Investing for income?

[Huntinkev]

It's difficult to invest in something you do not fully understand, and I don't understand any of this digital currency stuff. Also, how is getting into it now feasible for the common man at entry prices today?

That's me. I only invest in something I understand. I don't understand any of this digital currency stuff so I stay away from it. 1 bitcoin right now is $48,000....that's crazy.

 

[SDHNTR]

A 21 yr career Financial Advisor here. I’m not going to toot my own horn but I have the credentials and I’ve been around the block a time or two. There is good info and some really bad info here! I’m not going to offer any specific advice over the internet for people I know nothing about, but in this environment, you should probably abandon the idea of investing purely for income. Yields are too low, without taking on substantial risk. You can’t make it on pure yield alone. Instead, adopt a total return mindset and maintain a diversified portfolio with systematic withdrawals in place to meet cash flow needs.

It’s fine if Bitcoin enters the conversation, to a point, but it absolutely should not be THE conversation!

 

[Mighty Mouse]

how is getting into it now feasible for the common man at entry prices today?

Not sure if this is what you're alluding to, but bitcoin can be bought/sold in fractions. Each bitcoin is divisible into 100 million "satoshis" (aka, "sats"), just like a dollar is divisible into 100 cents. At the current price, you could transact in bitcoin in increments as low as $0.00047. I'm a bitcoin maximalist and don't pay much attention to other cryptocurrencies, but I would assume that most "altcoins" can also be traded in small fractions. I'm not saying that now is or isn't a good price at which to buy bitcoin (that depends entirely on your goals and risk tolerance), just pointing out that it can be traded in increments far below the whole bitcoin price.

 

[isocyanate]

For what it’s worth I have an older dual cpu dell precision set up mining for monero (alternate digital currency). It’s not expensive to operate and was idling anyway. I’m not ready to buy crypto with cash, but if my idle pc can accumulate some while I’m away...why not?

disclaimer: I have no idea what I am doing.

 

[BigBadJohn]

For what it’s worth I have an older dual cpu dell precision set up mining for monero (alternate digital currency). It’s not expensive to operate and was idling anyway. I’m not ready to buy crypto with cash, but if my idle pc can accumulate some while I’m away...why not?

disclaimer: I have no idea what I am doing.

says the guy that seems to know what he's doing

 

[isocyanate]

says the guy that seems to know what he's doing

I’m just saying that it’s equally likely that I downloaded a virus to my computer.

 

[rob86jeep]

For what it’s worth I have an older dual cpu dell precision set up mining for monero (alternate digital currency). It’s not expensive to operate and was idling anyway. I’m not ready to buy crypto with cash, but if my idle pc can accumulate some while I’m away...why not?

disclaimer: I have no idea what I am doing.

How long have you been doing it and how much have you made so far?

 

[isocyanate]

How long have you been doing it and how much have you made so far?

Only a couple days. Have mined about 0.0011 XMR, or $0.22 at current valuation. Computer draws under 75 watts, plus it's in my cold ass shop.

Just remember, that bitcoin was once worthless, and now can be exchanged, presumably, for $46K per block.

I can keep up with computer talk, but this crypto stuff goes wayyyyyyy deeper than I do.

 

[Wib]

I understand the thought process behind it, I just don't understand the "mining" process and I am disturbed by what this "product" really is. That's because it isn't a product, or service. You are buying nothing but blue sky speculation. Yes, so far it has produced growth. But having no tangible worth, what about the future? What happens when governments get fully involved wanting to regulate and tax? I heard India has already limited it significantly. The dollar is seemingly losing its once constantly held status, I get it. But the dollar (being an IOU) is still backed by a country. Digital is backed by a hopeful speculation. I just don't know and at this point is there really an entry point?

 

[isocyanate]

As I understand it so far, each cryptocurrency is based upon "blocks". Each block being based upon some quantity of correct solutions to a formula. The number of blocks is finite, and as more blocks are solved, the formula gets harder, i.e. requires more computing power. Similar to a government issued currency, it only has value because enough people agree that it does. That's probably a crude assessment, bordering on incorrect, but regardless, It's a deep dark rabbit hole.

Again, would not exchange real assets for cryptocurrency.

 

[jlh42581]

You dont buy crypto for the rate of return. The rate of return on crypto isnt shit compared to options. Its not even close

 

[fwafwow]

Only a couple days. Have mined about 0.0011 XMR, or $0.22 at current valuation. Computer draws under 75 watts, plus it's in my cold ass shop.

Just remember, that bitcoin was once worthless, and now can be exchanged, presumably, for $46K per block.

I can keep up with computer talk, but this crypto stuff goes wayyyyyyy deeper than I do.

Just don’t forget to report it as ordinary income.

 

[JRMiller]

A 21 yr career Financial Advisor here. I’m not going to toot my own horn but I have the credentials and I’ve been around the block a time or two. There is good info and some really bad info here! I’m not going to offer any specific advice over the internet for people I know nothing about, but in this environment, you should probably abandon the idea of investing purely for income. Yields are too low, without taking on substantial risk. You can’t make it on pure yield alone. Instead, adopt a total return mindset and maintain a diversified portfolio with systematic withdrawals in place to meet cash flow needs.

It’s fine if Bitcoin enters the conversation, to a point, but it absolutely should not be THE conversation!

I agree %100 and will go one bit farther as to say that right now with any investment, you’d like to make income, but your primary goal should be to keep ahead of inflation. Many numbers being thrown around as to what the inflation rate is right now, but personnaly right now my opinion is that if your investments are not earning at least %7 your not getting ahead your stagnent. If they they are earning %3 or less your actually losing money via inflation.
Just my opinion.

 

[JRMiller]

I don’t know if you need to have 7% returns to beat inflation, but I do know that if you are aiming for that return, you are taking on risk. There is no free lunch, and everything anyone thinks will increase in value, someone else disagrees with you and/or thinks they have a better alternative for the cash you paid them to make your investment.

Of course you're taking on risk.
Almost all means of investing have some degree of risk, be it small or substantial.

 

[Mighty Mouse]

As I understand it so far, each cryptocurrency is based upon "blocks". Each block being based upon some quantity of correct solutions to a formula. The number of blocks is finite, and as more blocks are solved, the formula gets harder, i.e. requires more computing power. Similar to a government issued currency, it only has value because enough people agree that it does. That's probably a crude assessment, bordering on incorrect, but regardless, It's a deep dark rabbit hole.

Again, would not exchange real assets for cryptocurrency.

The following applies specifically to Bitcoin, but other cryptocurrencies operate along the same basic lines:

A "block" is a chunk of data containing around 2,000 individual transaction records. Once a "miner" has verified that all transactions in a given block are legitimate, that block gets appended to the end of the "blockchain." The size of an individual block is capped by a data limit (1MB), but the length of the blockchain is infinite. Every Bitcoin transaction that has ever been made or will be made gets recorded in the ever-lengthening Bitcoin blockchain and is open for public viewing. The common protocol that all Bitcoin miners run is programmed with the goal of adding a new block to the chain every 10 minutes. A "difficulty adjustment" (i.e., adjustment to the computational intensity of verifying a block) is made every 2,016 blocks (roughly every 2 weeks) to keep average block times around the 10 minute target. Miners are paid for each block they verify with new bitcoin generated by the protocol. The "mining reward" began at 50 bitcoin per block and gets cut in half every 210,000 blocks (roughly every 4 years). The mining reward schedule caps the maximum number of bitcoin that will ever exist at 21 million.

Understanding these technical details isn't necessarily required to evaluate whether or not Bitcoin is a good investment, but there's a Bitcoin 101 lesson that nobody asked for. From an investment perspective, I view Bitcoin primarily as a speculative hedge against inflationary devaluation of the dollar. I think Bitcoin's volatility will gradually fall as adoption spreads and that its value will eventually stabilize to the point that it can function as a reliable medium of exchange and store of value. That said, a major crash following the current run-up is certainly possible and has historical precedent.

For anyone interested, this podcast series has a lot of good mildly-to-moderately technical discussion of Bitcoin as an investment: https://www.theinvestorspodcast.com/bitcoin-fundamentals/?amp

 

[Beendare]

Inflation.....I know what the experts base it on.....

But does anyone here think they are paying less for anything but a home mortgage in the last 10 years?

Everything is shipped.....so when fuel goes up...everything costs more. Groceries, Cars/trucks, clothing, EVERYTHING costs more....even electronics which are supposed to drop due to Moores Law are more expensive.

The new admin is attacking fossil fuels [leave the politics to another discussion] and that literally drives up the cost of everything. Heck along with fuel costs rising, UPS raising prices reports increases of 8% a unit.

The only index that is skewed is the Baltic dry index....which was through the roof going into 2021...but since there is so much backlog at the ports and no one can get anything off the ships...that has temporarily dipped.

Unless you think consumer demand will completely dry up....I say inflation is already here.

_____

 

[Wacko]

I have found this discussion quite entertaining to say the least.

As for the OP....I personally would NEVER have a financial advisor, there is a conflict of interest there - no matter what! I also would never buy an annuity....just doesn't make any sense. The best investment you can make is in yourself. Get some financial education and keep getting it. No one, and I mean no one, will care about your money like you do.

As for investing in income. Well there are several things you can do.

Individual companies. A good example here is Abbvie (ABBV) - currently yields just under 5%, just raised the distribution 10% not long ago and has a track record of high raises each year.

If you want real estate investments - look to reits. A good example is Getty (GTY) - they are in gas stations and convenience stores. Current yield is 5.5% payed quarterly.

Someone mentioned Closed End Funds (CEF'S) - A good example here is Tekla World Healthcare (THW) - Currently has 174 holdings - yields 8.2% annually and pays monthly.

Also ETF's - A good example here is Nationwide Risk Managed Income Fund (NUSI) - currently has 106 holdings, yields 7.6% annually and pays monthly.

There are risks with everything out there. If you educate yourself, make a plan, work the plan, manage your risk, and always be adding to your investments - either reinvesting distributions, or "new money" - will make you financially able to provide without stress and probably make it so you can leave a "legacy portfolio" for your family.

Worth what you paid for it.....

 

[SDHNTR]

There is an inherent conflict in paying for time, for a Financial advisor, or anyone else. How do you know if that financial plan I just billed you eight hours for, really took eight hours? Just like your auto mechanic, if you are paying for time, you better trust that person completely. Plus, managing an investment portfolio is not a one and done matter. To do it right, with a strategy and discipline, there’s a lot that hapoens behind the scenes on an ongoing basis. An hourly pricing model could rack up a big fat bill quickly.

There’s a reason why financial professionals who are bound by a legal fiduciary standard, charge an annual fee, based on assets. It’s the only clean way to do business. There’s no preference to product type and our interests as client and advisor are aligned. The only way I make more money, is when you are making more money, and vice versa.

 

[SDHNTR]

I hear ya and agree with those points. Ultimately, there must be a basis of trust.

 

[Wacko]

I'm always fascinated with the conflict of interest issue. First, a conflict in this instance can be mitigated if you either pay the advisor for time instead of by AUM, and/or by making sure that the advisor is not compensated by product choice. Second, conflicts are not per se bad (you are paying someone who should know more than you do, especially if you don't have the time or inclination to educate yourself), but they should be disclosed. Finally, if one wants to avoid hiring anyone with a conflict of interest, then think about your lawyer, CPA, doctor, plumber, electrician and probably many others. Technically anyone who is paid to determine or diagnose the problem and gets paid to fix or cure it, has a conflict.

As always you can take this to whatever level you want - whether it makes sense or not. Like cartridge debates - if a .308 will work, why not .243, or .223....

I'll give you an example: worth what you paid for it......

In most industries you can get a second opinion as well if you aren't interested, or too lazy in doing any research into whatever you have a need for - injury, law, finances etc. Google is your friend - most times....

Let's say I hire a financial advisor - he charges 1% for the "management" of my account. That is whether I make money or not. Then he invests me into several funds - all of which charge additional fees. Now I can be around 1.5% I'm paying in fees. Then there's the back door - the advisor gets additional fees to invest new money to the account, gets fees when he "realigns" my portfolio, additional fees for consults, whatever. Now I'm up to say 2% plus in annual fees....

The more "activity" an advisor makes the more he gets. Or he can do "nothing" and get his 1%. He also can get "kickbacks" / incentives or whatever from funds for having their clients invest in them.

If someone takes 10 minutes they can set up a 3, 4 , or 5 fund portfolio and save at least 1% in fees and get the same performance or better. Bogelheads have several, or lazyportfolioetf has more than enough....no need to be so lazy you don't learn about the #1 thing that can make you or break you.....

Bottom line is compare 20 year returns with a 1% increase in returns...tell me that financial advisor is going to get you better returns over that time frame - without just investing you in those same funds?? History has very, very few examples of anyone able to beat the market over that time frame...

Simple Savings Calculator

Making people feel like it is too complicated, or they don't have enough time / information - whatever, is the "hook" which gets them paid.....whether it is just for their "time" or asset management....

On the other hand, you can start educating yourself - you have 20 years or more (even if you have less) - what's a few hours a year to get better? You might even find you like it and get really good at it....

As for income investing - per the OP.....why is it I have never found a financial advisor that will have you invest in CEF's ?? Is it because they are risky? I don't think so. Are they different? Sure, but educating yourself lowers "risk". I don't mind paying their fund fees because they are doing things I don't necessarily want to deal with - option writing, leverage, all kinds of "advanced" investing techniques. Additionally their fees come out before the distribution - so a 5% distribution is after fees. I have been in them for years...still waiting to get "hurt"....but I "actively" manage my own accounts and pay attention to things....

So there ya go....education lowers "risk" in all things.....