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Passive Income Investing (Adrian): Covered Call ETFs, Split Funds & Risks Of High-Yield Investing – my review and opinion on it

ByWealth Diagram

This is my review and opinion on “passive Income Investing (Adrian): Covered Call ETFs, Split Funds & Risks Of High-Yield Investing” you can watch the video or you can see the highlight bellow the video

Highlights

  • Avoid individual companies even though they have high yield, they are really risky, they are the first to cut dividends
  • Covered Call ETFs, Split Funds & Risks Of High-Yield Investing
  • Split funds also know as split shared solutions
  • Covered Call ETFs are design for investors who would rather get their return now rather than later
  • Priority is cash flow over long term growth or overall total return
  • With Covered Call ETFs they do the trading for you, you just invest the money.
  • Covered Call ETFs This is passive trading so you pay a managing fee,
  • You are investing in a bucket of stocks with less volatility

  • Or you can learn to trade covered calls and do it yourself by stock picking. But this is active trading
  • With active trading you don’t pay a managing fee. you are investing in single stocks, more volatility

  • Split Funds, two tickets symbols
  • One is the preferred share( like the debt of the company) it’s yield is fixed forever, so less risk involve
  • It’s a fixed income. just like a bond, it’s fixed.
  • The second is capital shared also know as class A shared, this is very volatile, not fixed, leveraged, goes up and down.
  • Capital shared have huge yields
  • Split funds is difficult to understand for most beginning, they might become obsolete as new trading ways show up
  • Capital shared might not pay some dividends if underperformed
  • Of Course, because of the high yield, missing one or a few payment is still profitable in the long run.

  • A concern by the uneducated with dividend investing is that you capital is going down by certain % every year.
  • It’s a Legitimate concern but just look at the total returns instead of the stock price returns.

Sprit funds can give you any where from 10% to 20% yield

Example:

If you stock prices is going down by 5% per year, but you are yielding 15% per year, then you are profiting 10% per year.

The good thing about this is that you getting a cashflow and you can either use it or reinvested, so it’s realized.

Unlike index eft, which are good but there is very little or no yield, so it’s unrealized, so if you don’t sell it, you don’t get any money

  • Buy and hold for cash flow, for monthly income
  • Covered call appreciate too but to a lesser extent

I Just have a Aha Moment

This is great information, I just have an aha moment, so let me give you an example and hopefully, it give you courage to start investing.

Let’s think at covered call ETFs and split funds this way

If you have $100, you are going to give this money to a company and you never going to see that money again, so just forget about it. Therefore, you just lose that money

However, in return they are going to give you 10-15% yield every year in perpetuity, aka forever!

You can choose to use the cash to live off from it or you can use that cash to reinvest it.

Example

If you give $100 to the company and they give you 10% yield, you get $10 back, you can either use that 10 dollars on everyday living or you can reinvested by giving that $10 to the company.

Eventually, assuming that your standard of living does not goes up , so you are expending less than you earn.

that pool of money is going to grow so large that you can live off the dividend even if you stopped putting money into it.

Example

If your pool of money grow up to be $300,000. Well 10% of of that is $30,000. If you’re single and childless you can live off 20k per years and reinvest the remaining $10k, So that your pool of money grow even bigger next year. one of the best part of it, you don’t have to work ever again if you don’t want to.

So you work because you want to ,not because you have to.

For the people that think that $20k, is not enough for someone who is single and child less.
well, the united state is a really big place with many states.

Example

Let us take NY for example is one of the most expensive state to live in if you live in the city. But if you live outside the city , you can easily find one bedroom apartment for $500 per month, unlike in the city that you easily pay $1800 per moth for the same one bedroom apartment.

When I say one bedroom apartment, I mean everything. This include kitchen, living, bedroom and bathroom which have the toilet and bathtub.

And that’s assuming that you spend 20k per years, there are people that can live off 13k to 15k per year.

“Passive Income Investing” is his channel name
Here is the YouTube link if you are interested.

you can go through his YouTube playlist and watch some of his videos
or can check one of his most popular video name monthly portfolio unveiled, every month he shows his entire portfolio, what has changed or unchanged, basically he give you an update.

Final thoughts

Very useful information.

Find you courage, start now and adjust as you go

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