Investments to Generate Revenue

[cchoukal]

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Thought exercise:

So let's say you have a million bucks sitting around, and you wanted to invest it in such a way that it provided revenue, as opposed to growth for retirement. Think either a bit of salary replacement in order to work less, or maybe cover your housing costs (I assume most of you wouldn't just use it to pay off a mortgage at 3.5%). Where would you put it? Are there mutual funds comprised solely of dividend-earning stocks that kick out money? Annuities (ha!)? Laddered CDs and just accept low, guaranteed returns?

What say you?

 

[ethilo]

buy a house near a nice private college or medical school nearby and rent it to students. +/- property management company depending on your hobbies / interest. Then buy more of them and keep it coming.

 

[cchoukal]

Let’s say we wanted to be as passive as possible...

 

[okayplayer]

There are high dividend funds/REIT funds but they are sensitive to interest rate changes. When looked at over the long term, they don’t outperform a general total market index fund.

You could always put the 1mill in VTSAX and just transfer the dividends to your checking account. Only 2% or so but your original million will continue to grow that whole time, as will your dividend payments. In the end this will result in the best performance of that 1 million dollars.

A nice alternative if you want larger and more tax advantaged dividends is a California municipal bond fund (I think you are still in CA). Federal and state income tax free. Should return in the 3%+ range and be pretty stable.

Or do a combination of all of the above.

You have lots of options but ultimately it depends on your risk tolerance with the money and what your goals are (more money in the long run or more money as quarterly distributions).

 

[deleted480308]

Thought exercise:

So let's say you have a million bucks sitting around, and you wanted to invest it in such a way that it provided revenue, as opposed to growth for retirement. Think either a bit of salary replacement in order to work less, or maybe cover your housing costs (I assume most of you wouldn't just use it to pay off a mortgage at 3.5%). Where would you put it? Are there mutual funds comprised solely of dividend-earning stocks that kick out money? Annuities (ha!)? Laddered CDs and just accept low, guaranteed returns?

What say you?

@thewhitecoatinvestor just had an article about dividend stocks having potentially misleading returns

I’d say almost nothing pays better than being completely debt free

 

[Mman]

Thought exercise:

So let's say you have a million bucks sitting around, and you wanted to invest it in such a way that it provided revenue, as opposed to growth for retirement. Think either a bit of salary replacement in order to work less, or maybe cover your housing costs (I assume most of you wouldn't just use it to pay off a mortgage at 3.5%). Where would you put it? Are there mutual funds comprised solely of dividend-earning stocks that kick out money? Annuities (ha!)? Laddered CDs and just accept low, guaranteed returns?

What say you?

You could certainly invest in a dividend focused ETF such as SDY that currently has a 2.41% yield and would send you cash quarterly from those dividends. Although mathematically there is no benefit to doing that compared to just investing in a total market ETF that does not pay a dividend and just sell shares on a quarterly or annual basis to effectively create your own dividend from the proceeds.

If you are using dividends as a "salary replacement", though, it's important to remember that dividends can and do get cut periodically.

 

[DM27]

When it comes to investing you will have a lot of trouble competing with a boring total market fund. Dividend oriented investing often produces worse yields and the current trend in the market is lower dividends and larger stock buybacks.

 

[dmk5n]

Worth a look:

J collins take on Dividend growth investing.

https://jlcollinsnh.com/2011/12/27/dividend-growth-investing/

Mr Money Mustache. (referenced in above article)

Guest Posting from Dividend Mantra : What is Dividend Growth Investing?

Hello everyone. MMM here. Over the next few weeks, we shall dive into the exciting field of Dividends – the magical stream of free money that companies pay you just for owning their stocks. I…

www.mrmoneymustache.com

go curry cracker.

How Do I Live Off Just Dividends? - Go Curry Cracker!

How do I love off just dividends? Simple. I don't. Realizing capital gains and spending some principal is a fine way to pay the bills in retirement.

www.gocurrycracker.com

 

[Impromptu]

REITs will often give you larger dividends, but your total net worth will not grow as much as with the traditional total stock market investment. Despite the glamor of dividends, total net worth growth is more important. It is really easy to sell an old ETF or mutual fund and just pay the low long term capital gains rate. It will take about 5 minutes of your time, with 4.5 minutes figuring out which lot to sell and 30 seconds to execute the trade. Taxes are no harder, as you simply import your taxable account data as you usually would, and the computer figures out what sales or dividends go where.

 

[powermd]

Thought exercise:

So let's say you have a million bucks sitting around, and you wanted to invest it in such a way that it provided revenue, as opposed to growth for retirement. Think either a bit of salary replacement in order to work less, or maybe cover your housing costs (I assume most of you wouldn't just use it to pay off a mortgage at 3.5%). Where would you put it? Are there mutual funds comprised solely of dividend-earning stocks that kick out money? Annuities (ha!)? Laddered CDs and just accept low, guaranteed returns?

What say you?

I would buy a $hit ton of Verizon. 4% dividend and lots of potential for growth over the next few years with 5G. Large, stable company with limited downside. Earnings this AM. Will be interesting to see what kind of progress they're making.

 

[okayplayer]

On second thought, I would buy $1,000,000 of VTSAX and just follow the 4% rule as during retirement and withdraw $40k/yr.

 

[Mman]

I would buy a $hit ton of Verizon. 4% dividend and lots of potential for growth over the next few years with 5G. Large, stable company with limited downside. Earnings this AM. Will be interesting to see what kind of progress they're making.

because ya that seems like a great answer if you are looking for stable longterm income, just plow it all into one company. What could wrong?????

 

[narcotics999]

I would buy a $hit ton of Verizon. 4% dividend and lots of potential for growth over the next few years with 5G. Large, stable company with limited downside. Earnings this AM. Will be interesting to see what kind of progress they're making.

Seems att better. Pe 11 vs 15, dividend 6ish vs 4ish?

 

[okayplayer]

Have you guy heard of Enron? PG&E? Don’t put that much money in one company, please. Bad idea.

 

[pgg]

(I assume most of you wouldn't just use it to pay off a mortgage at 3.5%).

We just found a buyer for our one rental property. Closing next month. We were lucky and it appreciated a lot since we bought it as a short sale in 2009. Proceeds will be used to pay off the 4.25% mortgage in the house we live in. We'd rather have zero debt, zero headaches, and a simple lazy portfolio than that (or a different) revenue producing asset.

 

[sethco]

Out of the box, and somewhat morbid, maybe invest in Viaticals? I think it is an ethical issue and I would never invest a large amount, but for those willing, this would definitely be an alternative investment, although doesn't really kick out "dividends"

Investing in Life Settlements (Viaticals) | White Coat Investor

Investing in life settlements, is it morbid? Of course. But that doesn't bother me. What bothered me was the way the investment was being sold. Here are some cautions before jumping in.

www.whitecoatinvestor.com

What is a Viatical?

What is viatical? Learn about viatical settlements, viatical life insurance settlements. Get your life insurance policy appraised before throwing it away.

viatical.org

 

[leaverus]

nice timely post. I too would like a secondary source of passive revenue; making very good income right now for my part of the country but having to put in the hours for it.

On second thought, I would buy $1,000,000 of VTSAX and just follow the 4% rule as during retirement and withdraw $40k/yr.

i assume you mean at least 4% return on that vtsax so that principal never gets touched? ideally i'd like to start building generational wealth so that my kids (if i ever have any) can have some freedom in life.

 

[okayplayer]

nice timely post. I too would like a secondary source of passive revenue; making very good income right now for my part of the country but having to put in the hours for it.



i assume you mean at least 4% return on that vtsax so that principal never gets touched? ideally i'd like to start building generational wealth so that my kids (if i ever have any) can have some freedom in life.

The 4% rule is often quoted as retirement gospel. Essentially when you simulate all plausible market outcomes over various scenarios, if all you withdraw is 4% of your account balance per year, it will last forever >95% of the time.

**edit: assumption is you are retirement age when you start withdrawing. Some advocate a 3.5% safe withdrawal rate for early retirees.

What Is the 4% Rule for Withdrawals in Retirement?

The 4% rule is a guideline for withdrawing money from a retirement account regularly. It is designed to sustain your retirement without depleting your funds.

www.investopedia.com

If your goal is not extra cash flow today but growing your net worth over the long run, still buy $1,000,000 of VTSAX but reinvest dividends and don’t sell any of it until you retire/need the funds.

 

[Mman]

The 4% rule is often quoted as retirement gospel. Essentially when you simulate all plausible market outcomes over various scenarios, if all you withdraw is 4% of your account balance per year, it will last forever >95% of the time.

**edit: assumption is you are retirement age when you start withdrawing. Some advocate a 3.5% safe withdrawal rate for early retirees.

What Is the 4% Rule for Withdrawals in Retirement?

The 4% rule is a guideline for withdrawing money from a retirement account regularly. It is designed to sustain your retirement without depleting your funds.

www.investopedia.com

If your goal is not extra cash flow today but growing your net worth over the long run, still buy $1,000,000 of VTSAX but reinvest dividends and don’t sell any of it until you retire/need the funds.

For the sake of discussion, the 4% rule was based on studies looking at a 30 year retirement timeline, not lasting "forever". If you want money to last forever, you probably need to be down in the 2% (or maybe 3%) range of withdrawals.

 

[emergentmd]

If you are ok with some risks, although I think somewhat low, I would put it all in Syndicated apartments.

I have 250K in it now, and get tax free (8%)$1600/mo with hopes for cash out. If I could ever get to $1Mil, I would cover 1/3 of my income. 1/3 towards retirement.

 

[vector2]

With $1m, I'd wait for a bit of a correction (5-15%) and over the course of a couple months buy 500k of VTI (the ETF for VTSAX), 250k of VIG, 125k VYM, and 125k of HYD or some other high yield muni fund.

 

[Lonestar]

There are high dividend funds/REIT funds but they are sensitive to interest rate changes. When looked at over the long term, they don’t outperform a general total market index fund.

You could always put the 1mill in VTSAX and just transfer the dividends to your checking account. Only 2% or so but your original million will continue to grow that whole time, as will your dividend payments. In the end this will result in the best performance of that 1 million dollars.

A nice alternative if you want larger and more tax advantaged dividends is a California municipal bond fund (I think you are still in CA). Federal and state income tax free. Should return in the 3%+ range and be pretty stable.

Or do a combination of all of the above.

You have lots of options but ultimately it depends on your risk tolerance with the money and what your goals are (more money in the long run or more money as quarterly distributions).

Let’s say we wanted to be as passive as possible...

Thought exercise:

So let's say you have a million bucks sitting around, and you wanted to invest it in such a way that it provided revenue, as opposed to growth for retirement. Think either a bit of salary replacement in order to work less, or maybe cover your housing costs (I assume most of you wouldn't just use it to pay off a mortgage at 3.5%). Where would you put it? Are there mutual funds comprised solely of dividend-earning stocks that kick out money? Annuities (ha!)? Laddered CDs and just accept low, guaranteed returns?

Thought exercise:

So let's say you have a million bucks sitting around, and you wanted to invest it in such a way that it provided revenue, as opposed to growth for retirement. Think either a bit of salary replacement in order to work less, or maybe cover your housing costs (I assume most of you wouldn't just use it to pay off a mortgage at 3.5%). Where would you put it? Are there mutual funds comprised solely of dividend-earning stocks that kick out money? Annuities (ha!)? Laddered CDs and just accept low, guaranteed returns?

What say you?

I would put half in dividend paying stocks like PM, T, MO and other half in vanguard money market account. As passive as it gets.

 

[Wiscoblue]

VTI

 

[deleted50478]

Seems att better. Pe 11 vs 15, dividend 6ish vs 4ish?

Without knowing either stock well, the higher PE ratio and lower dividend shows that the market has higher expectations from Verizon. Unless you have some inside information suggesting that the market is wrong, I wouldn’t take lower PE ratio as an indication to buy.

 

[sleepallday]

Has anyone tried real estate syndication? Most of the platforms claim equity multiple >2 over 3-5 year holds. Can't really get more passive then this.

 

[cde]

Bond ladder, Insured Grade A municipal bonds if you are in a state with income tax