I'd like to put together a portfolio that would generate a 7% income yield. I am not risk averse, but I don't want investments that actively expected to go down over the long term (I'm not talking about market volatility.)

Can it be done, and how? Looking at all types of market investments. Not looking at off market private deals.

With leveraging its incredibly easy. Withou tleverage only reits and very rare companies that usually have deterioting revenue give that much but 5% is probably doable.

Example ohi,sbgl, kss, t, pbi averages like 6% and is fairly diversified but it's arguable whether all those have deteriorating revenue or not

Usually if yield > its industry its growth < industry unless it's miss priced

This was stock based. High yield bonds can of course give this yield

Yes, not only stocks, although I would buy them (and stock funds/ETFs) as part of the mix.

For instance, I was looking at floating rate loan ETFs. High yield bonds and/or funds/ETFs are also in play. I looked at, and actually owned agency REITs at one point.

This is not going to work out.

JQC is a really great floating rate loan fund. I'd highly recommend it.

Regardless, make sure you buy a closed-end fund, though, not an ETF. You can have big problems in a market panic with instant liquidity for relatively illiquid assets.

This is a good example of why it is hard to achieve 7% income returns. The yield is currently above 7% and it has been high throughout the past ten years. However, the total returns during this timeframe has been only 4.4% due to share price reductions.

That said, maybe this is better to hold if interest rates are rising.

Not sure how it works in the US and A but here interesting income gets dicked relative to dividend income so after tax yields of high yield / junk bonds makes it not that appealing considering risk.

Anyway I do something similar to what you're going for but it's inside a TFSA so there is no tax on the interest.

What I do is look for mispricing in Canadian convertible debentures ... even when you find things badly priced to get the whole group of debs over 7% you have to be willing to take some iffy companies.

For example I picked up debentures in IBG.TO and FTP.TO in January 2016 when both were trading between 60-70 cents on the dollar (now at par and 95 respectively) so the yield to maturity on those was very high, in the 20% range ..... getting 1 or 2 of those helps goose the overall yield of the folio

The convertible debs seems to be mainly a retail product here so you can pick some good spots. Right now there's not much I see that's compelling other than rolling over some 7-% yielders that are within 1 year of maturity and trading at or above par.

Not going to find it

Sp500 fund returns around this rate.

Very high variance tho

Well, interest rates have been zero for much of the last 10 years, so it isn't surprising a floating-rate fund would have underperformed over that time I suppose.

Have DJIA index funds grown about 6% a year on average in the long-run? And then there's the dividends on top of that?

Guess hoping to rely on it for steady income might be a very different thing ...


Am pretty new to investing, so there's a good chance the above isn't quite right Always enjoy learning more though

That's kinda my point. You can't just pick something today that yields 7% and expect to get that return over 10 years. Generally yields that high indicate either the payments will fall or the underlying will fall or both.

grunching here........... but i would say can't be done.

anything with that kind of yield is very risky. either won't make all the assumed payments or the principal will erode.

what can you actually invest in these days that gives a 7% current yield? can't imagine there's alot but certainly some.

careful on the canadian convertible bonds that someone talked about........ can't they pay principal - and maybe even interest - in stock, which is really bad

I mean that's not really the case. Plenty of BB-rated bonds out there or bank preferred stocks yield 6%-7%. If he wants 7% he can try to find it or ask others to.

With bonds expiring in ~10 years with a yield to maturity of 7%, you're talking about an investment that will yield 7% the vast majority of the time, but with a small but significant risk of defaulting. Putting all the money in such bonds is going to be a much less efficient investment than a balanced portfolio of bonds and equities.

A balanced equity/fixed income index portfolio is going to be the best bet unless you have very specific risk preferences/requirements.

Since OP can't get 7%/year guaranteed, the best general advice is a balanced index fund/ETF portfolio. He'd need to provide more specifics about the return profile he's aiming for to get better advice.

Seems like 7% over a long period of time (10 years or more), is really really hard without taking on way too much risk.

I'd be interested in answering the same question, but at 5%. That seems like a more likely possibility.

Why 7%?

Hey all:

The answer to "can I get 7% income on my investments?" is, it depends

How much work are you willing to take on to get this? How much capital are you working with? How soon do you have to do it? How much risk are you willing to take?

If you are a starting investor, you will have to increase your knowledge base. This will take time & effort...but could certainly be done by working/reading a 4-8 hrs. a week (Sat or Sun. afternoon) over a year or two.

If you can also "walk" into your positions, that will greatly benefit you. That is, divide up $100k and invest it over the course of a year.

Another thing that you can boost your income on investments by working with options. Specifically, you can write "covered calls" against some of your stocks. If you are sharp and paying attention, you can easily boost the return on your portfolio by 2-3% a year without taking on very much risk.

The other HUGE factor to this is if you can gain knowledge of certain industries AND HAVE THE PATIENCE to invest when that industry is going through difficult times. For example...in the great meltdown of 2008, there were REIT's with preferred shares paying 20%+. My ex business partner bought some preferred shares in a hotel REIT and has been collecting OVER 20% in income for almost 9 years now. He is also sitting on a nice capital gain. I don't think he will ever sell these shares....

Another example, and one that I was able to take advantage of myself, was the collapse in BDC's. BDC's are "business development companies". These guys typically make high interest loans to companies that aren't big enough to do a public debt offering, too big for a local bank, too small for a national bank. They may also have "credit issues", I.E. non-investment rated debt (junk bond ratings). So these BDC's loan money out a high rate of interest. They will also work with management of the company to improve their product, or operations, and help them get to the next level. I almost forgot to mention that they will frequently get an equity "kicker" for a small part of the company. If the company succeeds, then these small equity positions can actually turn out to be quite valuable...

ANYWAY, to make a long & complex story short, there were BDC's selling with a yield in the high teens. This was about a year or so ago. If you bought these, you would have collected some nice income AND would be sitting on a nice capital gain.

So yes, if you have knowledge, are patient, and are willing to take on some amount of risk, you absolutely can get 7%+ in income.

i earn more than that with my cash.

it's not entirely passive, it involves a decent amount of work but it's all FDIC insured.

Google 'bank bonuses.' it's basically bonus whoring new bank accounts. some are like $200 with little money tied up. others you get an effective APR of 8%+ for a few months tying up $10k+.

takes working finding them, doing DD on them, setting them up, meeting the requirements and monitoring them. but the returns are so juicy on a % basis i sometimes wonder why i bother with stocks at all.

Good luck getting 8% with bank bonuses on any significant amount of money

Significant to who? You?

I'm already doing it with an amount that is significant to me and > 99% of people. If you happen to be in that < 1%, congratulations. But to try and re-define 'significant' to mean that which is significant to your cohort is absurd.

Numbers would probably be helpful:

$50-100k you could have working at 8%+ easily. Every dollar of that would not always be earning that rate but the whole would, at the end of the year.

I hope one day to become such an out of touch baller that I will handwave dismiss $100k as insignificant.

If you're making $8000 a year on bank bonuses that's pretty impressive. I seriously doubt it thought.

it doesn't sound sustainable, but it does sound like a great way to start off building an investment roll. Once the returns diminish to the point it's not worth it, use the money elsewhere.