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If we want to be traders–if we don’t want to be buy-and-hope passive investors–there’s a key piece of the puzzle we need.

Constant income.

Tennis players who need all of their income to come from the wins they may or may not get in each tournament almost certainly won’t make it.

And traders who need all of their income to come from the wins they may or may not get on each trade probably will suffer the same fate.

What’s a solution?

Rental properties, T-Bills, high-yield savings accounts while they last, or high-yield dividend stocks/ETFs.

Remember, we’re not going for “total return”. The income that may or may not show up via share price increase doesn’t solve our problem of needing money this month. Our trading account over the long-term will provide way more growth than the market.

But we need money now –to make it through the inevitable losses and drawdowns.

That being the case, we learned that a high-yield ETF like QYLD (or RYLD or XYLD)  is far better than a Dividend Aristocrat like PG–when it comes to actual money in our actual pockets.

But what if our situation was slightly different? What if we need money, but we need it in 5 years or so?

In that case, we could theoretically take our monthly or quarterly payments and re-invest in shares rather than take the money out.

Re-investing in shares allow us to access the magic of compounding, making our dividend payments bigger and bigger.

Let’s do that for QYLD and PG. Instead of taking money immediately, we buy more shares. Then we’ll take the money out starting in 2023. What do we get then?

QYLD still wins by a landslide.

After re-investing our shares for several years, in 2023 we would have been able to pull out a total of $4,970 in PG (on a $100k investment).

In QYLD, after re-investing, we could have pulled $8,950 this year.

But what about the share price??

Geez, who let those people in here?

Yes, it’s true, Total Return Zealots. If we combined the share price increase and all of the dividend payments, and never took any money out, we’d have a bigger chunk of money at the end of this particular period using PG:

But, as we know from the previous Newsletter, this “win” is a lucky break. Remember what the Total Return was between the two from 2014-2018?

PG actually lost money!

So, if we need money, not cross-your-fingers hope, which is better:

• Rolling the dice that a Dividend Aristocrat happens to go up exactly when we need it to?
• Or taking the “guaranteed” money to offset any drawdowns in our trading account?

A bird in the hand seems better.

In our next Newsletter, we’ll look at the one of the highest possible yields we can find.

And it comes from a shocking place.

Talk to you soon.