Lahardan Financial
No Result
View All Result
Saturday, March 6, 2021
  • Home
  • About
  • Economy
  • Government & Politics
  • Investing
  • Retirement Planning
  • Wealth Protection
Lahardan Financial
  • Home
  • About
  • Economy
  • Government & Politics
  • Investing
  • Retirement Planning
  • Wealth Protection
No Result
View All Result
Lahardan Financial
No Result
View All Result
Home Investing Bonds

A Simple Set & Forget Cashflow Portfolio

Leon Wilfan by Leon Wilfan
August 3, 2020
in Bonds, Cashflow For Retirement, Investing
0
businessman chill beach

Source: iStock/anyaberkut

Share on FacebookShare on TwitterLinkedIn

A few days ago, while working in a café, I struck a conversation with a fellow digital nomad.

After the initial chitchat about the weather and current surfing conditions, the conversation, as it always does, led to the inevitable question…

“What is it that you do for a living?”

I explained that I’m an investment strategist, which was much to my new friend’s liking.

He was dealing with an investing dilemma and needed professional advice.

He’s already built a successful business and would now like to slow down and enjoy life some more.

For that purpose, he set aside some money which he would like to put to work to create an extra cashflow stream.

Initially, he was considering investing in real estate. However, the problem is that he travels a lot. So he doesn’t want to be bothered by potential repairs and complaining tenants or be paying an agent to manage his properties. It’s too much responsibility, something he’s trying to escape.

His next thought was investing in the stock market. But the issue here is that he doesn’t know how to do it correctly. He always had trouble recognizing when he should buy and when he should sell. Furthermore, he doesn’t like the extensive research that goes into it. Not to mention that the inherent price volatility of stocks has caused him many sleepless nights in the past.

What he wants is a simple, low-risk, zero-maintenance, cashflow solution.

I saw this as an exciting challenge and agreed to help him.

As I was thinking about it, however, I realized that there are probably thousands of people like him looking for the exact same solution.

And that one of thousands could be you, my dear investor.

After all, you are reading the Cashflow For Retirement letter.

How To Create A Set & Forget Cashflow Portfolio

So how does one go about creating such a solution?

Since the purpose is to generate passive income, I first narrowed down my focus on cashflow-generating assets—real estate, bonds, and dividend stocks.

The last asset—dividend stocks—of course, isn’t appropriate for this purpose. My friend was quite clear that he finds stocks to be volatile.

Likewise, he disapproved of real estate, considering it too high-maintenance. However, there is a way around that problem—Real Estate Investment Trusts (REITs).

REITs are a perfect solution for those looking to benefit from brick & mortar investments without any hassles associated with property ownership. They are large diversified holdings that trade on exchanges just like stocks. And since they earn profits from rents that they regularly distribute to shareholders, they were a perfect addition to this portfolio.

The last cashflow-generating asset I was considering were bonds.

The problem here is that buying and selling bonds is not as straightforward as you might think. Moreover, unless you hold them to maturity, you could end up selling them for less than their face value. Meaning, I would have to select dozens of bonds with different maturities and arrange them in what we call a bond ladder. Quite complicated, and more so because my friend would have to keep repurchasing new ones as the old mature. Not what you would call low-maintenance.

Fortunately, there’s a simple way around that as well—bond ETFs. Investing in these funds pretty much solves the above problems for you. They trade on stock exchanges so you can easily buy and sell them at will. All you must do is pick the one that invests in the type of bonds you’re looking for, and you can start collecting the cashflows, without ever having to worry about further maintenance.

The last two challenges I had to tackle were diversification and inflation protection.

When it comes to diversification, for the portfolio to have as low risk possible, it must be diversified geographically over different regions and across different sectors of the economy—something I would have to watch out when selecting the portfolio’s holdings.

As for inflation, real estate is generally considered an efficient hedge against it, and so are bonds. Therefore, those two should more or less take care of that.

However, I still decided to add another asset—gold. This was to provide additional inflation protection, as well as to lower the downside risk of the whole portfolio.

These Three ETFs Are The Perfect Solution

Now that you know which assets should be in such a portfolio, let’s look at the specific investments.

For the bond part, which should represent 40% of the total, I suggest the Vanguard Total International Bond ETF (BNDX).

It’s got a global and multi-industry exposure, so it’s well-diversified and holds only investment-grade bonds—those with the lowest risk of default.

Since investment-grade bonds are one of the lowest-risk investments on the market, BNDX has a somewhat low dividend yield of only 3.25%. But that shouldn’t bother you because the next recommendation more than compensates for that.

For the real estate part, which should also represent 40% of the total, I suggest the iShares Global REIT ETF (REET).

Again, this is an ETF with a global and multi-industry exposure, investing in over 300 REITs. Talk about diversification.

REET also provides an impressive yield of 6.29%.

For the last part, the precious metals, which should represent 20% of the total, I suggest the SPDR® Gold Shares ETF (GLD).

This is a physically-backed gold fund, which means that buying its shares is nearly identical to holding bullion. It’s the most straightforward and cost-effective way to access precious metals.

And this is it—a simple, low-risk, zero-maintenance, cashflow solution, consisting of only three ETFs.

Overall, this portfolio will yield you roughly 3.8% annually in dividends, and about 1-2% additionally in capital gains.

Moreover, it’s downside risk will be only about a third that of a broad stock market index such as the S&P 500.

Best of all, after the initial setup, you’ll never have to think about it again.

Good investing,

Leon Wilfan

Share138Tweet86Share24
Previous Post

The Growing Political Divide And What It Means For Your Investments

Next Post

Silver Prices Are Going To The Moon. Here's Why

Leon Wilfan

Leon Wilfan

Leon Wilfan is the Chief Investment Strategist for Lahardan Financial.In his early 20s, Leon started a career in real estate, working alongside his father to learn the principles of value investing. After five years, he took a break from his career to pursue an MBA degree at the prestigious Vienna University of Economics and Business. Vienna University is the birthplace of the Austrian Economic Theory, a way of thinking that explains that the reality of economics cannot be captured by mathematical models, but rather by the behavior of individuals on the market.

Today, Leon applies these principles in his analysis of the stock market, which allowed him to predict:

- In December 2018, the rise of gold prices
- In November 2019, the stock market expansion caused by the Fed’s “repo” operations
- In February 2020, the coronavirus crash
- In March 2020, the “QE Infinity” stock market turnaround

Leon’s highly-sought research has also been featured on CNN, Forbes, Newsmax, Money Life, Wealth Professional CA, Value Walk, and other financial outlets.You can follow his work at LahardanFinancial.com, or by subscribing to the free e-letter Cashflow For Retirement.

Next Post
silver stock prices

Silver Prices Are Going To The Moon. Here's Why

stimulus bill money for americans

What The Second Coronavirus Stimulus Bill Means For Your Stock Portfolio

2020 light bulb

Stock Market Projection For The Rest Of 2020. Plus, My Top Two Investment Recommendations

Leave Comment
Lahardan Financial

We bring you expert insights for taking control of your investments.

Categories

  • Bonds
  • Budgeting
  • Cashflow For Retirement
  • Crypto
  • Economy
  • Emerging Markets
  • Global Economy
  • Government & Politics
  • Investing
  • Retirement Planning
  • Stocks
  • Trading Strategies
  • U.S. Economy
  • Wealth Protection

Site Navigation

  • Home
  • About
  • Privacy Policy
  • Terms and Conditions
  • Whitelist
  • Disclaimer
  • Contact Us

Recent News

learning

Trading Stocks For A Living – Here Are My Top Three Lessons

September 25, 2020
Roller Coaster Economy Recovery

Is The Stock Market Correction Over? Here’s What You Should Know As We Enter The Riskiest Part Of The Year

September 23, 2020
  • Home
  • About
  • Privacy Policy
  • Terms and Conditions
  • Whitelist
  • Disclaimer
  • Contact Us

© Copyright 2020 Lahardan Financial

No Result
View All Result
  • Home
  • Cashflow For Retirement
  • Retirement Planning
  • Investing
  • Wealth Protection
  • Government & Politics
  • Terms and Conditions
  • Disclaimer
  • Privacy Policy
  • Contact Us

© Copyright 2020 Lahardan Financial

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.