Don't Get Lured by the Hype

When you approach investing for income versus just blindly investing for an index value, you see the market in a whole new light.  Many go 30 years in funds due to their employer sponsored 401Ks. However, to achieve legacy status, it's not about having a portfolio with a price that goes up.  It's about owning income generating assets.

These assets can be bonds, CDs, real estate assets, REITs, Partnerships, or equities (stocks) that provide a reliable income. The reason this is important is because even in a market downturn, the income is still being generated. The name of the game is to earn enough principal in your career (that's right, earn it - not just grow it) that when you are ready to exit the workforce, the income generated from your owned assets will support your standard-of-living and outpace inflation. While others are locking in losses selling their fund shares to pay the bills, you are just sailing along on your bi-annual coupons and quarterly dividends.  Every bond and ticker share you had at retirement, you bestow to your kids - and then some.

If US Treasuries are over 4%, or AAA companies like Microsoft and Apple are as well, it makes a lot of sense to first cover your current day expenses with them. Of course, you would also consider any pensions and Social Security that will come into play as well and adjust to your risk tolernance.  After the bills, fuel, food are covered, you can then put the rest of what you earned into the other asset types.  Diversify largely.  I2Guru has a 200 ticker watch list and is never in under 30 different tickers at a given time.

To still achieve compounding even with scraping off dividend income for fun stuff, a strategy similar to the Dogs of the Dow is applied.  That is, whenever market sentiment has a good stock down, look for another position that has climbed and now has a lesser dividend yield.  If the data supports it, make the switch.  You just compounded on your gains and gave yourself an annual raise!

The I2Guru 200 are accessible on the Income Screener menu. There you can see which holdings are ripe for selling and which are ready for the buying.