Income portfolios?

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dualstow
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Income portfolios?

Post by dualstow » Mon May 15, 2017 7:12 am

Would it be fair to say that none of the so-called Lazy Portfolios are income-oriented? If not, which ones in the boglehead wiki or at portfolioCharts is the most income-oriented?

Is it the case that income and lazy clash because income limits upside?

Sure, lazy portfolios are fine for retirement. Collect interest, sell shares.* That's why we always talk about Safe Withdrawal Rates.
As someone who doesn't have & won't have a pension, I'm just curious. I'll have to make my own pension.


*old zen saying.
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Re: Income portfolios?

Post by AnotherSwede » Mon May 15, 2017 11:20 am

Isnt PP an income portfolio? Use cash until need to rebalance.
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Re: Income portfolios?

Post by dualstow » Mon May 15, 2017 11:31 am

AnotherSwede wrote:Isnt PP an income portfolio? Use cash until need to rebalance.
I think of the PP as a steady growth & limited loss portfolio.

Sure, any portfolio that holds cash "provides" income, and those that don't have an emergency fund-- at some point it's semantics.

However, I'm thinking of something like Vanguard's Wellesley fund ( search for "27" at vanguard.com . That's the fund #).
It's bond-heavy, and the stocks focus on dividends. Not abnormally high payouts like you see with REITs, but companies that tend to keep paying dividends and raise them over time, like Pepsi and MMM. It's popular with retirees because they want the spending money.* Not just siphoning off a pool of cash. They want the portfolio to generate and pay them an allowance of sorts.

The tradeoff is that an income-oriented portfolio by definition cannot be growth-oriented. At least I think that's the case.
-- - - - - - - - -
*At every dividend thread at Bogleheads, you can find the argument that it's better to just sell shares.
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Re: Income portfolios?

Post by sophie » Mon May 15, 2017 12:20 pm

Wellesley is a great option if you're looking for some dividends.

The PP is great for drawing income though, because of that cash component. You get your "dividends" from rebalancing when cash drops to the lower end of the band. Wellesley means you'd have no cash outside of those dividends, and there might be times when you need to sell shares, maybe at a loss.

Whatever happened to your muni bond funds? I guess Puerto Rico happened :-) but they're not a bad option for high-tax situations.
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Re: Income portfolios?

Post by dualstow » Mon May 15, 2017 12:28 pm

My munis are mostly local to my state. I'm sure the nationals took a hit, but so far so good.
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Re: Income portfolios?

Post by mathjak107 » Mon May 15, 2017 12:49 pm

personally i would not draw cash to live off of from the pp. it is designed to be a cohesive portfolio that includes cash or short term bonds to balance off the long term treasury bonds as well as act as stock options when stocks are down only with out an expiration date .

the cash is as much a part of the mix as every other component .

sometimes my income portfolio will hold an unusually large cash position to balance out a bit more aggressive equity income dividend fund . but that does not mean i go spend the cash .

ya'all can do as you like but i think not treating the cash as an integrated part of the portfolio and treating it like you would a checking account is not the best idea.

when i ran the gb i still maintained whatever cash and sources i needed for my income flow , i didn't cannibalize the portfolio design for spending money any more than i would raid my bond funds daily to pay bills . these portfolio's are designed to balance each part out and the designs are what they are and the parts really should not serve functions like spending cash .

being retired i hold a year in spending cash. i keep 5 years withdrawals in an income optimized portfolio for up coming spending needs .

then i have another 5 years withdrawals in a growth and income model for eating in 7-12 years .

all the rest goes in a growth model for eating decades out .

if i used wellesly as a fund i would likely hold 2 years cash with wellesly .
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Re: Income portfolios?

Post by dualstow » Mon May 15, 2017 2:57 pm

I'm in a low tax bracket myself. I'm just curious if income portfolios can never be a part of lazy portfolios.
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Re: Income portfolios?

Post by mathjak107 » Mon May 15, 2017 3:21 pm

i would not call it a lazy portfolio . my income model is assorted bond funds , assorted duration and a smidgen of a dividend equity income fund .

it maintains a volatility of 75% less than the s&p 500 . it's funds change from time to time based on the bigger picture and the updates we get from insight . .

last year high yield was a 20% stake in the model .high yield was a no brainier. it was pounded like 1/2 of all energy companies were going to default . it was silly . fidelity high income fund had a beta half the s&p 500 yet returned 16% .

this year we hold zero high yield funds as the spread is gone and the low hanging fruit was picked that made it worth it and the risk is back now.

there are times that different types of bond funds are better than others and although the model is 72% bond funds most stay the same for years .

but that model is devoted to producing an income stream that fills the cash bucket every year . depending where some extra opportunity is returns vary every year .

here are some example returns i had . remember it is 70 to 80% bond funds and runs about 75% less volatility than the s&p .
2012 10.70
2013 2.9
2014 7.1
2015 flat
2016 6.70

i can't disclose what the current models are but i can always post an older model we used as an example . but no one should use it because it is not current .
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Re: Income portfolios?

Post by sophie » Tue May 16, 2017 6:36 am

dualstow wrote:I'm in a low tax bracket myself. I'm just curious if income portfolios can never be a part of lazy portfolios.
I haven't seen a lazy portfolio designed for income. I still think the lack of cash is a major Achilles' heel of these funds. It forces the investor to hold cash separately, which means the portfolio's income returns aren't comparable to a cash-inclusive portfolio like the PP. Actually, the PP is the only cash-inclusive portfolio I'm aware of, unless you maintain a bond ladder as part of a lazy portfolio.

The problem with bond ladders, though, is that if you have to sell the bottom of the ladder for whatever reason, you're left with longer-maturing Treasuries...then what do you do?
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Re: Income portfolios?

Post by barrett » Tue May 16, 2017 7:58 am

Hey dualstow, What are your reasons for wanting an income generating portfolio in retirement? My suspicion is that this is more of a psychological issue. Or maybe you long for something that is similar to what your parents or grandparents likely had? Psychologically I love the idea of a retirement portfolio that throws off a lot of income. In practical terms I think it will be better to have a more tax efficient mix.

Of course much would depend on what mix of accounts you will be pulling from (tIRA, Roth, taxable, etc.).
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Re: Income portfolios?

Post by mathjak107 » Tue May 16, 2017 8:29 am

sophie wrote:
dualstow wrote:I'm in a low tax bracket myself. I'm just curious if income portfolios can never be a part of lazy portfolios.
I haven't seen a lazy portfolio designed for income. I still think the lack of cash is a major Achilles' heel of these funds. It forces the investor to hold cash separately, which means the portfolio's income returns aren't comparable to a cash-inclusive portfolio like the PP. Actually, the PP is the only cash-inclusive portfolio I'm aware of, unless you maintain a bond ladder as part of a lazy portfolio.

The problem with bond ladders, though, is that if you have to sell the bottom of the ladder for whatever reason, you're left with longer-maturing Treasuries...then what do you do?

damn , i keep hitting the report this post link instead of the quote , so lost my post .

anyway , what i had said is i would not want a lazy income portfolio that has disregard for what is happening in the world ,rates ,inflation and asset types .

i am very happy with the one i use and it is optimized to do a good job with income generation .

but it has to be dynamic and change as the bigger picture changes .

as an example why , one fund out of the ones in it last year was fidelity high yield . it really was a low risk , low hanging fruit situation last year that really was a no brainier
. it's 20% stake in the portfolio clocked in at 16% returns . but this year ,different situation . the low hanging fruit is gone and it is far more riskier so there is no high yield fund in the model anymore .

when the dollar was weaker international bonds can be a boost , if inflation picks up floating rate ,tips and commodity linked funds can add a boost .

so yes there is a core of basic bond funds but around the core the smaller positions can vary as they should .

a 35 year old bull market in bonds and higher rates made things a whole lot easier to buy and die with a bond fund .
Last edited by mathjak107 on Tue May 16, 2017 8:38 am, edited 1 time in total.
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Re: Income portfolios?

Post by mathjak107 » Tue May 16, 2017 8:37 am

this is no longer a current model but in the past this is an example of one . DON'T USE THIS -IT IS NO LONGER CURRENT !

all fidelity funds . overall beta 75% less volatile than thje s&p 500

Total Bond FTBFX 26%

Equity Dividend Income FEQTX 23%

High Income SPHIX 21%


Short-Term Bond FSHBX 17%

Limited Term Bond FJRLX 13%
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Re: Income portfolios?

Post by dualstow » Wed Jun 28, 2017 11:26 am

barrett wrote:Hey dualstow, What are your reasons for wanting an income generating portfolio in retirement?
I'm not saying I do. I was just curious about the absence of income portfolios within the lazy portfolio universe.
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Re: Income portfolios?

Post by sophie » Fri Jun 30, 2017 7:24 am

Well, usually the goal is to minimize income while you're accumulating, to reduce the tax liability. The PP makes the transition into withdrawal phase very well, but most lazy portfolios don't. Having to sell shares frequently would be a pain.

Between Social Security and the PP you should be all set, but what about looking into an annuity? That's actually my plan for about 25% of my retirement savings (with TIAA-CREF). Unlike dividends, the income stream is guaranteed and it will feel like getting a paycheck. No need to mess around siphoning money from multiple accounts or selling shares every month. The PP's cash allocation will be there to cover any shortfalls, and I'll only have to rebalance the PP every 2-3 years. I'm mindful of the fact that eventually investment management is going to become a problem if it's too complicated.
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Re: Income portfolios?

Post by barrett » Fri Jun 30, 2017 2:02 pm

dualstow wrote:Would it be fair to say that none of the so-called Lazy Portfolios are income-oriented? If not, which ones in the boglehead wiki or at portfolioCharts is the most income-oriented?

Is it the case that income and lazy clash because income limits upside?

Sure, lazy portfolios are fine for retirement. Collect interest, sell shares.* That's why we always talk about Safe Withdrawal Rates.
As someone who doesn't have & won't have a pension, I'm just curious. I'll have to make my own pension.
I think Desert gets tired of blowing his own horn so I'll nominate his mix as a good income portfolio. It's kinda Wellesley-ish with 10% in gold. I actually love it for an IRA. Keeps all that dividend and interest income where you can deal with it on your own timeframe, and also gives enough exposure to gold to mitigate sequence of returns risk.
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Re: Income portfolios?

Post by dualstow » Fri Jun 30, 2017 2:16 pm

I'll take another look, Barrett, thanks.
sophie wrote:Well, usually the goal is to minimize income while you're accumulating, to reduce the tax liability.
I've got no real tax issues. The munis are more for diversification, Sophie. However, you have probably hit upon why you don't often see income mentioned in lazy portfolio discussions. I guess that's it.
Between Social Security and the PP you should be all set, but what about looking into an annuity? That's actually my plan for about 25% of my retirement savings (with TIAA-CREF). Unlike dividends, the income stream is guaranteed and it will feel like getting a paycheck.
I have always shied away from annuities, but I will definitely be checking out what's out there when the time is right.
(1) When I first began investing, it was largely about building my own "annuity" with rising dividends. Not high-yielding stocks or REITs, but Pepsi & Chevron, for example.
(2) I still don't like the idea of buying a product from someone who then waits for me to die. O0 I know, it's illogical.
(3) I will likely inherit a large windfall someday (The later, the better). I learned long ago from reading Bogleheads not to ever count on something like that, so I have been investing as if that possibility does not exist. At the same time, I have often considered putting some of that windfall into an annuity, should I actually receive it. A second vp. The idea of buying new dividend stocks at age 60 or 70 or 80 does not sound appealing to me.
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Re: Income portfolios?

Post by mathjak107 » Sat Jul 01, 2017 4:06 am

even at 65 you have long term money you won't eat with for as long as 20 or 30 years . that money is still long term money and a dividend income fund would be just fine . so would dividend paying stocks , i am just not a lover of taking on individual company risk at any point in time for anything but speculation so i like funds instead .
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Re: Income portfolios?

Post by dualstow » Sat Jul 01, 2017 9:20 am

I agree, m. New equity money goes to index funds.
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Re: Income portfolios?

Post by sophie » Sat Jul 01, 2017 9:21 am

dualstow wrote: (2) I still don't like the idea of buying a product from someone who then waits for me to die. O0 I know, it's illogical.
Like medical insurance, after you happen to get sick?

Unlike medical insurance companies, corporations that sell annuities have no direct power over your health. Unless one of them decides to make a deal with a Mafia hit man :-)

I was thinking annuity in part for the guaranteed return (dividends/interest could drop at any time), and in part for the simplicity. When I'm 87 and having trouble negotiating financial websites, I don't want to be struggling with complicated investments and making stupid but costly mistakes. Even the PP could become intractable because of the need to rebalance, especially in/out of gold.
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Re: Income portfolios?

Post by Kbg » Mon Jul 03, 2017 11:33 am

sophie wrote:
dualstow wrote: (2) I still don't like the idea of buying a product from someone who then waits for me to die. O0 I know, it's illogical.
I was thinking annuity in part for the guaranteed return (dividends/interest could drop at any time), and in part for the simplicity.
http://boards.fool.com/the-kicker-for-2 ... 31452.aspx

http://www.philosophicaleconomics.com/2 ... ks/#fourth

Well worth one's time
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Re: Income portfolios?

Post by dualstow » Mon Jul 03, 2017 1:06 pm

Thank you, sir!
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