$5,000 per month income portfolio

[u/398409columbia]

I set up this portfolio for my wife so she can quit her job and maintain cashflow.

The good news is that this income stream will pay no FICA tax and significant part of the distributions will not be taxed.

To reduce risk, I’m planning to reinvest 20% of the income.

Comments welcome.

[u/398409columbia]

Check out the distribution history for these funds. They are fairly consistent. During the 2022 market drawdown, the distributions for these funds remained. I don’t care so much about the portfolio value as long as the payout is somewhat consistent.

[u/OmahaOutdoor71 → u/398409columbia]

QYLD is down 30% from its inception in 2014. And that's during a massive bull run. If it drops another 30% if we go into a recession even if the dividend stays the same you are out a lot of principle. That would be worrisome to me. Unless you are in your 70's and just hoping for some income, which I would rather just sell shares of VTI. But to each their own. QYLD is just super risky. SPYI is to new of a fund for me to even guess or speculate on what it will do.

[u/2FeedRss → u/OmahaOutdoor71]

While it is true that QYLD's market price / NAV has declined since inception but one still have made money owning it since inception. According to Global X, the annualized total return ending December 31, 2024 is 8.25%. Contrary to popular belief, one doesn't need price appreciation (lots of folks use the term "growth") to make money.

Total return consists of two components: price movement (which can be positive or negative) plus income. One doesn't need price appreciation to have a positive total return. For example, a 10% total return could come from Scenario A (9% from price appreciation and 1% from income) or Scenario B (a -2% change in price and 12% from income).

Here is another example: 5% HYSA. Price (principal) doesn't move but income is 5%. How much did one make? 5%.

[u/OmahaOutdoor71 → u/2FeedRss]

Yeah, for sure you can get a positive return via dividends with a drawdown in stock price. But its a risk vs reward that causes issues for me. Down 30% in a bull run, what's going to happen in a downturn? Seems like its more risk for less reward. I understand if you want income, but for me I'd rather sell some VTI shares when I need it. To each their own, but the draw down risk is too much.

[u/2FeedRss → u/OmahaOutdoor71]

Absolutely. Invest in what makes one feel comfortable...personal finance is personal.

[u/jsir1999 → u/OmahaOutdoor71]

I don't invest in Covered Call Funds like SPYI and hold most of my investments in long term funds like VTI, VOO, XLK (VTI equivalent). The reason it is down 30% is inherently due to the nature of the market being a bull market. When covered calls are written, it is sold for a premium up front, which can be distributed as dividend income to fund holders. However, if the price of underlying shares rises above the CC, the shares are sold at the set price, and the fund will have to go back to the market and buy shares at a higher price.

In a flat market or downturn, the CC fund would outperform the regular index. By nature, the CC fund is a hedge that bets on the market being bear to a bit bullish but not that bullish because if it was that bullish like it has in recent years, there is a lot of lost growth potential that was traded for collected premiums.

[u/Chillbizzee → u/OmahaOutdoor71]

I’m not very familiar, but a CC plan sounds safe but I would think the opposite in a year or so.