Help with portfolio to generate income with relative principle stability

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Thrifty2
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Joined: Thu Mar 31, 2016 9:47 am

Help with portfolio to generate income with relative principle stability

Post by Thrifty2 » Mon Apr 11, 2016 4:38 pm

Thanks to all your answers to my original post last week. I have spent several days re-examing my goals and thought about an acceptable AA.

Facts about me

Goal is to generate current income to supplement my social security

Somewhat risk adverse

Desired Asset allocation: A portfolio that will generate current income while minimizing (not eliminating) the risk to a decline in value of my principle. I have abandoned my previous AA and at this point I have No specific equity vs fixed income percentages in mind.

I am not interested in trading or watching the market. Also, the fewer funds I have the better one would be great but even three or four would be ok

I have looked at a number of different kinds of assets including
Annuities (which I have decided do not want)
Mutual funds such as vanguard dividend growth and vanguard dividend appreciation (index)
Vanguard REIT Index
MLPs (eliminated do to the multi state tax filing requirement)
Vanguard short and the niter educate term Federal Bond funds
Vangua d short and intermediate term Corporate bond funds
Vanguard short term and intermediate tax exempt bond funds
Vanguard Wellsey
(I want to keep duration on the shorter side as I believe during my lifetime rates will more likely be in the upward trend as apposed to the last eight years where they have trended down.
or
I can continue using CDs which have almost no credit risk due to fdic coverage and which have a defector put in the event of a major increase in rates by bailing out and paying the early withdrawal penalty.
I am also unsure as to whether mutual funds or ETFs are the way to go. Nice thing about mutual funds is that unlike ETFs that have a bid ask spread and a discount/premium spread, mutual funds are bought and sold at NAVs which I assume is less risky.

A relative has suggested P2P lending with part of my portfolio but I would rather not go there because of the extra credit risk and work involved. Another relative mentioned mutual funds that are floating rate but in looking into them although they may be less violate I perceive them is being more risky because of the credit worthiness of the borrowers especially in an economic downturn.

Any other income ideas are welcome.

For what it's worth this will be done in a fully taxable non-retirement account However again, stability of principle is important.

So here I am swimming in a sea of income options with no great idea on how to pick or allocate among them. So where do I go from here.

I have also read about Robo advisors who would do the picking and choosing for me so I would not have to worry about allocation.

Throughts,comments, ideas anyone.

Thanks

Thrifty2
Last edited by Thrifty2 on Thu Apr 14, 2016 12:48 pm, edited 1 time in total.

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patrick013
Posts: 1846
Joined: Mon Jul 13, 2015 7:49 pm

Re: Help with portfolio to generate income with relative principle stability

Post by patrick013 » Mon Apr 11, 2016 6:06 pm

VCIT or VCSH Corporate Bond ETF
VYM High Div Yield Index ETF
VPU Utilities ETF
VNQ REIT ETF

also, possibly:

ITM Market Vectors Intermediate Municipal Index ETF
MUB IShares National AMT-FREE Muni Bond ETF

Don't know if that's what you want but it can't be too far off.
Here's some backtest figures.

Image
age in bonds, buy-and-hold, 10 year business cycle

looking
Posts: 613
Joined: Thu Mar 01, 2007 7:14 pm
Location: morgan hill ,ca

Re: Help with portfolio to generate income with relative principle stability

Post by looking » Mon Apr 11, 2016 6:27 pm

Unread
postby patrick013

im not quite understand your back text,could you please explain in details

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patrick013
Posts: 1846
Joined: Mon Jul 13, 2015 7:49 pm

Re: Help with portfolio to generate income with relative principle stability

Post by patrick013 » Mon Apr 11, 2016 6:38 pm

looking wrote:Unread
postby patrick013

im not quite understand your back text,could you please explain in details


When I put those ticker symbols into the backtest program on
portfoliovisualizer.com I can see dollar results for each of the
3 portfolios. I think in a flat or downward trending market an
income portfolio or a govt. bond heavy portfolio would provide
great income with stability of investment more than the market
stock portfolio with a much higher std. dev. and potential drawdown.

Or just backtest a basic income portfolio as an account for that purpose.
age in bonds, buy-and-hold, 10 year business cycle

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