I apologize for being absent but its taken more than a week at home to get synced back into my normal schedule (and time zone!) since my return from our Italy vacation. I actually developed a bad cough last week and minor upper respiratory infection, I guess I needed more recovery from this trip. Anyway, I’m returning to consistent blog posts starting with this one on passive income.
One of the basic tenants of financial independence is building a stream of passive income as a means to replace your regular (job-related) income. In preparation for my planned early retirement, over the past two years I’ve been building an income portfolio. This portfolio is unconventional as there is barely a trace of dividend paying stocks. The lions share of my portfolio is investment in Real Estate Crowdfunding. These investments pay me a preferred rate of 8%, some monthly and a few make large quarterly payouts. This is a generous yield in the market environment we’re in, with bond yields at all time lows.
The other significant portion of my income portfolio is invested in a fixed income mutual fund, the Semper MBS Total return fund. To be fully transparent and to give you an idea of the monthly income generated from this fund; I have invested $250,000. in this fund and my monthly income is over $1200. This is a low risk bond fund in my opinion, its actively managed by a capable team who specialize in mortgage-backed securities, and I’m extremely pleased with the monthly payout.
Another area I continue to earn consistent monthly income from is Selling put options. This has been a winning strategy for me over the past couple of years and I can realistically see myself doing this throughout my retirement. Recently I sold puts on AT&T, Kimberly Clark and Proctor & Gamble. These are the types of stocks I target for put selling; liquid stocks of solid companies that have sold off based on headline risk alone, with no fundamental problems. My monthly income from option-writing averages between $1400-1700/mo. NOTE: If you haven’t purchased the book I recommend on put selling, go the link above and follow the amazon link to purchase it. Its a great read and very informative and I base my money-making system on the lessons learned from this book, written by Dr. Robert Valuk.
The remainder of my income portfolio is invested in a ladder of CD’s. I purchase them in my Charles Schwab account and I ladder them from 3 months, out to 12 months in duration. As one matures I roll the cash to a new 12-month CD.
All total my income portfolio is generating approximately $52,000. Per year. This is terrific considering that I am still employed full time. I do not spend a dime of this passive income, I reinvest it in the Semper MBS fund as well as CD’s. If the crap hit the fan, if I lost my full time job; could I retire today given the amount of my passive income? Yes I could, though I’d feel much more comfortable earning a minimum of $75,000 annually in retirement. When you factor in my annual property tax bill (in 2017 it was $10,400!) and the cost of health insurance (the subject of a future blog posting) there wouldn’t be much left over for things my wife and I enjoy doing.
Start finding ways to build up a passive income stream. Its very rewarding AND enjoyable. I get excited when I see dividends hit my bank account several times per month from my various investments. For my female readers; HAPPY MOTHERS DAY!