FIRE - how to structure portfolio

Dec 6, 2019 13 Comments

Smart Peeps of Blind,

How should one structure their investments to generate enough income to living on for 20 years?

Here’s a simple way, please poke holes at it:

Say your monthly expenses is $6k and you have $2.5m. Spread the entire amount across high dividend yielding stocks like McDonalds, Target, Exxon Mobile, Coca-Cola, Johnson & Johnson, etc. to generate the $6k (after tax).

I can think of a couple of potential issues with this plan: inflation, risk of losing principle during recession, companies can change dividend % anytime.

Will inflation be countered by the growth in equity over time? Dividend will still be paid out if the stock takes a dive during recession, right? If company reduces dividend, I can just move the $ to another company.

I know people say to diversify and include rental property. But bonds and CDs give very low yield and rental property need maintenance and don’t produce great income after all the taxes and expenses.

Thanks in adcance for your thoughts and advice!

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TOP 13 Comments
  • SAP DVOw73
    60% VTSAX, 25% Total Bond Market, 15% Long term Treasury Index for being inversely correlated.
    Dec 6, 2019 2
    • Apple 7AHRIK3
      OP
      Thanks but I need income. This seems like a portfolio for someone with a job.
      Dec 6, 2019
    • SAP DVOw73
      The returns are the income? It seems reasonably defensive.
      Dec 6, 2019
  • Microsoft tfsUEwWt
    10 years ago you probably would have had GE on your list...
    Dec 7, 2019 0
  • Amazon / Eng ONT8
    Life is short, short the market
    Dec 6, 2019 0
  • Symantec +veGuy
    Keep everything in stocks except 2 years of expenses...in case of recession you can use that...we can’t predict how much time it will take to recover from recession but you have to make some assumption
    Dec 7, 2019 0
  • GoDaddy Good Daddy
    Add some CEF and REITs to your mix
    Dec 7, 2019 0
  • Amazon superr_man
    r/financialindependence
    Dec 7, 2019 0
  • That’s easy mate .. you are looking 10K-11K pret tax .. 0.4% of $2.5M . Plenty of options there
    Dec 8, 2019 1
    • Apple 7AHRIK3
      OP
      Did you mean 4%? I’m looking for options with less volatility without drawing too much from principle.
      Dec 8, 2019
  • Cerner RznG63
    Dividend paying whole life insurance. Structured for cash value not death benefit. Your IRR will be 5%+ by year 7, you can live off it easily by year 20. Won’t take your full 2.5m so do whatever else you want with for current living. How do you have 2.5m btw?
    Dec 13, 2019 0
  • Apple onepunch
    Balance between growth and dividend stocks
    Dec 7, 2019 0
  • Amazon misa-misa
    For one. You Will have to keep rebalancing the stocks to make sure they still are high yielding both in dividends and their value. This is harder than you think.
    Dec 6, 2019 0

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