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This decade in Elon

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This decade in Elon

As the decade has gone on, the occurrence of Elon Musk events has increased, and a brief glance back at the timeline shows this isn’t just a psychological phenomenon: Elon really is Elonning more often.

Cast your memory back, if you will, to the reaches of Very Recent History. At the beginning of this decade, Tesla had just one car: the Roadster. SpaceX had not yet secured a commercial crew contract for NASA. Neuralink, the company attempting to create commercialized brain-machine interfaces, didn’t yet exist, nor did the Boring Company, Musk’s tunneling concern.

Back then, Musk was still best known for getting fired from PayPal. And while Tesla had built the Roadster in 2008, wowing car nerds with its acceleration, it was still a niche product. Plus, both SpaceX and Tesla nearly went bankrupt in 2008. So while it’s possible Musk was saying as much weird shit as he would say later on, he didn’t have the same kind of spotlight on him; the stakes were lower.

Then, in 2010, three significant Elon events occurred, which would set the stage for more to follow: in June, SpaceX launched the first version of the Falcon 9, and Tesla went public. In October, Tesla took occupancy of the former NUMMI factory in Fremont, California.

From here, the pace of Elon-related activity would only accelerate. Some of this was inevitable: SpaceX and Tesla were taking on new business challenges, launching new products (literally, in SpaceX’s case), and becoming more popular. That meant Musk’s pronouncements took on a new weight and received more media coverage. It also meant that Musk was trotting himself out more often: because Tesla doesn’t advertise, promoting the brand meant Musk had to serve as a celebrity hypeman.

SpaceX

After the initial 2010 launch of the Falcon 9, SpaceX became the first private company to dock at the International Space Station in May 2012. The Dragon spacecraft went on to be a major way that NASA delivered supplies to the ISS. By April 2015, SpaceX had flown seven missions to the space station. In 2014, NASA deepened its relationship with SpaceX, contracting the company to develop a version of its Dragon capsule for people.

SpaceX falcon 9 landing

Things began shifting in 2015. In December, SpaceX landed its first rocket. Before this, there’d been some skepticism about Musk’s idea of a reusable rocket as a possibility at all — and some skepticism still exists about whether it’s a reasonable cost-cutting measure. (Refurbishing a rocket is expensive.) But after this initial landing, SpaceX so routinely landed its first stages that people began to take them for granted. In December 2017, SpaceX launched and landed its first reused rocket. In 2018, SpaceX flew the first Falcon Heavy, sending Musk’s Tesla Roadster into orbit.

spacex explosion

The launches did not go entirely smoothly. In June 2015, a Falcon 9 exploded a few minutes after launch when a strut failed in the rocket’s upper stage liquid oxygen tank. The second rocket blew up during fueling in September 2016 — and this time, there was a whiff of scandal, as sabotage was considered among the reasons for the explosion. This explosion was ultimately chalked up to a problem with the helium tanks, carbon fiber composites, and solid oxygen. The two explosions delayed SpaceX’s other planned launches as the company investigated to determine their causes. There was a third explosion in 2017, but this one didn’t slow the slate of flights since it was just an engine on a test stand. A fourth explosion happened in April 2019 when a test version of the Crew Dragon — the SpaceX vehicle meant for people — blew apart. Leaky valve, propellant, boom.

In September 2016, Musk presented plans for his proposed attempt to create a Mars settlement. In an hour-long presentation — here’s a truncated version — Musk introduced the Interplanetary Transport System: a spaceship and rocket. (There were, obviously, a lot of unanswered questions left after the presentation.) This system was updated in 2017, and Musk said he planned to put all of SpaceX’s resources into the Mars mission; this does not seem to have happened yet.

As SpaceX was flexing, the rocket launch market began to change. The commercial market for launching satellites into geostationary orbit was “very soft” in 2017 and 2018, SpaceX president Gwynne Shotwell said. That threw a wrench into SpaceX’s plans. In financial documents dating from 2015, which were obtained by The Wall Street Journal, SpaceX had projected more than 40 launches; there were actually 20. In 2019, SpaceX had estimated 52 launches — one every week — and there were, in fact, 12, with two more scheduled before the end of the year.

The slowing market for commercial satellites — and the smaller number of rockets needed to launch them — meant that SpaceX needed to retool its plans. Now, since SpaceX is a private company and doesn’t have to make its planning public, I can only speculate about what that entailed.

It may be why SpaceX dipped its toe into space tourism. In 2018, Musk announced that Yusaku Maezawa, a Japanese billionaire and founder of Zozotown, Japan’s largest online clothing retailer, will be the first private customer to ride around the Moon on the company’s future ship, which was rebranded from the Interplanetary Transport System to Starship. But betting on the billionaire might not be such a good idea since he tweeted in May that he was broke. SoftBank’s Yahoo Japan has since acquired Maezawa’s Zozo, an online fashion retailer, for $3.7 billion. So, presumably, the trip is still on.

Space tourism isn’t SpaceX’s only moneymaking strategy. SpaceX is also venturing into the realms of telecommunication with its Starlink venture, which may begin offering broadband services as early as next year. (Take that projection with a grain of salt: in 2011, Musk said he’d put a person in space in three years. It is 2019, and a human has yet to fly aboard a SpaceX rocket.) Starlink is a proposed constellation of at least 12,000 satellites in low Earth orbit, though the company has asked for an additional 30,000 satellites. Astronomers have some misgivings about this effort.

SpaceX launched 60 of those satellites in May, and some of them have failed; a second launch in November sent up 60 more. The 2015 SpaceX financial estimates The Wall Street Journal got ahold of projected the Starlink business would dwarf the rocket launch business — and now, as a result of the slowed pace of launches, Starlink seems like a make-or-break business for SpaceX. (Again, this is all guesswork; it’s sort of hard to figure out what’s going on financially with a privately traded company.) In any event, in October, Musk tweeted that he was going to send a tweet using the Starlink system. “Whoa, it worked!!” he wrote.

If Starlink is successful, then the 2020s will truly be a new era for SpaceX: it will be a consumer business.

Tesla

Tesla’s initial public offering was in June 2010; the company raised $226.1 million during the first IPO of an American carmaker since Ford went public in 1956. Tesla badly needed the cash. The company had teetered on the edge of bankruptcy during the 2008 financial crisis. It had only one car, the Roadster, and it had never made a profit. This would all change over the course of a decade, and thanks to the ready availability of information on publicly traded companies, Tesla’s travails would prove easier to track than SpaceX’s.

For better and sometimes worse, this decade was the decade of the Tesla factory in Fremont, California. Every Tesla car built this decade came from Fremont. Without that plant, it seems unlikely Tesla would have been able to begin its deliveries of the Model S (in November 2012), the Model X (September 2015), or the Model 3 (July 2017).

The Model S, priced between $57,400 and $77,400, was supposed to go into production in 2010, but production didn’t actually start until 2012. These kinds of delays would be a common refrain: the Model X, an SUV that started at $132,000, was introduced in February 2012 and was initially scheduled for production in early 2014; deliveries started in September 2015.

Tesla Model 3 launch

Then there was the matter of the Model 3. At its unveiling in March 2016, Musk said the Model 3 would be his affordable, mass-market electric car: the base model would cost $35,000. A week after Tesla started taking orders, the company said 350,000 people had reserved the cars.

That raised some manufacturing questions since the Fremont factory had delivered fewer than 51,000 cars total in 2015. Part of Musk’s initial plans for making the Model 3 involved turning the factory into an “alien dreadnaught,” a machine to build cars, he said in a 2016 earnings call. This did not turn out as planned. In 2018, Musk admitted that Tesla relied too much on robots to build the Model 3s, which is why there were manufacturing delays leading up to the car’s introduction in July 2017.

But even after the Model 3 began production, there were bottlenecks. The Fremont factory was bursting at the seams. The catch-all for this, of course, was “production hell.” So Musk… built a tent in 2018. And that tent became another assembly line.

The Fremont plant was also where workers complained about their conditions. According to reporting from The Guardian, ambulances had been called more than 100 times to the Fremont factory between 2014 and 2017 for fainting spells, dizziness, seizures, abnormal breathing, and chest pains. “Hundreds more were called for injuries and other medical issues,” the report said. Another report from 2017 showed that Tesla workers were injured at a rate of double the injury average. Workers in the tent in 2019 said they were pressured to take shortcuts to hit production goals.

Worker unrest meant the possibility of a union arose; unions are common in car manufacturing, after all. A Tesla employee, Jose Moran, wrote a 2017 Medium post complaining at length about working conditions and saying that’s why he thought Tesla should unionize. At first, Musk claimed Moran was an employee of the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), rather than Tesla. By 2018, the National Labor Relations Board was involved, reviewing Musk’s tweets (“Why pay union dues & give up stock options for nothing?” he tweeted in May 2018), among other evidence. In September 2019, Tesla and Musk were found to have violated labor law.

Even as Fremont was the primary Tesla site, Musk’s manufacturing ambitions led to several new factories. The unfinished Gigafactory 1 opened in Nevada in July 2016; it was 14 percent complete at the time. The August 2016 acquisition of SolarCity would give Tesla what would later be known as Gigafactory 2. In January 2019, Tesla broke ground for the Shanghai Gigafactory; by October, Tesla claimed it was ready for production. A fourth Gigafactory is planned for Berlin.

The Gigafactories have also given rise to some controversy. In 2018, Business Insider reported that batteries at the Gigafactory were getting scrapped (or reworked) at a rate of 40 percent. The man who was blamed for the leak was an assembly line worker named Martin Tripp, and Musk characterized him as engaging in “extensive and damaging sabotage” in an email to staff, Bloomberg reported. Litigation between Tripp and Tesla is ongoing. A former security manager named Sean Gouthro alleges in a whistleblower report with the Securities and Exchange Commission that Tesla behaved unethically in its search for the leaker. Tesla maintains it terminated Gouthro for poor performance.

Then there’s Gigafactory 2. New York (the state, not the city) spent $958.6 million on the factory and wrote that down to about $75 million — though that figure doesn’t capture the plant’s economic value to the surrounding area, The Buffalo News reported. Some workers there have said they found the work environment hostile.

Of course, the 2016 SolarCity acquisition was more than just a factory; it was a new line of business and possibly a conflict of interest. (The shareholder lawsuits are still out there, and they allege SolarCity was going broke before the acquisition, and “conflicted fiduciaries” negotiated an inflated price on SolarCity shares. Tesla and Musk have denied these claims.) SolarCity’s founders are Lyndon and Peter Rive, Musk’s cousins. Musk was chairman of both companies when Tesla bought SolarCity; he was also SolarCity’s largest shareholder.

At the time, SolarCity was the biggest player in residential energy. Since then, it’s been passed by Sunrun and Vivint Solar, Marketwatch reported in June. Maybe that was because most of Tesla’s resources were being sucked up by Model 3 production, as Musk said in a deposition. (Tesla has said that the number of batteries supplied by Panasonic is a “fundamental constraint.”) Maybe people got tired of waiting for the Solar Roof, a product announced by Musk at the same time as the acquisition — which still hasn’t seriously surfaced as a consumer product three years later. It is perhaps also worth mentioning the hair-raising litigation from Walmartnow dropped — about a series of solar panel fires.

Energy storage and solar panels may be a Tesla business we see grow over the course of the next decade or so. After building the largest battery in the world — in Australia — to help buttress the electric grid, Tesla may soon be building an even bigger one in California. The company has also introduced a new industrial storage pack. In California, several energy companies have been cutting power to avoid wildfires, and those blackouts are unlikely to stop anytime soon. That may provide an opportunity for Tesla’s consumer energy business as well.

Judge Considers Whether To Hold Tesla Chief Executive Elon Musk In Contempt Over Tweet

At times, the pressure from Tesla appeared to be getting the better of Musk. The most significant stress period occurred in August 2018. On August 7th, Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.” By August 24th, Musk had abandoned this plan. Then, a month later, the SEC sued him over the “funding secured” tweet: “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” prosecutors wrote in the complaint. Two days later, the suit was settled: Musk would step down as chairman of Tesla, and both he and Tesla would pay $20 million fines. Also, there was a provision about tweeting, which got relitigated this year because Musk will never log off.

In any event, Tesla carved out its first back-to-back quarterly profits in the last two quarters of 2018. In the second quarter of 2019, Tesla made and delivered the most cars in its history, though the company still posted a loss for the quarter. It made its first profit in 2019 during its third quarter. One consistent theme throughout Tesla’s existence has been skeptics who’ve said the business doesn’t seem sustainable. Despite the naysaying and some close calls, Tesla is still in the ring. With the Model Y (a compact SUV) and Cybertruck coming in the next decade, Tesla has the opportunity to prove naysayers wrong — or undergo another production hell. Strap yourself in because, whatever happens, it’s likely to be a fascinating ride.

Other businesses

Musk launched two new ventures this decade: Neuralink, a company for brain-machine interfaces, and the Boring Company, a tunnel-boring venture. The two companies appear to have much less day-to-day attention from Musk. At his Twitter defamation trial in December 2019, Musk described Tesla and SpaceX as occupying 95 percent of his time. Still, both ventures are worth mentioning at least in part because they seem to expand Musk’s science fiction-influenced worldview.

Neuralink was founded in 2016, about a decade after the first clinical report of a person using a brain-machine interface to move a cursor on a screen. Neuralink was publicly unveiled in 2017, and Musk gave more details on the company’s ambitions: to give people who are disabled a way to command computers as a compensatory aid, allow for telepathic communication, and graft human thought onto AI systems.

Well, Musk usually dreams big.

In 2019, we got some more details on the design of the Neuralink technology: flexible threads to be embedded in the brain. Also, a monkey has used the technology to “control a computer with its brain,” Musk announced, to the surprise of his team. The company is still in early stages, and biotechnology usually takes more than a decade from initial research to sale on the market, with lots of studies in between to help characterize the technology.

The Boring Company is moving faster, probably because it doesn’t require brain surgery. In January 2017, Musk tweeted about Los Angeles traffic “driving me nuts.” He said he had a new venture in mind: the Boring Company.

Musk wasn’t kidding. The Boring Company began as a hole in the SpaceX parking lot. Financed by hats and Not-A-Flamethrowers, plus an equity raise, the tunnel-boring concern debuted its test tunnel with a party in December 2018. At that time, three other potential projects were in the works: one for a Dodgers Stadium in LA, one in Chicago, and one in the DC area. (A potential tunnel on the west side of LA was canceled after a group of residents and community groups sued.)

In 2019, Chicago got a new mayor, and, suddenly, the Boring Company project was placed on the back burner. But Las Vegas, which is no stranger to quixotic transit projects, stepped into the breach: the Las Vegas Convention and Visitors Authority entered into a $48.6 million contract with the Boring Company to build a “people mover.” That project broke ground in November 2019, and it’s expected to be completed by CES 2021.

Elon himself

Musk’s Twitter account exists in an ongoing state of epistemic uncertainty. Sometimes he tweets things that seem like jokes and aren’t — a lot of these things pertain directly to the Boring Company, which seems to be something of a catch-all for Musk’s whimsy — and sometimes he really is just joking. (I don’t think he’s going to build a volcano lair.)

There are, however, some more general things that Musk was up to during the 2010s, of which, the most significant were his involvement with OpenAI and the hyperloop.

The hyperloop was first revealed to the public in 2012, with more details following a year later. Musk said publicly that he had “no plans” to build his design, but that didn’t stop a lot of other people from forming hyperloop companies. The basic plans called for “pods” traveling at 800 miles per hour to send people quickly from San Francisco to Los Angeles. Musk did build a test track that’s about a mile long outside his SpaceX headquarters, and in 2015, he began hosting a pod-racing competition for students. These events seem to be largely hack-a-thons, which may also serve as recruiting pools for engineering talent. Next year, Musk says, the test track will have a curve. And an actual hyperloop may eventually be built in India.

There is also the matter of artificial intelligence. While many AI experts have come to believe that artificial intelligence is likely to be limited, Musk has warned about hyper-intelligent, human-hating AI: “we are summoning the demon,” he said in 2014. (As of 2018, he’s still anxious about it.) So Musk was one of the founders of OpenAI, which is meant to build friendly AI. The foundation initially raised about $1 billion from various tech companies and executives, including Musk. In February 2018, Musk stepped down from the foundation since there might be some conflicts between his attempts at Tesla to build self-driving cars and OpenAI’s work, but he said he will remain a donor. The CEO remains Sam Altman who was formerly the president of Y Combinator.

If this all seems a little far-fetched, there may be an explanation: “There’s a billion to one chance we’re living in base reality,” Musk said onstage in 2016. Musk has apparently done a great deal of thought about the possibility that we’re all living in a simulation, and “my brother and I agreed that we would ban such conversations if we were ever in a hot tub.” The notion of a “base reality” may be a reference to a 2003 hypothesis put forward by philosopher Nick Bostrom, though it appears a bit more certain than Bostrom’s line of thought. It is a view echoed by some computer scientists, though the most effective rebuttal I’ve seen is, essentially, “well, so what if we are? This is a distinction without a difference.”

Musk also poured $2 million into a satire company, Thud. In March 2018, Musk announced the venture on Twitter with some former Onion staffers on board who said at the time, “We can confirm that we have learned nothing from prevailing trends in media and are launching a brand-new comedy project.” By December 2018, however, Musk told the group that no further funding would come from him; the group then had six months to launch and figure out a monetization strategy before the money ran out. Ambitious projects, like DNA Friend, a 23andMe satire, were quickly rushed out the door. Thud was shuttered in May.

Defamation Lawsuit Against Tesla CEO Elon Musk Over Calling British Rescue Diver “‘Pedo Guy” In Los Angeles

In somewhat less amusing news, Musk also stood trial for defamation in December 2019. The suit was brought by Vernon Unsworth who helped rescue a soccer team and their coach who’d been trapped in a cave in Thailand. Musk had also attempted to assist with the rescue, by building a “minisub,” with the notion that it could be used to ferry the children from the cave. In an interview with CNN, Unsworth said the tube was a “PR stunt” with “absolutely no chance of working” and that Musk could “stick his submarine where it hurts.” (Musk’s lawyers would later pressure Unsworth to apologize for some of the comments he made in this interview during the suit.) Musk then called him a “pedo guy” on Twitter.

Musk apologized for and deleted the tweets, but Unsworth felt he’d been defamed. In a week-long trial in Los Angeles, both men laid out their cases; Musk won. That weekend, he celebrated by going to celebrity hot spot Nobu in his Cybertruck prototype with his girlfriend, pop star Grimes.

There’s probably some stuff I’ve missed here, but that’s just because there’s so much stuff. It does seem, looking back, that the pace began to accelerate around 2015. One question I get most often about Musk — from friends, family members, neighbors, and my editors — is “Okay, but is this dude for real?” Well, the rockets are real, the cars are real, the Not-A-Flamethrower is real, and so is the tunnel starting in the SpaceX parking lot. The lawsuits are varying degrees of real. The timelines Musk gives himself on the products he makes are almost always wishful thinking, and not all of his ideas work in reality.

For most of the rest of it, your guess is as good as mine. It may turn out that he was serious about that volcano lair after all. Because with Musk, the spectacle is also the point: he’s not just a CEO; he’s an influencer. I mean, he smoked weed on The Joe Rogan Experience; beefed with the president, the press, and Azealia Banks; spent time taunting his haters; and sent his Roadster into space and then live-streamed it.

The rise of the social media influencer as a new form of celebrity in the 2010s seems to have suited Musk. He’s leaned heavily on YouTubers and, like many other influencers before him, engaged in a popular crossover event. He has a devoted army of fans, just like Taylor Swift or PewDiePie. Like most influencers, he seems to enjoy spectacle. And also like most influencers, he’s used social media — and his own celebrity — as a valuable form of marketing. That’s especially important for Tesla (which has arguably become the car brand for YouTubers) since Tesla doesn’t engage in paid advertisements. Sure, some Elon activity is decidedly spontaneous, but even that works in favor of the marketing since it makes his fans feel closer to him. I mean, how many big-deal CEOs besides Musk tweet about Rick and Morty, or engage with random followers? To borrow a turn of phrase from Jay Z: Elon Musk isn’t just a businessman; he’s a business, man.

Musk seems unlikely to stop Elonning anytime soon. We do not yet have the technology to predict cycles of Elon activity, thus allowing us to forecast heavy Elon seasons. I sincerely hope someone is working on this, but, until then, I suppose we’d all better keep an eye on his Twitter account: he appears more often there than anywhere else.

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Retirement Savers Are Turning to Dividend Stocks for Income. Here’s How to Use Them in Your Portfolio.

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Retirement Savers Are Turning to Dividend Stocks for Income. Here’s How to Use Them in Your Portfolio.
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For investors who are saving for retirement, dividend stocks are a crucial building block—with reinvested payouts juicing returns during the preretirement phase and providing crucial income to retirees during the drawdown phase.

Indeed, the once-sleepy world of dividend investing is hot. With their attractive income and yields, dividend stocks not only offer solid returns in an era of ultralow bond yields that doesn’t appear to be ending soon, but also hold the promise of price appreciation. The S&P 500 index’s yield was recently around 1.9%, about even with that of the 10-year U.S. Treasury note—itself a common source of income for retirement savers.

Dividends also offer a number of advantages beyond income, one being that qualified dividend income is taxed as a capital gain and at a lower rate than ordinary income receives. The top federal capital-gains tax rate is 23.8%. Payouts can also help buffer volatility in tumultuous markets, providing returns even if a stock’s price goes down, and give a stock portfolio much-needed diversification. All of these attributes make dividend stocks an important investment for the diligent retirement saver.

“If done correctly, dividend-yielding stocks are the gifts that keep on giving,” says Lewis Altfest, CEO of Altfest Personal Wealth Management in New York.

Retirees’ need for dividend income—or income of any sort, really—has become particularly acute over the past 30 years or so, as companies have turned away from offering pensions that guarantee workers steady payouts during the course of their retirements. The corporate replacement for pensions, so-called defined-contribution plans like 401(k)s, instead put the onus for retirement saving on workers, and many of them are struggling to turn those savings into streams of retirement income.

Against this backdrop, many companies, policy makers, retirement researchers, and financial firms are trying to develop strategies and products that retirees can draw upon for income in retirement. Among the offerings and ideas: withdrawal mechanisms for workplace retirement-savings plans, “bridges” to maximize Social Security benefits, and an array of annuity offerings.

Now, a growing number of investors are seizing on dividend stocks as a cornerstone of their retirement-income strategy. For these savers, there are two schools of thought on how best to employ a dividend-stock strategy: total return or pure income.

With a total-return approach, investors focus on the growth in their portfolio over time with a variety of asset classes. Total return for stocks includes dividends as well as capital appreciation (or losses) to give investors the ability to take distributions from a combination of yield income and price appreciation. Capital preservation is not necessarily the main objective.

It is “based on a holistic view of the portfolio, matching the asset allocation to [the retiree’s] risk-return profile, [using] diversified investments and [minimizing] costs,” wrote Colleen Jaconetti, a senior investment analyst at Vanguard Group, in a 2016 research note.

With the pure income approach, investors incorporate dividend stocks and often an allocation to bonds to damp stock volatility. It essentially entails setting up a diversified portfolio and living off the dividends in retirement or using them to supplement income from other sources, such as Social Security or, for those who still have them, pensions. A $5 million portfolio with an average dividend yield of 2%, for instance, would throw off $100,000 a year before taxes.

But some caution is necessary when it comes to mixing dividends with retirement-income portfolios. Investors should be wary of chasing high-yielding stocks, for instance, given that a high yield is sometimes a signal of a stock with deeper problems.

Dividends have historically provided better protection during downturns, says Daniel Peris, a portfolio manager at Federated Investors who has written two books on dividend investing. “That virtue has been less visible for the past decade due to the absence of a downturn.”

“There’s always a reason for that extra yield, and it would be that there’s a lot of extra risk,” says Philip Huber, chief investment officer of Huber Financial Advisors in Chicago.

Investors also should take care not to create an unbalanced portfolio that’s too focused on stock income or too heavy in richly valued sectors, as utilities and consumer staples currently are.

And, especially when investing for the long term, investors with a myopic focus on yield might overlook some well-performing companies that don’t pay dividends, such as Facebook (ticker: FB) and Google parent Alphabet (GOOGL).

What’s more, dividends aren’t guaranteed. While companies typically strive to maintain dividend payments once they’ve been initiated, they can be cut in times of duress. During the financial crisis, for instance, General Electric cut its annual dividend from $1.24 a share to 40 cents. It’s now down to a token sum of four cents a share annually. (GE is a onetime dividend stalwart, with decades of consecutive payout increases until the first cut in 2009.)

Both the income and total-return approach can face problems if a retiree runs out of money and needs to tap principal too aggressively—no small worry considering that life expectancies have been increasing. According to the Center for Retirement Research at Boston College, the average 65-year-old retiree can now expect to spend about 20 years in retirement, up from 13 years in 1960.

Still, proponents of dividend stocks say that a well-executed strategy can provide income and capital appreciation that can stretch savings.

Jeremy Schwartz, global head of research at WisdomTree, says that on a real basis, which takes inflation into account, dividend stocks acquit themselves well relative to other kinds of assets and thus are valuable components of a diversified retirement portfolio. “Stocks are real assets that tend to see dividends and profits grow with inflation over time,” he says.

A $5 million portfolio with an average dividend yield of 2% would throw off $100,000 a year before taxes. Not bad if you can afford it.

An attractive trait of dividend cash flow, Schwartz adds, is that it is much less volatile than stock-price movements are. He points out that the WisdomTree US Total Dividend exchange-traded fund (DTD), which weights its 878 holdings by expected dividend streams, recently yielded about 2.9%. Apple (AAPL), with its hefty dividend stream, has the largest weighting in the fund.

On top of that, the fund’s net share repurchase yield—that is, the stock buybacks as a percentage of the underlying holdings’ market capitalization—was 2.2%. That’s a combined shareholder yield of a little more than 5%.

“That’s a pretty attractive equity-risk premium,” Schwartz says, comparing the ETF’s 5% shareholder yield to the 0.21% for Treasury inflation-protected securities recently.

While experts note that not every stock has to pay a dividend in accumulating assets for retirement, they say dividends are a crucial factor in racking up total returns, which combine capital appreciation with reinvested dividends.

John Buckingham, editor of the Prudent Speculator newsletter and chief investment officer at AFAM Capital, agrees that the portion of a portfolio that’s designated to earn returns for five years out and beyond should be pretty much all in stocks, “provided that you have the discipline and patience to stick with it, and that’s a big caveat.”

“There’s just not a lot of excitement in bonds or other fixed-income type investments,” he adds. Dividends typically go up every year, “and that’s likely to increase as corporate profits grow.” Bond coupons, meanwhile, are often fixed.

Dividend Bargains

These stocks sport yields that exceed that of the 30-year U.S. Treasury bond and offer potential capital appreciation as well.

E=Estimate; *Fiscal year ends July

Sources: AFAM Capital; Bloomberg

TOTAL-RETURN STRATEGY

Huber, a proponent of total-return investing to build a retirement nest egg, advocates an approach in which portfolio assets are periodically rebalanced (from better-performing asset classes to underperformers, for example) and occasionally sold to supplement income for retirees.

“It’s hard to retire and live solely off the income of dividend-paying stocks and high-quality bonds,” he says.

He generally favors dividend-growth stocks, or ones that are regularly increasing their disbursements, over higher-yielding names. Dividend growers, he says, have “more of a quality bias” and are “more defensive in a downturn.”

Jaconetti, though, prefers holding a balance between those broad types of dividend stocks. “The markets are cyclical, and nobody really knows what’s going to happen,” she said in a recent interview.

She is skeptical of overweighting dividends, in part because traditional equity-income sectors such as utilities and consumer staples have been bid up, leading to higher stock valuations. Those sectors, and stocks, could be vulnerable to a selloff, their dividend support notwithstanding.

“Dividend-focused equities tend to display a significant bias toward value stocks,” she says. Until recently, value stocks had underperformed growth names for many years. “You may not realize you are changing the composition or risk profile of your portfolio if you are doing it for the sole purpose of cash flow.”

One fund that has had success with a total-return strategy: the Columbia Dividend Income fund (LBSAX). Its 10-year annual return of 12.2% places it in the top 15% of its Morningstar category. The fund recently had its biggest weighting in information-technology stocks (21%), followed by financials (19%) and industrials (14%). Its top holdings included JPMorgan Chase (JPM), which yields 2.8%; Microsoft (MSFT), 1.4%; Johnson & Johnson (JNJ), 2.9%; and Merck (MRK), 2.6%.

“We continue to focus on identifying companies with free-cash-flow and balance-sheet strength, which we believe becomes more important as the economic cycle progresses,” the managers wrote in their outlook following the third quarter.

DIVIDEND INCOME STRATEGY

Charles Lieberman, chief investment officer at Advisors Capital Management in Ridgewood, N.J., dislikes the total-return approach.

For starters, there’s the “sequence of returns problem,” which is a commonly cited concern among retirement researchers. If, say, an investor’s portfolio runs into a cluster of down years as retirement approaches, it can mean a much lower base of assets on which to generate income.

Making portfolio withdrawals to raise cash when the market is declining is particularly vexing to him, partly because it can mean tapping principal—something many investors are loath to do. “When the market goes down sharply, you have to sell off more assets,” Lieberman says. “When the market recovers, the portfolio is operating on a smaller base, and it potentially never recovers.”

The so-called safe annual distribution, or withdrawal, rate for a retirement portfolio is around 4%, says Lieberman. But even at that rate, he says, there’s a chance a retiree can run out of funds. (Many retirement researchers these days are encouraging a more fluid withdrawal rate.)

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So one of his firm’s strategies aims to produce income that keeps up with inflation. The strategy typically has about 80% of its holdings in stocks, in many cases including higher-yielding master limited partnerships and real estate investment trusts, with the remaining 20% in fixed income and preferred shares. Since its inception in 2001, the strategy has had a net annual composite return of 6.8%.

One REIT that Lieberman holds is Medical Properties Trust (MPW), which develops and leases health-care facilities such as hospitals. It yields 5.2%.

Lieberman doesn’t worry about the notion that emphasizing income-producing stocks can lead to dangerous overweightings in value stocks. “I have sufficient knowledge to be able to make some judgments about what sectors—and what companies—can safely provide income,” he says. “I don’t feel like I am required to invest in every sector proportionally.”

David Blanchett, head of retirement research at Morningstar, says there are times when the income approach—even one that’s less diversified—makes sense in retirement.

“Portfolios focused on income are likely to be less diversified than their total-return counterparts, but tend to produce higher levels of income, and may be attractive alternatives to total-return strategies for investors focused on current consumption,” he wrote in a 2015 paper that he co-authored in the Journal of Portfolio Management.

DIY STRATEGIES

Many investors sort out these retirement-income strategies with the help of an advisor or wealth-management firm. But what about do-it-yourselfers?

One option that growing numbers of investors are pursuing is to assemble a portfolio of dividend-paying stocks. To properly execute this difficult and potentially expensive strategy, a lot of research is required to fully understand the companies and how durable their dividends are.

Among the dividend stocks that Buckingham thinks are undervalued—but that pay a yield greater than that of 30-year U.S. Treasuries—are Royal Caribbean Cruises (RCL), which yields 2.7%; Cisco Systems (CSCO), 3.1%; Amgen (AMGN), 2.6%; AT&T, 5.2%; KeyCorp (KEY), 3.9%; Synchrony Financial (SYF), 2.4%; and Prudential Financial (PRU), 4.3%. The 30-Year U.S. Treasury’s yield is about 2.3%.

“We are not buying dividend stocks just for the sake of dividends,” says Buckingham. “We’re seeking capital appreciation, as well.”

Built for Yield

Here is a sampling of 10 funds, including two ETFs, with a dividend focus.

Morningstar lists FDGFX and KMDVX as having trailing 12-month yields. The dividend yield of the index that DTD tracks was supplied by WisdomTree. As of Oct. 31, the weighted average yield of PDRGX was 1.97%, according to T. Rowe Price. Data through Nov. 12. *Annualized. **An SEC yield, which is used for six of these funds, essentially entails taking dividends paid by a fund’s underlying holdings recently, subtracting expenses and then calculating an annualized number.

Sources: Morningstar; Bloomberg and company reports.

Instead of assembling a dividend-stock portfolio, a likely safer and less-expensive option is a mutual fund or a combination of funds. “A fund would be more efficient. They have the opportunity to buy on a larger scale,” Jaconetti says.

One of the top performers is the $39.5 billion Vanguard Dividend Growth fund (VDIGX), which reopened to new investors in August. Its annual expense ratio is 0.22%. Run by longtime manager Donald Kilbride, the fund aims to invest in high-quality and defensive companies. The fund’s top recent holdings included Coca-Cola (KO), Medtronic (MDT), and McDonald’s (MCD), and its benchmark is the Nasdaq US Dividend Achievers Select Index—whose members have raised their dividends for at least 10 straight years.

The fund has placed in the top 20% of its Morningstar peer group based on one-, three-, five-, and 15-year returns. Its 10-year annual return of 12.8% is in the top 30%.

That’s the kind of performance retirees can live with.

Whatever approach is used for retirement income, dividends should play a key role—but it’s important to understand where and how they fit in.

Corrections & Amplifications

An earlier version of this story was accompanied by a table that showed the 12-month yields, including capital-gains distributions, of 10 mutual funds. The table has been updated and now excludes those distributions.

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com

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Passive income: 15 ways to let the money flow in

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Passive income: 15 ways to let the money flow in

For many people, toiling for a living isn’t fun.

There can be lengthy commutes, dress codes, annoying coworkers, unreasonable supervisors, taxing physical labor, insufficient vacation time, heavy workloads, and a lack of appreciation, among many other things.

Thus, it’s easy to dream of money just arriving, without our having to clock in to earn it. Fortunately, passive income streams don’t have to be a dream. There are many sources, with examples including REIT dividend income, residual money, real-estate investments, interest, and other income-generating assets. Here’s a look at 15 of them — see which opportunities could work for you.

red mailbox stuffed with hundred dollar bills that are almost spilling out

1. Stock dividends

One of the simplest ways to enjoy passive income streams is to buy stock in healthy and growing companies that pay dividends. Better still, look for dividends that have been increased regularly at a good clip (many companies often hike their payouts annually) and that have room for further growth, as evidenced by a dividend payout ratio of around 70% or less. The payout ratio is the amount of the annual dividend divided by the trailing 12 months’ earnings per share. It reflects the portion of earnings being paid out in dividends. The lower the ratio, the more room for growth. A ratio above 100% means the company is paying out more than it earns, which isn’t too sustainable. Here are some examples of stocks you might consider and research further:

Stock

Recent dividend yield

AT&T

5.3%

National Grid

5%

Duke Energy

4.5%

Verizon Communications

4.5%

Pfizer 

3.7%

Flowers Foods

3.5%

General Motors 

3.4%

China Mobile 

3%

Data source: Yahoo! Finance.

2. REIT dividends

Another kind of dividend to collect is from real estate investment trusts, or REITs. They’re companies that own real-estate-related assets, such as apartments, office buildings, shopping centers, medical buildings, storage units, and so on — and they are required to pay out at least 90% of their earnings as dividends. They aim to keep their occupancy rates high, collect rents from tenants, and then reward shareholders with much of that income. If you’re interested in real estate as a way to make money, check out these examples of REITs to consider as investments:

REIT

Property focus

Recent dividend yield

Iron Mountain

Document storage

6.6%

Welltower 

Healthcare

5.9%

Realty Income 

Retail

5%

Public Storage

Storage units

4.1%

Host Hotels and Resorts

Hotels

3.9%

Digital Realty Trust

Data centers

3.5%

Data source: Yahoo! Finance.

3. Stock appreciation

Another way to wring income out of stocks, even if they don’t pay dividends, is to buy stocks that you expect will appreciate in value over time and then, when you need income, sell some shares. If you have a fat portfolio of such stocks when you retire, you might sell some shares every year to create a cash stream for yourself. Studying and choosing the stocks that will perform very well for you is easier said than done, though, so if you don’t have the interest, skills, or time to become your own stock analyst, consider simply investing in a low-fee broad-market index fund or two, such as one based on the S&P 500. Here’s how much you might accumulate over several periods if your investments average 8% average annual growth:​

Retirement: Where Could You Get Safe 6% Income?

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Retirement: Where Could You Get Safe 6% Income?

The stock market was on a roll all year long last year, and the rally continues in the new year. Most investors love the idea of rising markets and for a good reason. It gives everyone a feeling of getting wealthier. However, it becomes challenging if you need to put new money to work in the market. Also if you invest in 401(k) every paycheck, and still have more than 10-15 years to retire, you are getting less of a bargain each passing month. In fact, a fast-rising market is sort of a bad deal for young investors whose time horizon is long because they will be getting less number of shares for the same amount of money.

On the other hand, for retirees or near-retirees, a rising or a bull market is actually a very good thing, since they are not putting much of new money to work. On the flip side, a prolonged bear market early in the retirement can be devastating.

However, most retirees do not invest for total return, but for a regular stream of income while preserving capital. So, the big question that faces every retiree is how to get safe income without dipping into or losing principle. Obviously, bank or CD deposits pay next to nothing. Bonds have been in a bull market for nearly three decades and are expected to lose value in a rising interest rate environment. Yet, there are several viable alternatives; however, none is without flaws or risks. For our examples, we would assume that our typical investor needs $40,000 of annual income from the investment portfolio. Rest of the spending-need will be met by social security or other fixed income coming.

We will discuss three options; the first two only provide 4% income, whereas the third option will aim to provide 6% income with less volatility and smaller drawdowns.

Option 1: Traditional 4% Withdrawal Method

It is often said that as long as you have 25 times of your annual expenses, that should suffice. The traditional advice goes something like this:

  • Keep 1 or 2 years of expenses in cash like securities.
  • Invest the balance in a 60:40 or 70:30 stocks/bonds portfolio (generally in mutual funds or ETFs) and rebalance every year.
  • Withdraw inflation-adjusted 4% every year to re-fill the 2-year cash account.

Here are some potential problems with the above advice:

  • This was designed with an average retirement lasting 25 years. However, every person is an individual, and the term ‘average’ loses its relevance when we are talking about an individual. Moreover, average lifespan has been increasing, and it requires that one must work much longer than traditional retirement age.
  • To be able to live off 4% of the portfolio, usually one requires a large portfolio size. Though, this can vary from person to person, depending upon their spending expenses. For our example, to be able to draw $40,000 annual income, the retiree will need an investment portfolio of $1 million. Anything less will result in an income gap. To make matters even worse, the two-year cash component would be required in addition to $1-million portfolio. After adding 2 years of cash-component, the investment capital will need to be roughly $1.1 million.
  • This approach is particularly risky if there is a prolonged bear market in the early phase of retirement. A prolonged bear market at the onset of withdrawal phase can lead to large depletion of the portfolio, which can be difficult to recoup.
  • Another potential problem would be a scenario where the retirement lasts much longer, say, 35 or 40 years long? Can you afford to be out of money at the age of 90? Money should be the last thing that you should be worried about at that age. In our opinion, to have a safe and worry-free retirement (at least from money perspective), you will need a retirement fund, which is roughly 35 times (instead of 25 times) of your annual expenses.

Option 2: Conservative Dividend Stock Portfolio – 4% Yield:

This option is nothing new, in fact, it is a very popular approach among DGI (Dividend Growth Investing) believers. If you still have a few years before you actually need to live off the income from your investments, and you buy and accumulate shares over a long period of time, this is a solid approach.

For a DGI portfolio of solid, large-cap, blue-chip companies, it takes something around 5+ years before it can start throwing 4-5% or higher income. Typically, such a portfolio will start with an average yield of 3% or less, and with dividend reinvestment and yearly dividend increases, the annual yield should get to 4% plus in 5-7 years. Alternatively, if you mix in a few REITs and higher yielding but relatively safe stocks such as AT&T (T) and Verizon (VZ), you could have a starting yield of 4%. Nonetheless, it is generally advisable that you start a DGI portfolio a few years before you actually plan to retire and reinvest the dividends until you actually retire, to be able to draw 4 to 5% income in retirement. Afterwards, we can safely assume that any inflation would be met by dividend increases.

This option is solid and much safer than option-1 since we are never withdrawing or depleting the capital. Another advantage is that if for any reason, the dividend income does not grow sufficiently for some years matching the inflation that would be a signal to tighten the belt temporarily and reduce spending for few years. The major flaw is that one needs to have a large sum of capital to generate the income. Besides, some folks may suggest that our investor is going to leave too much money behind. But in our view, that is a good problem to have. They could leave it for their heir or their chosen charity or some combination thereof. There may also be issues surrounding RMD (required minimum distribution) if the money is in an IRA. RMD situations can vary greatly from person to person, and as such, it is a topic too large to cover here in this article. But, generally, a large portion of RMD could be met by the dividend income generated.

Below is a table of 25 sample dividend stocks that if invested equally (based on prices as of 01/23/2018), will provide a starting yield of 4.12%. However, the most conservative investors should aim for only about 3% starting yield.

Option 3: Nearly 6% Safe Income With Smaller Drawdowns

After all, the stock market is at an all-time high, and the run may continue for much longer. However, we know that the bull market is not going to last forever. The longer the bull-run continues, higher will be the risk of a major correction. This option is worth considering if you constantly worry about the eventual market downturn and what it is going to do to your portfolio. If your income needs are higher than 4% of the size of your portfolio and you cannot tolerate very large drawdowns, this option is worth a look.

Is the income really safe?

We believe so, on a relative basis, though nothing is 100% safe in the investing world. Now, we have seen that both option-1 and option-2 require high starting capital to be able to generate a reasonable income. In this option, we are trying to generate higher yields with less capital, and we are mitigating any additional risks by using multiple strategies. Actually, this option results in higher income, market matching total returns and smaller drawdowns. We will try to demonstrate this in a minute.

We will invest in three different portfolios, or we can call them baskets, or buckets, or any other name that you may like. For younger folks though, we recommend an additional fourth bucket for growth.

As in option 1 and 2, let’s assume we have total investment capital of $1,000,000.

Bucket 1: Core DGI Portfolio (40%)

Invested Capital: $400,000 (40%)

Total Return Target: 10-12%

Dividend Target: 4%

No retirement portfolio could ever be complete without a DGI bucket. This should make the foundation or “Core” of our investments. Just like the foundation of a house, the foundation of our portfolio needs to be strong. You should choose the strongest stocks which are available at a fair price while applying the following criteria:

  • Large-cap, blue-chip company with a sizable moat in its industry.
  • Dividend yield at least matching S&P500, or preferably 3%.
  • Must have raised the dividends in the previous 10 years. Better yet 20-25 years. CCC list by SA Author David Fish is a good place to start.
  • Not more than 3 or 4 names from the same sector. At least one company from each sector.
  • Reasonable valuation at the time of buy. Alternatively, buy using DCA (dollar cost average) approach.

For the DGI portion, we could use the same stocks as listed under Option 2 (Conservative Dividend Portfolio) above in this article.

Here is the same table of 25 stocks as listed before but with a total allocation of 40% (yield as of 01/23/2018).

If you absolutely do not like to own and manage individual stocks, your second best option will be to have some low-cost dividend-centric ETFs.

ETF Name

Symbol

Expense/fee

Distribution (12 month Yield)

Objective

Vanguard High Dividend Yield ETF (VYM)

VYM

0.08%

2.81%

High current yield

Vanguard Dividend Appreciation ETF (VIG)

VIG

0.08%

1.88%

Dividend growth

WisdomTree U.S. Quality Dividend Growth Fund (DGRW)

DGRW

0.28%

1.80%

Dividend growth

WisdomTree SmallCap Dividend Fund (ETF) (DES)

DES

0.38%

2.89%

Small-cap dividend

Powershares KBW Premium Yield Equity REIT ETF (KBWY)

KBWY

0.35%

7.25%

REIT dividend

iShares U.S. Preferred Stock ETF (PFF)

PFF

0.47%

5.58%

Preferred dividend

SPDR S&P International Dividend ETF (DWX)

DWX

0.45%

3.85%

International

AVERAGE

0.30%

3.72%

Bucket 2: Risk-Adjusted Portfolio

Invested Capital: $350,000 (35%)

Total Return Target: 10-12%

Income Target:6%

We will suggest two different strategies here. As such, you could either choose one of them or have both of them by dividing this capital between the two to provide better diversification. Of course, there will be more work if you decide to choose both of them.

Strategy#1:

Sector Rotation:

In this strategy, even though the dividend yield will be similar to S&P500 (generally around 2% most times), but we would assume that rest could come from withdrawals. The main advantage would be that we will be invested in the best performing two sectors of the economy at any time rather than invested in all 10 sectors. If none of the sectors are performing better than the risk-free assets, then we will be invested in 10-year treasuries and/or cash. Though the strategy can have so many variations, the backtesting results from one such strategy are provided below. The look-back period for measuring performance is three months with monthly rotation.

Strategy#2

Modified 6% Income Strategy:

We are calling it modified because it is slightly different from our original ‘ 6% Income Strategy’, which is being used in our Marketplace service. However, the performance is comparable. This strategy invests in four CEFs (EVT, FFC, KYN, NMZ) along with TLT/IEF and using SHY or CASH as the risk-hedging asset. It is normally invested in the four CEFs (25% each) as long as each of the CEF has performed better than the risk-free assets with a 3-4 months look-back period. The look-back period can vary from 3-6 months or a combination of more than one, say 50% weight each to 3-months and 6-months. If any of the CEFs has not performed well enough, then the specific CEF will be replaced by 10-year or 20-year treasury fund for the next month. The rotation is on a monthly basis.

The main advantage of this strategy is that it would create a consistent income of about 6% due to high distribution from the CEFs. However, a word of caution: This strategy may not perform as well during a raging bull market as we see currently. However, it should make up during the times of stress or panic and preserve the capital at the same time. Just to provide a general idea, the back-testing results from one such strategy going back to the year 2006 are presented below:

List of securities:

  • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT)
  • Flaherty & Crumrine Preferred Securities Income Fund (FFC)
  • Kayne Anderson MLP Investment Company (KYN)
  • Nuveen Municipal High Income Opportunity Fund (NMZ)
  • iShares 20+ Year Treasury Bond ETF (TLT)
  • iShares 7-10 Year Treasury Bond ETF (IEF)

Bucket 3: CEFs portfolio – 8% Income

Invested Capital: $250,000 (25%)

Total Return Target: 10%

Income Target: 8%

This is similar to our regular ‘8% Income CEF’ portfolio. We recently provided an update here.

Security

Symbol

Security

Name

Type of CEF

Investment

dollars

Current Dividend

Yield

Dividend

amount

1.

PCI

PIMCO Dynamic Credit Income Fund ( PCI)

Debt & Mortgage securities

$25,000

8.83%

$2,207.50

2.

PDI

PIMCO Dynamic Income Fund ( PDI)

Debt securities

$25,000

8.88%

$2,220.00

3.

KYN

Kayne Anderson MLP ( KYN)

Energy MLP

$25,000

9.01%

$2,252.50

4.

RFI

Cohen & Steers Tot Ret Realty ( RFI)

Realty

$25,000

7.70%

$1,925.00

5.

RNP

Cohen & Steers REIT & Pref ( RNP)

REIT/Pref

$25,000

7.48%

$1,870.00

6.

UTF

Cohen & Steers Infrastructure ( UTF)

Infrastructure

$25,000

8.03%

$2,007.50

7.

JPC

Nuveen Pref & Income Opps Fund ( JPC)

Preferred

$25,000

7.81%

$1,952.50

8.

STK

Columbia Seligman Premium Tech ( STK)

Technology

$25,000

8.03%

$2,007.50

9.

NMZ

Nuveen Muni High Inc Opp ( NMZ)

Utilities

$25,000

5.75%

$1,437.50

10.

HQH

Tekla Healthcare Investors ( HQH)

Health Care

$25,000

8.60%

$2,150.00

TOTAL

$250,000

8.01% (average)

$20,030

Total Income from Combined Portfolio:

Invested Capital

Total Return

(over 10 year period)

Income

Core DGI

400,000

10-12%

16,494 (~4% dividends)

Risk-Adjusted Rotation Strategies

350,000

10-12%

21,000 (~6% distributions or withdrawals)

8% Income CEF portfolio

250,000

10%

20,030 (~8% distributions)

TOTAL

$1,000,000

10-11%

$57,524 (~5.75%)

Let’s see the risk and drawdown potential:

One method is to see how specific security would behave in a crisis or recession would be to look at how it behaved during the 2008-2009 financial crisis. Though there is no certainty that next time around it would be exactly the same, it does provide some idea. Below table assumes the net-declines in each type of security based on their respective behavior in 2008-2009.

* This is the assumed NET decline in prices after subtracting the 8% distributions.

Conclusion:

We are not advocating that the high-income strategy is the best strategy for everyone. One needs to look carefully at their personal situation, particularly the risk-tolerance. If someone has a $2 Million portfolio and his or her income needs are only 2% of the portfolio size, we think a DGI strategy would be great and cover all bases. However, on smaller portfolios, it becomes difficult to raise sufficient income solely by index investing or even DGI strategy. What we need is a little more diversified approach in such situations, such as the option-3 described above. It provides much higher income, better strategic and asset diversification, market-matching returns and one-third less drawdowns.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. The stock portfolio presented here is a model portfolio for demonstration purposes; however, the author holds many of the same stocks in his personal portfolio.

Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, MON, ADM, MO, PM, KO, DEO, MCD, WMT, WBA, CVS, LOW, CSCO, MSFT, INTC, T, VZ, VTR, CVX, XOM, VLO, HCP, O, OHI, NNN, STAG, STOR, WPC, MAIN, NLY, PCI, PDI, PFF, RFI, RNP, UTF, EVT, FFC, KYN, NMZ, NBB, HQH, JPC, JRI, TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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