Where are people investing for income these days?

[james.hendrickson]

@amarowsky

It is usually really hard to sustain business growth of 10%, much less dividends of 10%. Whats your sense of how these funds are able to do that? Obviously they get some money from the companies they own shares in, but where does the rest of the revenue come from?

[corn18]

The S&P 500 has returned 14.432% annually over the last 10 years. You can invest in that with zero fees.

As for where to invest for income, I just do what I always do: 60/40 stocks / fixed income with 25% of my stocks in international. I guess I'm not an income investor. I buy positions when I have money and I sell positions when I need money. Pretty simple.

[disneysteve]

The S&P 500 has returned 14.432% annually over the last 10 years. You can invest in that with zero fees.

As for where to invest for income, I just do what I always do: 60/40 stocks / fixed income with 25% of my stocks in international. I guess I'm not an income investor. I buy positions when I have money and I sell positions when I need money. Pretty simple.

You're certainly not wrong, but you're talking about two different things: investing for growth vs. investing for income.

With growth investing, you want to see the value of your holdings rise over time. If you buy a stock for $10/share, in 10 years you hope it will be $50/share. With income investing, you aren't concerned with the value rising. You care primarily about the periodic income it throws off. If it's $10/share now and 10 years from now it's still $10/share, that's just fine if all along it pays you a steady 6 or 8 or 10% quarter after quarter after quarter, like a bond.

There is a place for growth and a place for income. It just depends on your needs and goals and timeline.

Once you are retired and no longer have a paycheck coming in, generating a steady income from your portfolio becomes key which is why retirees tend to have portfolios tilted more toward income generation and less toward growth. You're not there yet - neither am I. So we're both growth-heavy. But we're also both getting close to that point in our lives when we're going to be looking to lock in some steady income from our portfolios to at least partly replace our paychecks.

[james.hendrickson]

You're certainly not wrong, but you're talking about two different things: investing for growth vs. investing for income.

With growth investing, you want to see the value of your holdings rise over time. If you buy a stock for $10/share, in 10 years you hope it will be $50/share. With income investing, you aren't concerned with the value rising. You care primarily about the periodic income it throws off. If it's $10/share now and 10 years from now it's still $10/share, that's just fine if all along it pays you a steady 6 or 8 or 10% quarter after quarter after quarter, like a bond.

There is a place for growth and a place for income. It just depends on your needs and goals and timeline.

Once you are retired and no longer have a paycheck coming in, generating a steady income from your portfolio becomes key which is why retirees tend to have portfolios tilted more toward income generation and less toward growth. You're not there yet - neither am I. So we're both growth-heavy. But we're also both getting close to that point in our lives when we're going to be looking to lock in some steady income from our portfolios to at least partly replace our paychecks.

To note, often growth stocks will pay income and visa versa.

[disneysteve]

To note, often growth stocks will pay income and visa versa.

For sure. Growth stocks can pay dividends and income investments can grow in value over time. But the bulk of the return from an income investment will come from the distributions, not from the growth in value and the bulk of the return from a growth investment will come from the increase in value, not the dividends.

The long term average yield of the S&P 500 is 1.87% so most of the total return comes from the rise in value. As corn18 said, the only way to access that is to sell some of your holdings.

[corn18]

You're certainly not wrong, but you're talking about two different things: investing for growth vs. investing for income.

With growth investing, you want to see the value of your holdings rise over time. If you buy a stock for $10/share, in 10 years you hope it will be $50/share. With income investing, you aren't concerned with the value rising. You care primarily about the periodic income it throws off. If it's $10/share now and 10 years from now it's still $10/share, that's just fine if all along it pays you a steady 6 or 8 or 10% quarter after quarter after quarter, like a bond.

There is a place for growth and a place for income. It just depends on your needs and goals and timeline.

Once you are retired and no longer have a paycheck coming in, generating a steady income from your portfolio becomes key which is why retirees tend to have portfolios tilted more toward income generation and less toward growth. You're not there yet - neither am I. So we're both growth-heavy. But we're also both getting close to that point in our lives when we're going to be looking to lock in some steady income from our portfolios to at least partly replace our paychecks.

Well, those two CEF funds cited (CHW and CGO) certainly look a lot riskier than the S&P 500. A lot fewer holdings and higher risk, IMHO. I would rather hold the S&P 500 than either of those CEFs. And you don't have to pay a 3% fee, which is ridiculous.

[disneysteve]

Well, those two CEF funds cited (CHW and CGO) certainly look a lot riskier than the S&P 500. A lot fewer holdings and higher risk, IMHO. I would rather hold the S&P 500 than either of those CEFs. And you don't have to pay a 3% fee, which is ridiculous.

No argument. Definitely riskier, hence the high returns. And a 3% fee is super high.

[LivingAlmostLarge]

Well, those two CEF funds cited (CHW and CGO) certainly look a lot riskier than the S&P 500. A lot fewer holdings and higher risk, IMHO. I would rather hold the S&P 500 than either of those CEFs. And you don't have to pay a 3% fee, which is ridiculous.

but the 3% fee is fine if it's paying 13%. Definitely worth the risk. Even the 9-10% return might be worth it if the S and P only returns 7%. It's a wash but there is a lot more upside probably. But I recall the days of 10% CDs. Those were the glory days of retiring with guaranteed income. you don't have that now.

[amarowsky]

but the 3% fee is fine if it's paying 13%. Definitely worth the risk. Even the 9-10% return might be worth it if the S and P only returns 7%. It's a wash but there is a lot more upside probably. But I recall the days of 10% CDs. Those were the glory days of retiring with guaranteed income. you don't have that now.

unfortunately I have not found anything as liquid as these that pay as high dividends. Indeed they are high risk bonds, but..... Does risk really matter anymore when large companies CANT go bankrupt in america?

And they are beholden to debt before profits.... + the convertible waiver enables the premium , as it will just be converted into common stock. (To my knowledge that has never happened, meaning these companies must be ok paying this risky debt & junk bonds from these companies).

Most of my $$$ is invested in Total stock index's or SP500 index's, but I was super fortunate to keep these in my arsenal for the consistent payments.

Lol, Almost wish I didn't say anything.... The NAV on CHW is going really high now.... in 2 days went from $8.10 ish --> $9.00 [Rarely acts this volatile....] I have tried to keep relatively quiet on these funds for the past decade. Didn't want to ruin a good thing. Now it's paying well under 10% [closer to 9.33%] (likely backlash in regards to the administration's tweet that they want to hold out on next stimulus until after election is decided) so big corporations won't get their pay day yet. Makes since this would help out bonds on the very short term.

[Petunia 100]

You're certainly not wrong, but you're talking about two different things: investing for growth vs. investing for income.

With growth investing, you want to see the value of your holdings rise over time. If you buy a stock for $10/share, in 10 years you hope it will be $50/share. With income investing, you aren't concerned with the value rising. You care primarily about the periodic income it throws off. If it's $10/share now and 10 years from now it's still $10/share, that's just fine if all along it pays you a steady 6 or 8 or 10% quarter after quarter after quarter, like a bond.

There is a place for growth and a place for income. It just depends on your needs and goals and timeline.

Once you are retired and no longer have a paycheck coming in, generating a steady income from your portfolio becomes key which is why retirees tend to have portfolios tilted more toward income generation and less toward growth. You're not there yet - neither am I. So we're both growth-heavy. But we're also both getting close to that point in our lives when we're going to be looking to lock in some steady income from our portfolios to at least partly replace our paychecks.

If your portfolio value is rising though, you can sell some to receive that "income". It doesn't matter much if your increase is from dividends or growth. However, less volatility is very attractive once one reaches the withdrawal phase.

[disneysteve]

If your portfolio value is rising though, you can sell some to receive that "income".

Sure, but that's not the same as getting a check every month or quarter like clockwork.

Income-oriented investments also tend to have more stable values with less volatility. When you're dependent on the income, you don't want to see your balance going up and down a lot every day. The last thing you want is for your account balance to drop 20% right before you were planning to sell some shares for your next infusion of "income". That's much less likely to happen with an income-oriented investment.

[LivingAlmostLarge]

Sure, but that's not the same as getting a check every month or quarter like clockwork.

Income-oriented investments also tend to have more stable values with less volatility. When you're dependent on the income, you don't want to see your balance going up and down a lot every day. The last thing you want is for your account balance to drop 20% right before you were planning to sell some shares for your next infusion of "income". That's much less likely to happen with an income-oriented investment.

That might be why right now RE paid for paying a dividend in the form of rent is not a bad thing right now

[JBinKC]

I am relying upon dividends for any income needs and do own a select few of higher yielding securities. I do have a fairly large position in Jupiter Mines on the Australia Exchange which has paid a variable dividend ranging from 13-30% since its inception so the business is a cash cow. The company operates a manganese mine at a 36% grade (so there is no milling requirement for the ore) with a 100 year mine life at its current production rate which they eventually intend to double capacity. Manganese is the intended metal replacement for cobalt in EV battery production as advertised during Tesla's battery day so I think there is a chance for much more future volume growth under a higher future commodity price scenario with much less execution risk given I am paid well to hold shares. Every academic research paper I have read indicates there will be a massive material shortage in a green build out if there is any serious intention to replace the energy supplied by carbon sources.

[amarowsky]

The S&P 500 has returned 14.432% annually over the last 10 years. You can invest in that with zero fees.

As for where to invest for income, I just do what I always do: 60/40 stocks / fixed income with 25% of my stocks in international. I guess I'm not an income investor. I buy positions when I have money and I sell positions when I need money. Pretty simple.

james.hendrickson They are risky bonds (junk quality) so much lower rating, for higher premium. (+ the premium you get for being convertible bonds)

Also, if my understanding is correct. Because the mutual fund is close ended, the managment is allowed some liberties to "heavy use of leverage to increase returns". I'm hoping this is the type of leverage like "writing covered calls/puts" to boost gains. But I imagine... as most big corporations, they aren't always covered contracts (I don't know this, but it would be my assumption).

I haven't dont a lot of options trading. But I did a bit of experiments with writing covered calls on some GE stock I had back in the day (had a few hundred shares, so I thought it was a nice modest experimental project). Understanding that these CEF's are managed assets, and having the clever rule of NOT being able to issue additional shares, seems to make the fund more transparent at times. Because the fund itself is not allowed to buy back shares.

Again, these are merely my speculations. It is my opinion, that these have been wise investments for my needs so far. Considering we all have different risks and consequences we need to consider and avoid in our individual investment choices.

[LivingAlmostLarge]

I have to admit to being intrigued by closed end funds. But I"m still hooked on real estate.