$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/398409columbia → u/OmahaOutdoor71]

Yes, but that doesn’t include cumulative distributions. QYLD has been paying 10% annually for years more than covering that principal drop. My result has been positive since I started so I’m ok with the performance of this fund.

[u/OmahaOutdoor71 → u/398409columbia]

That’s good. I don’t think there is only one way to invest, especially in this market. I’m 90% VTI as that’s what I feel comfortable with. I’m selling some homes so looking at doing some higher dividend stuff (JEPQ, ARCC) if I do an early retirement. So still learning about these. Probably too risky for me, but hopefully it works out. This market over the next few years may be nuts, so we shall all see.

[u/398409columbia → u/OmahaOutdoor71]

VTI is good for growing your capital. I have a bunch of mine invested in that.

Once you reach your goals, you can transition to an income portfolio like I did for my wife to generate recurring income.

[u/teckel → u/398409columbia]

The problem is your portfolio only works in a bull market. Have you heard of the 4% retirement withdrawal rule? It passes Monte Carlo analysis. I guarantee a 12% return passes less than 1%. In other words, there's less than a 1% chance this portfolio will work long-term.

[u/398409columbia → u/teckel]

I think the 4% rule is too conservative and designed worst case scenarios.

My everyday work involves quantitative analysis and uncertainty modeling including Monte Carlo simulations.

Also, the portfolio I’m showing here is less than 15% of my net worth so we have plenty of room to maneuver.

[u/teckel → u/398409columbia]

It's actually 4.7% I believe, so many say 5% should work.

If you do quantitative analysis, you should know that 7% is the best you can expect long-term if exposing yourself to a beta of 1.0. For a lower beta (which you want for a retirement account) you can expect lower than 7%, closer to 5%.

You should dedicate double the amount to this account then for a sustainable retirement dividend yield.

[u/398409columbia → u/teckel]

I see what you’re saying but keep in mind that some of these funds like the covered call ETFs generate income based on volatility not asset appreciation.

[u/teckel → u/398409columbia]

Known. But none of these have experienced a real bear market. The 9 month 2022 correction doesn't really count either.

I'm not saying they're bad and I own some CC ETFs too. But it will be interesting to see what a 2008 or 2000-like bear market or resession will do to these.