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Progress Log: Investing for Passive Income

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WJK

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@WJK Thanks man, but the dividends only make up a small portion of the portfolio's total return. The portfolio has also gained about $12,000 this year due to capital appreciation alone. The reason I don't pay much attention to this number is that I don't intend to sell my shares, so the capital appreciation is kind of irrelevant to me. It's the actual dividend income that I will be using to help fund my lifestyle in the future.
The thing that scares me about stocks and bonds is my lack of control. It's too much like gambling for me.
 

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thechosen1

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Hey, you might be right.
The thing that bothers me about stocks and bonds at my age (and I do own a good amount of stocks) is that it takes decades and decades for it to be worth anything.

I've really used my stock investments as a kind of secondary bank account that grows and that I can tap if I need to for better opportunities.

That being said, cash is king when it comes to doing business or seizing new opportunities, whether a new investment, a real estate deal, or a business move.
 

Colton

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The thing that bothers me about stocks and bonds at my age (and I do own a good amount of stocks) is that it takes decades and decades for it to be worth anything.

I've really used my stock investments as a kind of secondary bank account that grows and that I can tap if I need to for better opportunities.

That being said, cash is king when it comes to doing business or seizing new opportunities, whether a new investment, a real estate deal, or a business move.
I certainly hope that it won't take decades and decades for the portfolio to be worth anything, but I guess we shall see. Personally, if I could get this thing to the point where the dividend income is covering my rent, I would consider that to be extremely valuable.
 

thechosen1

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I certainly hope that it won't take decades and decades for the portfolio to be worth anything, but I guess we shall see. Personally, if I could get this thing to the point where the dividend income is covering my rent, I would consider that to be extremely valuable.
That is valuable; it's just the slowlane method and goes against everything in both books!

There are much faster ways to do what you are seeking. But, this way will work too.
 

Colton

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That is valuable; it's just the slowlane method and goes against everything in both books!

There are much faster ways to do what you are seeking. But, this way will work too.
Correct me if I’m wrong, but my takeaway from MJ’s books wasn’t that investing in the stock market is a bad thing, but rather that it’s not a reliable method to achieve wealth at a young age. To that point, if you check out my most recent update you’ll see that I’m still working on the entrepreneurial end of things too. So I don’t think I am going against everything in both books.

I started this thread to focus more on my investments than on business, so that might have given the impression that I think investing is more important or that I'm against being an entrepreneur.

In my view, it just makes more sense to start investing young and still be working to try and start/grow a business rather than exclusively doing one or the other, but I’ll admit I could be wrong and time will be the judge of whether this was a good call.
 

ericaung

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Correct me if I’m wrong, but my takeaway from MJ’s books wasn’t that investing in the stock market is a bad thing, but rather that it’s not a reliable method to achieve wealth at a young age. To that point, if you check out my most recent update you’ll see that I’m still working on the entrepreneurial end of things too. So I don’t think I am going against everything in both books.

I started this thread to focus more on my investments than on business, so that might have given the impression that I think investing is more important or that I'm against being an entrepreneur.

In my view, it just makes more sense to start investing young and still be working to try and start/grow a business rather than exclusively doing one or the other, but I’ll admit I could be wrong and time will be the judge of whether this was a good call.
start investing earlier and business are the best things to do in 20s. I don't think investing in the stock market is a bad thing.

Btw, you should invest in stable coins like USDC/USDT and park it into Block-Fi or Crypto.com interest accounts. It is also the other way of passive income too. My two cents here is there is still risk of losing money there...but its very rare. so just invest not too much
 

Colton

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End of September Update

We saw a bit of a pullback in the market this month, and subsequently the portfolio value is sitting at about $95k.

However, the dividend income has grown to $310 per month. One of the nice things about dividend investing is that the dividends tend to move independently of short term market price fluctuations.

Key purchases this month were into CLX, XYLD, VICI, and BMY. I didn't contribute as much money into the fund this month as I normally would have. I actually spent a lot of money on new clothes this month but I am happy about this.

Business-wise, I am planning out and working on a new idea which I believe will provide me with a nice source of location independent income. It involves learning and marketing a new skill that will be also beneficial to my personal life and existing ecommerce business.

I have tried experimenting with a new product for my existing ecommerce business as well, but we'll se how that one turns out. Business income overall was a bit lower this month, likely due to the seasonal nature of the gardening niche.

That's all for this month, thanks guys.

@ericaung
Thanks, I've skimmed the topic of stablecoins but don't own any yet. They are interesting, but one the things that stuck out to me is that the high yields currently offered on them are expected to decline in the future depending on who you ask. Definitely something to look into more. I do own a little crypto through and am receiving interest payments on that.
 

ericaung

Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Oct 6, 2018
61
54
115
End of September Update

We saw a bit of a pullback in the market this month, and subsequently the portfolio value is sitting at about $95k.

However, the dividend income has grown to $310 per month. One of the nice things about dividend investing is that the dividends tend to move independently of short term market price fluctuations.

Key purchases this month were into CLX, XYLD, VICI, and BMY. I didn't contribute as much money into the fund this month as I normally would have. I actually spent a lot of money on new clothes this month but I am happy about this.

Business-wise, I am planning out and working on a new idea which I believe will provide me with a nice source of location independent income. It involves learning and marketing a new skill that will be also beneficial to my personal life and existing ecommerce business.

I have tried experimenting with a new product for my existing ecommerce business as well, but we'll se how that one turns out. Business income overall was a bit lower this month, likely due to the seasonal nature of the gardening niche.

That's all for this month, thanks guys.

@ericaung
Thanks, I've skimmed the topic of stablecoins but don't own any yet. They are interesting, but one the things that stuck out to me is that the high yields currently offered on them are expected to decline in the future depending on who you ask. Definitely something to look into more. I do own a little crypto through and am receiving interest payments on that.
Yes, they are expected to decline in the future. However, there are many crypto platforms nowadays. U can easily switch to high yields of any platform. Also, nothing to lose at atll. USDC coin is always will be 1:1 to US currency.
 

FierceRacoon

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Jun 1, 2019
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You do not have to be active with options, trade a wheel strategy - if you own 100 shares, place a covered call above your cost basis price (in case you get assigned you will be sold out for a profit) and then you can forget it. It will either expire worthless and you rinse and repeat it, or it will expire in the money and sell your 100 shares of the stock. In that case place at the money or slightly in the money put trade and again forget it - it will either expire worthless (then rinse and repeat) or you get assigned and buy back 100 shares of the stock. You will do this once a month only so it is not much active trading at all. And it significantly boosts your income (I roll calls and puts to avoid assignments so I collect dividends and premiums but if I get assigned it is not an end of the world to me - you can also use the options against a portion of your holdings).

Here is a picture of what options do to my portfolio income (on top of the dividends):
View attachment 38765

This is an amazingly clear explanation.
My interpretation is that it is betting on volatility: hoping that the stock will be fluctuating up and down. If it were to keep increasing then this strategy would lose money by selling, then buying back at a higher price.
 

WJK

Platinum Contributor
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Oct 9, 2017
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This is an interesting thread to me. I too chase passive income -- not in the stock market. I do it through buying privately owned real estate trust deeds and notes at a discounted price. I too am trying to balance my business income with passive income for the long haul. It's a lot of work to find these deals, but, it sure is fun when I do.
 

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Martzee

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Denver, Colorado, United States
This is an amazingly clear explanation.
My interpretation is that it is betting on volatility: hoping that the stock will be fluctuating up and down. If it were to keep increasing then this strategy would lose money by selling, then buying back at a higher price.
When doing this strategy you need to make sure you do not fall in love with your stock and be willing to buy or selling it as needed.

Also, you can skew your strikes depending on the market to offset the volatility issue. If the stock is mostly rallying, try to place your calls as high as possible, and your puts as close to the price as possible. In a down-trending market or stock, place your puts as far away as possible and your calls as close as possible (but still above your cost basis).

When selling the individual options, try to sell to collect at least 1% premium, meaning, that if a stock trades at $40 a share, you want at least 0.40 premium when selling puts or calls.

If the market is tanking and you need protection for your 100 shares, move the calls deep in the money. For example, the stock is trading at $40 a share but it was in a downward moving spiral and you are afraid that it will be going further down. You roll your calls from $45 down to $35 strikes. You will receive $5 of the intrinsic value plus the time value left in the contract, let's say 0.20 (total $5.20), The $5 intrinsic value now protects your stock. If the stock drops to $35 a share, you still will see no loss as it will be offset by the call.

There are tons of ways to play with the wheel setup but of course, the best setup is the easiest and simplest one. Avoid trying to predict the market.

As far as your statement on ever-rising stock and the wheel losing money - you need to shift your strikes in a way that you collect more premium than you would eventually lose. So if you let's say buy 100 shares of a stock at $40 and sell a call at $45 and you get called away at $45 and the stock is currently at $49, you then buy at the money or in the money puts (I prefer at the money).

However, the goal is not to get assigned, so I roll rather than let it go. I only let it go when there is no way to roll (or I forget to roll it, which happens more than finding no way out).
 

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