An Instant 4-Fund Portfolio for $48,000 in Retirement Income

Michael Foster, Investment Strategist
Updated: June 6, 2017

A couple days ago, we showed you how to get $4,000 in monthly income from just 4 stocks.

A bonus? Each of these buys pays dividends every single month—precisely when your bills roll in.

That $4,000 number was no accident; it’s the average amount a 65- to 74-year-old couple in the United States spends every month, according to the Bureau of Labor Statistics. That makes this a great number to shoot for when you’re building your own retirement nest egg.

And today we’re going to go further, with 4 funds that give you an extra margin of safety while you’re pocketing the same amount of income—a nice $4k a month—in your golden years.


Diversification—one of the oldest pieces of financial advice there is.

Consider the 2008–09 meltdown. While stocks were going down in flames, U.S. bonds and some municipal bonds were actually rising. So if you had diversified into them, you gave yourself some nice ballast to help steady your retirement account.

Of course, sticking to U.S. Treasuries and municipal bonds is a terrible idea now. Treasuries are paying a pathetic 2.24% if you buy 10-year notes, meaning you’re guaranteed almost a 0% return after inflation! And speaking of inflation, don’t forget it hits retirees harder, since costs for things like health care grow much faster than what you’ll pay for many other routine purchases.

The bottom line?

We need to get more creative. We’ll start by doing an end run around U.S. bonds and into bonds from some of the world’s biggest cash-producing international corporations. Now that corporate profits are rising in the double digits and company bankruptcies are falling, it just makes sense.

A New Approach to Income

We’ll need to do more than just buy a couple corporate bonds from a broker, though. That’s because brokers often sell some of the worst-quality bonds to smaller clients, since the big institutions have already snapped up the best issues.

But don’t worry; we can easily invest with the big institutions using funds that diversify across hundreds of bonds while still paying big dividend yields.

Case in point: the Vanguard Long-Term Corporate Bond ETF (VCLT), which pays a 4.2% yield that has helped this fund’s total return soar since its IPO nearly a decade ago:

The Power of a High Yield

VCLT is particularly attractive because it limits itself to investment-grade, high-quality companies and diversifies across 77 different investments. Its biggest positions are in stocks known for financial prudence and steady cash flow like Regions Financial (RF) and Dow Chemical (DOW), with the rest of the portfolio spread across other reliable multinationals.

Big Dividends From Top-Quality Stocks

On top of bonds, we’ll want stocks, as well. We all know the market has been on a tear since 2009, and while we can’t expect it to go up forever, we know stocks have a tendency to rise steadily over the long term. We also know that dividend stocks tend to provide more reliable long-term growth and that we can count on the best ones to keep up their dividends in most market conditions.

So let’s get a piece of this action with two ETFs focusing on strong dividend-paying companies: the Global X SuperDividend U.S. ETF (DIV) and the SPDR S&P 500 High-Dividend ETF (SPYD). With just these two funds, we’re getting a diversified portfolio of over 70 companies across different sectors, with exposure to everything from technology to real estate to health care.

You could get similar diversification with an index fund, but then you’d be stuck with dividends of about 2%. No thanks!

Instead, DIV and SPYD can give us a diversified portfolio and an average dividend yield of 5.4%. And thanks to their stalwart portfolios, these funds have provided steady gains over the past year, in addition to their big dividend payouts.

2 “Steady Eddie” Picks

Even so, neither fund has fully caught the market’s attention to this point, but that’s not too surprising; both are relatively new, and many investors just don’t know they’re out there. That’s a good reason to get in now.

The Power of Preferreds

There’s one other secret that many investors aren’t really clued into: preferred stocks. They act like common stocks, but they’re much smaller and tougher for everyday investors to get into.

That doesn’t mean they’re illiquid, though. Big institutional investors, such as hedge funds, love these things and buy them often. Back in 2008, Warren Buffett bought a ton of preferred stock in Goldman Sachs (GS), an investment that ended up getting him a 19% annualized return by the time he sold out.

So how can we follow the Oracle of Omaha’s lead? These aren’t the kinds of assets we can just buy through our online brokerage accounts; we need an insider’s help. Luckily, there are a few funds that give us just that. And they have big dividends, because preferred stocks tend to have much higher yields than common stocks.

For instance, the Market Vectors Preferred Securities Ex-Financials Fund (PFXF) is paying a 5.7% dividend thanks to the 111 preferred stocks in its portfolio. And although the fund’s dividend is choppy due to the nature of how preferreds pay out at different times of the year, PFXF’s distributions have remained remarkably steady over the last few years, even when payouts have been dropping everywhere else in the market:

A Reliable Income Generator

That steady income stream makes this an easy “set-it-and-forget-it” option for retirees who want to spend their retirement enjoying life … not scrutinizing charts.

Putting It All Together

Combined, you can use only these four funds to get a bit over $4,000 per month in retirement income if you have $870,000 to invest. Here’s how the numbers break down:

With $217,500 in each fund, we’re getting a bit more than $4,000 in monthly income thanks to the average 5.5% yield on these four funds. We’re also getting bonds, stocks and exposure to high-quality companies boasting familiar names and sterling profit histories.

But what if you don’t have $870,000? Or what if you have that kind of cash but want to have some left over—beyond just the basic amount the Bureau of Labor Statistics says we need—to spend as you like?

It’s not impossible. In fact, it’s quite easy. With 4 other funds I’m pounding the table on now, we can goose those dividends all the way up to an average of 7.5%!

Think about that for a moment: at a 7.5% average payout, your $870,000 will get you $65,250 in income, or over $17,000 more than the average retired couple needs!

That’s enough to pay for an amazing vacation (or two!) in every single one of your golden years.

And if you don’t have an $870,000 nest egg, don’t worry. These 4 largely unknown funds will still let you hit our $4,000-per-month income target on a retirement account that’s $220,000 smaller!

Oh, and before you ask, yes, these yields are safe: all 4 funds easily generate enough investment returns on their holdings to cover their massive payouts, and all 4 are just as diversified as the funds I showed you above.

I can’t wait to show you the surprising secret behind these high, safe yields and give you everything else you need to know about these 4 little-known funds. Simply click here to get the full story and kick-start your own safe 7.5% income stream now!