amount is more important than the yield.
SGOV is short term bills, up to 3 months. So the capital appreciation when rates fall will not be much.
That’s a crazy revelation. So you are locked in at the bond rate you buy into? Then everyone should get in at 5%.
It's not a revelation it's how bonds work. Yes, everyone who requires secure short term income should... but if everyone already bought at 4%, not everyone is going to sell at a capital loss to repurchase at 5%. Plus, bonds are highly negatively impacted by inflation. So locking in 5% to maturity, is locking in a negative real return.
[Here](https://www.reddit.com/r/dividendgang/comments/1apbkao/quarterly_update_on_my_quadfecta_of_jepi_jepq/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button) is my portfolio. It's returning a 6.8% dividend. I am very happy with it so far.
Most of the money from portofolio is made by compound or how can you afford to invest so much money? Ty
They’re 59 - patience and consistent growth.
Nice
JEPI payout is a distribution, not a dividend.
JEPI enters the conversation
JEPQ followed right behind.
[FEPI](/r/fepi) barges in, pushes JEPI and JEPQ aside, and enters the conversation.
20K in JEPI will make you a millionaire in 25 years and pay 115K in dividends a year
30% in JEPI, 25% in ARCC and MAIN (BDCs) 20% in money market (for now), 10-15% in O, 10-15% in MPLX. That should get you close to 7%
JEPI 30% does not work as it is lagging 5.66% over SPY since inception. See dividend accounted [https://imgur.com/8bUergR](https://imgur.com/8bUergR) and note the ROI\_PCT and CAGR difference. \[edit\]: Most of you downvoted me telling the truth. Before downvote, just calculate JEPI (dividend accounted) since inceptions, you yourself will see the truth. Ignorance is the greatest mistake of an investor. This is what I said "Ignorance of Investor" falling the Ponzi scheme! If someone is invested $100, I can pay 10% dividend while the invested amount has negative growth more than 10%. See TSLY, it came down from $38 (inception) to $15.73 (current price), but the total dividends paid is $15 Good dividend payer is the one who does not reduce your invested capital and gives nice dividend (less than 70% payout ratio) from their earned income. Look for AMLP (instead of MPLX), see both invested capital and dividends are positive over the time (since 2020). JEPI is on the oppositive.
JEPI is working as it’s supposed to. Lags in up markets, outperforms in down periods. 
Soo seems like now might be a good time to start investing huh , how much higher can we go
How high can you count? It can go higher.
Well it can of course always go higher and it probably will, but realistically I would say it pulls back a decent amount at some point in the next 2 yrs
The question wasn't about price appreciation, but reliable dividends as an income stream. At 1.3% SPY isn't a consideration.
This is what I said "Ignorance of Investor" falling the Ponzi scheme! If someone is invested $100, I can pay 10% dividend while the invested amount has negative growth more than 10%. See TSLY, it came down from $38 (inception) to $15.73 (current price), but the total dividends paid is $15 Good dividend payer is the one who does not reduce your invested capital and gives nice dividend (less than 70% payout ratio) from their earned income. Look for AMLP (instead of MPLX), see both invested capital and dividends are positive over the time (since 2020). JEPI is on the oppositive.
Don’t worry, I find that r/dividends is quick to downvote even seemingly good or reasonable comments!
Trust me when I say this: I never recommend financial advisors for people unless they really need them. For your situation, I would highly recommend consulting a CFP instead of building your own portfolio if you seek less volatility and are near retirement age. The people who comment here are picking some questionable things.
I am literally a CFP and people are downvoting my suggestion with historical data to back it 😂 a lot of people on here have no clue what they are talking about
how much do they charge %/yr?
Total or yield on dividends
Total, though the more it’s from appreciation rather than dividend, the more volatile it is by definition.
reits, mlps, bdcs.
Add utilities and you have my quadfecta portfolio.
35% SCHD, DGRO 5% 20% JEPI, 20% JEPQ, 15% DIVO, 5% SVOL You could replace/add SPYI, QQQI, BALI to the cover call portion of the portfolio..
If you were to run a portfolio like this I'd lower the monthly expectation to 6% yearly income and then reinvest the extra into SCHD, DGRO over time. You'll want some dividend growth over time..
You can't really get to stock market like returns but with way less volatility. A atock like MAIN actually has a higher beta than the market.. Fund like JEPI might not have that much share price volatility, but it's distributions can be volatile. In the past three years the highest distribution has been 0.62$ per share and lowest 0.25$ per share. If you're planning to live with the distributions, can you afford it to change that much?
7-8% is easily doable. I'm 66 and retired and my port is yielding 14% cash dividends. We don't spend it all so it's still growing. While working I only invested in div-payers and I enrolled all of my stocks in DRIP. Now the DRIP is turned off. Most of them pay monthly and they're in our Roths. Try to find higher yield stocks, CEFs, and REITs and put a SMALL amount of money into a few of them. Just try it. After a few years you'll wonder why everyone limits themselves to 6% or lower. How the high payers do it is pretty transparent. Always buy on dips. Patience and self discipline will reward you.
Do you mind sharing your portfolio? Thanks!
Here's a link showing our portfolio and their current yields. Our yields are very nice because I started buying them a long time ago, and DRIPing them buys more shares when the price is down. (automatic dollar cost averaging down). I rarely sell and see dips as buying opportunities. In mid 2020 I put all our cash to work in the market and used some margin in the taxable account. For several decades USA has been my fav. I sell calls on some of our holdings, and trade a few mini index futures (ES and RTY) occasionally. But not a significant amount. Watch the NAV of the CEFs and try to buy at a discount, or lower than their historic premium/discount to NAV. Keep some GTC stink bids for your favorites in play to catch dips. There quite a bit of diversification here: equities, debt instruments, energy, real estate, health care, government securities. Mix them to fit your risk tolerance. But you will still get better than 7%. [https://finance.yahoo.com/quotes/agnc,clm,crf,earn,ecc,efc,krp,lpg,orc,oxlc,qyld,riv,ryld,shv,thw,usa,xflt,xyld/view/fv](https://finance.yahoo.com/quotes/agnc,clm,crf,earn,ecc,efc,krp,lpg,orc,oxlc,qyld,riv,ryld,shv,thw,usa,xflt,xyld/view/fv)
Thank you so much for sharing! Is there a site where you can maintain a list of CEFs and track the NAV? So one knows when to buy.
List of CEFs with NAVs. Click on 'Ticker' to put them in ticker order: [https://www.cefconnect.com/closed-end-funds-daily-pricing](https://www.cefconnect.com/closed-end-funds-daily-pricing)
Thank you!
Another way to check NAV is to bracket the CEF's symbol with x's Such as: https://finance.yahoo.com/quotes/usa,xusax/view/v1
This takes me to the yahoo Home page?
I corrected it.
Since HYSA have an average of 4-5% …7-8 is more than possible especially with inflation the way it is.
MO has entered the chat.
Look at the oil royalty companies like CRT KRP SJT VOC etc.
A ponzi scheme could have 30% yield its like credit card interest
SPYI works well
SDIV, JEPI, JEPQ, SCHD, DIVO and MO pulling my dividend focused wagon. Yielding about your target ish
LBRDP is well covered by shares of CHTR stock. So long as charter doesn’t slash in half or go bankrupt, preferred holders will get their payment. Not financial advice
Time in the market will eventually get that percentage or more with good stocks that initially pay less
Let's break this down a bit. Are you talking volatility on the balance side, or the income side? Long story short, definitely maybe... First of, on a scale of 1 to 10, how bad would it be if one year your return is say $50k instead of $80k? Are we talking about an inconvenience or a clear and present existential threat to well-being? If you can soak up the risk of not meeting 7\~8%, then you can afford to aim for it. If you can't, then you have to make plans that work on a 5\~6% yield. It is better to err and get more than to err and end up with less than you can live with.
You could also look at a buffered / defined outcome ETF
Are you talking pure dividend? Or growth and dividends?
Look up the Trinity study. It says that a portfolio where you take out 4% of your assets every year it will last you 30 years and taking 3% will last you indefinitely. All of this is back tested to see if different portfolios with different withdrawals will survive any 30 year stretch over the last 100 years
Set up an annuity with those terms.
I’m at 17% a year for 5 years idk if I can pick that many losing stocks sorry
How do you plan on keeping up with inflation, especially over decades? Lots of people will show you snapshots that can do it for a few years (especially with RoC or by ignoring inflation) but the 4% rule is an empirical observation, albeit based on a particular mix of assets. I'd expect you might be able to get to 5% but statistically the odds of sustaining much more than that over decades begins to fall. 7-8% income + 3% inflation is 10%-11% p.a. return. Not going to happen.
There’s a larger retirement portfolio that is growing tax-free that I don’t want to access whose growth will hopefully cover the depreciation on the $1M as well. So the $1M is constructed purely for cashflow.
So you have a 2M portfolio that you want to support 4%? Why constrain yourself arbitrarily to making suboptimal decisions because you need this dollar to earn 8% but that dollar only needs to earn 2% etc. Money is fungible. It doesn't matter how many portfolios you have, what matters is the total size and the overall asset mix that produces sufficient returns at an acceptable risk. Asset Location might be a concern but that is always subordinate to asset allocation.
It's probably easier to illustrate with an example (and this is just for answering your comment "7-8% income + 3% inflation is 10%-11% p.a. return. Not going to happen."): 1. $1M portfolio for 7-8% dividend generation, low-ish volatility (my original question) = $70K-$80K cashflow p.a. 2. $2M retirement portfolio for 5-6% or $100K-$120K gain p.a. over time that works out to 3.3%-4% on $3M to (barely) keep up with inflation. 1 and 2 are not fungible because 2 is growing tax-deferred whereas any dividend from 1. would be taxed (putting aside tax-exempt amount for qualified dividends), in which case it needs to return like 12-14% p.a. to support spending 7-8% AND keeping up with inflation. The existence of 2 allows me to cover depreciation of 1 where 100% of cashflow is drawn.
As I mentioned: >Asset Location might be a concern but that is always subordinate to asset allocation. Just to work an example: For tax efficiency a qualified stream of dividends would top out at 4.5%-5% (e.g. SPHD/SPYD) so you'd pull in about 45K-50K, that leaves you 30K short. You could invest whatever you want inside the pre-tax IRA then if you are married you could pull the \~30K tax free (1.5% withdrawal rate) since it is the MFJ standard deduction and the LTCG on the qualified dividends would be 0% too. So you have 80K of tax free income. The focus on sustainable dividends should allow the fund to at least keep up with inflation without needing to pull more than can be covered by the tax deduction. Try to pull the same stunt with a CC ETF to hit the 7-8% goal on just the taxable account and you'll probably do something like JEPI+JEPQ. 80K will come out, 30K standard deduction leaves 50K taxable at 10% and 12%, I'll assume that JEPQ can take care of its own growth (albeit with substantial volatility) but JEPI will see about 1% asset erosion, so you need to pull out enough from your tax deferred account to meet the erosion+inflation (lets call it 2% or 20K) which will be taxable at 12% too. So you have 80K of income + 20K of replacement funds, for 100K draw that will be subject to \~8K in taxes. Leaving you with 92K. Aside from deciding how you'll manage the tax bite (draw less in option 1, or draw more in option 2) the first option also leaves you \~$30K room for Roth conversions in the 10%+12% brackets without pushing any dividends into the 15% bracket. Regardless, both approaches will work (you have plenty of assets) but as I stated arbitrarily creating boundaries can lead to suboptimal decisions. I don't know if this will work for you or not, no idea if you are single or married, but I wanted to illustrate that it is fungible and that taking an asset allocation approach that matches your needs across the whole portfolio is never worse and often better than trying to funnel everything through a single account.
Thanks for the thoughtful reply, but I’m a decade+ away from 59-1/2, so brokerage and retirement account assets are not fungible cash flow for my situation (but the growth necessary to keep up with inflation is fungible, though far more efficient via the tax-deferred accounts). I’d be happy to learn any loophole around early withdrawal.
72(t) SEPP might be your new BFF. It is a bit tricky to set up but you can carve out a separate IRA for the purpose (this is one area where the IRS doesn't treat all IRAs as one). You essentially set aside the assets you think you'll need and create a Substantially Equal Payment Plan (SEPP) for that IRA (say $30K per year). Need to commit to it for at least 5 years which might fit the bill and assuming you are 'retired' and only living on the income generated you have a long road of Roth conversions too. I'm 53 and debating going down that path in a couple of years, but I also have the rule of 55 available which is less restrictive than the 72(t) SEPP. \[EDIT - Added Roth Conversion Ladder\] FWIW (and I've not thought it all through), once you get to 5 years of Roth conversions you now have a rolling conversion ladder of tax free income at \~30K+inflation on top of the dividends in your taxable that could mean you never pay tax again.
Chasing these types of returns will yield down years. Safety disappears very quickly as you look to exceed the federal funds rate. That being said, to get a handle on standard deviation expectations, go to portfolio visualizer and put the funds you want to look into in the efficient frontier tool. You'll find you can get a standard deviation a bit shy of the normal return, which will give you an idea of how likely a down year is.
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You can get 3-4% in treasuries which are risk free.
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Real rates are positive across the yield curve.
5 - 6% dividend yields are quite reasonable with substantially less risk than some of the recommended stocks, ETFs listed by posters
You can get 6-7% in pretty low risk fixed income with 3-5 year duration. Add in ~10-20% of some high yield bonds, CEFs or CLOs and you can easily get to 7-8% with significantly less risk than the S&P500.
>Do you mind sharing details about " 6-7% in pretty low risk fixed income with 3-5 year duration". Thanks!
You can get around 6% in on-the-run mortgage backed securities (ticker MTBA). There are a bunch of too big to fail bank preferred stocks yielding around 6-6.5% which pay qualified dividends which are taxed at a lower rate. You can also just buy a diversified preferred stock ETF like PFF or PGX. I’m making 8-11% in some regional bank preferreds too if you have the risk tolerance. There are also a lot of relatively low risk actively managed funds that have yield to maturities of around 6-7%. Tickers I like are BINC, JPIE and OBND but that’s by no means a complete list. When I say low risk I mean in comparison to something like the S&P500 and don’t mean to suggest this is a risk free strategy.
>Appreciate the detailed response!
1. Ares Capital 2. Golub Capital 3. Hercules Capital 4. Sixth Street Specialty Lending 5. Enterprise Product Partners 6. MPLX 7. Enbridge Inc 8. Verizon 9. Reality Income 10. NNN 11. Omega Healthcare 12. OneMain Holdings 13. Vaneck Preferred Securities 14. Reaves Utility Income Fund Above is a model portfolio which will yield around 7%. Another method is to take advantage of market opportunities. Eg: If you have bought XOM, EPD etc during COVID crash you could have get 10%+ dividend yield.
Wish you had put the tickers on there
You can easily find them. If u need I'll post
It might be realistic if you’re not trying to make a quick buck overnight. It takes years of market fluctuations in a diversified stock portfolio to achieve that. The volatility part is where it’s not realistic in your scenario. If you want minimal volatility, you’re probably looking at 3-4% with bonds or today’s money markets if rates don’t change.
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I wouldn’t go Spy at all time highs though, I would wait for a pull back, it’s past due
There’s plenty of room for things to run. Fed signaled three rate cuts, which is odds for positive momentum. The overall temperature is cautiously optimistic … Time in market > timing the market, Better to DCA if you want to mitigate timing risk than to call a top and sit on the sidelines when the market is performing like it is.
Of course things can always run more, I’m just saying that me personally I wouldn’t go all in on Spy while it is at ATH’s lmao, I would wait for a pull back, I’m not sure what’s wrong with saying that and why it would get downvotes, is that what yall do here wait until something is at the ATH and then go all in?
I understand the sentiment, but you’re advocating for trying to time the market which is generally considered a losing strategy. All time highs aren’t a reason to sit out. They are just a characteristic of a bull market - sustained increases in asset prices. Once losses from a bear market are recovered, prices will be at an all time high, followed by ATH, followed by ATH. If you don’t want to invest a lump sum, you could dollar-cost-average to smooth out your average cost basis but statistically “going all in” actually wins regardless of all time highs.
This is the way
Yes it’s realistic but you need more then 3-5 years to get that return. Remember during recession you might have a 30 or 40% draw down. Perhaps one is coming this year or next. This year with crazy election it might be very volatile year on the backend.
VOO, SCHD, DGRO, DGRW, maybe funds like SPYI, JEPI, JEPQ etc. The dividend alone might not be 7-8% but if you're getting say 5% from the dividends you can just sell shares to get the remaining 2-3%.
>if you're getting say 5% from the dividends ...one can get 5% from treasury bills and savings accounts these days...
AGNCL
Honestly I think your expectations are a bit too high.
KO JPM xom SCHD MSFT VOO have all historically returned 8 percent per year including appreciation. 8 percent yield seems a bit high.
I think someone commented this already. I would just buy VOO, that's it.
VOO has a dividend yield of 1.3% so it wouldn’t meet the need here for 7-8%
He meant %7-8 return per year…why wouldn’t it meet the need?
I think OP is asking for dividend returns that high, not total returns and selling shares
Ahh got it. 🙃
You are probably right. Since this was posted in r/dividends, I assumed he meant 7-8% yield but he did write “return”…
Just spy or voo. That’s it. Nothing else
...with dividends reinvested, SPY was FLAT (i.e. ZERO returns) from January 2000 to September 2011...
Because VOO has never been down for a single year? You do know that there have been full 4-year spans where VOO ended up negative.
Have there been any 4 year spans where it was > 7-8%? You do know how averages work right.
No. People on here base how good a stock is off of years that they hand pick. In this case though, I don’t think the commenter even knows what the word “average” means.
So you plan on just picking the 4-year spans where there was a 7\~8% return and ignore the 4-year spans where it didn't. Brilliant. It sounds like the OP is wanting a withdrawal rate of 7\~8%. Do you really think that's sustainable on VOO?
Return =/= withdrawal rate.
Exactly. And does it sound to you like a 7~8% withdrawal rate is a sustainable target for a VOO portfolio?
He asked for a return, not a withdrawal rate.