"Not long ago, a Reddit user posed this challenge, asking what would be an "ideal mix" of stocks and exchange traded funds (ETFs) to "generate $250k/yr off of that $3M while still having relatively low-medium risk on the actual value of the stocks I'm buying." Doing some quick math, it would require an average annual yield of $250,000 / $3 million, or"
"There are high-yield stocks out there, and a few of them are worth considering. However, in order to achieve "relatively low-medium risk," there needs to be wide diversification. Therefore, most of the $3 million portfolio should be dedicated to ETFs containing multiple stocks and/or options on those stocks. So, let's kick off our hypothetical portfolio plan with a handful of stocks that offer sizable yields. A Few Supersized-Yield Stocks I recently highlighted five stocks with 12%+ annual yields and, separately, four stocks with 10%+ yields that pay monthly."
A $3 million cash base requires an 8.33% annual yield to produce $250,000 of income. High-yield stocks exist but often carry moderate-to-high risk. Broad diversification is necessary to limit principal volatility, so most of the portfolio should allocate to ETFs that hold multiple stocks or options. A smaller portion can be used to buy individual high-yield stocks to boost overall yield. Examples cited include monthly-paying and double-digit-yield names, with specific mentions of a floating-rate BDC and a packaged-foods company with large cash holdings.
Read at 24/7 Wall St.
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