Retirement Income, Conservative Approach

Discussion in 'Trading' started by PCanyon, May 28, 2007.

  1. PCanyon


    I'm not sure which forum would be the most appropriate for this, so I'm going with this one.

    I have a friend with limited trading experience but pretty solid real estate investing.

    He is retired and asked me if I knew a conservative approach that would return around 10% a year which he would use to augment his other income from investments. He is open to just about any approach--doesn't have to be trading. He said he was going to diversify among a few trust deed funds but doesn't think that's wise right now because of the problems with non-prime lending.

    I have traded a junk bond fund approach for many years and have averaged slightly over 11% with a MMD of 2.2? and he's interested in learning that (very simple) but wants to diversify into at least another approach or two.

    Any suggestions on how to pull out 10% a year with low risk?
  2. There are no "conservative" approaches that yield 10% in this environment.

    If your "friend" wants to obtain a 10% yield he/she will need to accept exposure to moderate risk. One approach would be to put a percentage of the capital into insured CD's. Current rates indicate a return on 6 month money at around 5%. The balance of the money would need to be exposed to risk of loss.

    Options that embrace moderate risk include

    1.) Selling premium
    2.) Covered calls
    3.) Intraday directional trading
    4.) Swing trades
    5.) Fixed income trading

    All of the above depend on skills that most people here on ET lack, most probably yourself as well. For instance, of the choices listed above it is unlikely that you or anyone you know can trade the fixed income market and obtain a return in excess of 10%. The reason is, that the fixed income markets are dominated by professionals, virtually all of whom work of institutions.

    Depending on the level of skills you can find, I would suggest a combination of options 1 through 4 as your best bet.

    Good luck
  3. Covered calls on dividend stocks????
  4. Several paragraphs of comment and thats what you ask about...?

    As I pointed out before, it depends on the skills of the trader. You must have missed that while you were thinking of what to type.
  5. Sorry - I was just throwing out ideas.

    Really your 1-4 are similar: the normal Joe will fail miserably. All of these require experience and ability.

    Same with the link below since it requires market timing:

    But I'll still throw it out as a possibility...
  6. PCanyon


    Steve--he knows he has to accept some risk.

    Shoes--Thanks for the link but I would think HY ETFs would pretty much have the same volatility of closed-end, high yield's and also Direxion's PDHYX, all much more volatility than a good managed high yield, which can be timed very simply.

    The best bond fund, as far as risk reward goes that I could find for him was XLAZH, a floating rate fund. It's current yield is around 8% but with NAV appreciation it pushes 10%.
  7. The stockpickr site has a couple of retirement portfolios that seemed to me to be filled with good ideas.