Lowest risk portfolio to generate 1000 Monthly income on a 200,000 $ portfolio

Discussion in 'Trading' started by oktiri, May 21, 2011.

  1. How can this be accomplished with the lowest Beta ? I'm not talking about no risk, I'm talking about minimizing risk.
    No rentals, I'm saying 0 to min "management", doesn't want to screen tenants, manage property, deal with AC / carpets problems.
  2. 6% ??
  3. There can be risk in anything of course, but I would highly recommend looking into CEFs (Closed end funds).

    Many of them pay monthly dividends - many have managed distributions meaning you get paid the same amount each month for a while - and then sometimes the fund adjusts up or down depending how they are doing.

    There are funds that invest in bonds, dividend stocks, do covered call writing, REITS, etc and funds that do all of the above. They trade during the day just like stocks and one thing to consider is buying ones that are trading at a discount to their NAV - meaning the market price is less then the value of the assets.

    Learn about them at:


    A few example funds that I like would include:
    There are many that can work. Again, these can fall and you should study how they did around the Lehman crash (late 08/early 09), etc. Some fell more then others.

    Anyway, I would strongly advise you to consider at least some funds like these for at least some of the money.

    One more thing - as far as rental properties go, you can always hire a property management company to do all that work for you. The fee is usually around 10% of the rent. Yes, there can be expenses, but there can also be writeoffs, etc.

  4. What about something like 60% in junk bond funds, 40% in higher-yielding blue chip equities? Might be a bit less than 6% yield, but you should get some capital gains too.

    Generally it's impossible to maximise yield whilst minimising risk. Yield is compensation for risk-taking.
  5. Butterball


    Beta relative to what though? Equities?

    There are different source of well-known beta generators. A diversified asset allocation of many of these collects risk premium from a diverse array of sources, hoping that negative returns in one asset class will be compensated by another.

    Usually, this strategy will lower your overall returns vs. a pure equities portfolio, but also lower overall risk and beta relative to any single asset class.

    Some ideas to try: Developed market equities, emerging market equities, government bonds, investment grade bonds, junk bonds, preferred & convertible equities, REITs (real estate), MLPs (natural resources & infrastructure), commodities, precious metals.

    You can create a simple spreadsheet with monthly total returns of the above asset classes (including interest & dividends) and see that over the last 30-40 years this approach would have generated approx 6-9% a year with a max drawdown of approx. 8-15%; depending on the exact allocation between bonds and more risky assets.
  6. 6% per year carries a lot of risk no matter what you do.
  7. You have the equation backward. Decide how much risk you are willing to assume and then back into the return that will generate. If it turns out that for X level of risk you will generate a 4% return and not 6% (about $650 monthly) than lower your expectation.

    Right now you can generate a 4% return at a fairly modest level of risk. Going north of that in this artificially low rate period ratchets the risk up pretty quickly. Is the extra $350 a month worth it?