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Marc Cuniberti: Income portfolios

FILE - In this Wednesday, July 8, 2015, file photo, Federal Hall's George Washington statue stands near the flag-covered pillars of the New York Stock Exchange. U.S. stock indexes edged lower in early trading Tuesday, Aug. 8, 2017, pulling back from the market’s most recent record highs. Health care and consumer-focused companies were among the biggest laggards. Energy stocks also fell as crude oil prices headed lower. Banks and utilities had some of the biggest gains.
AP | AP

There are a variety of strategies for investing, and many of these strategies don’t just entail buying a bunch of stock and funds and then waiting for the market to go up to make money.

Some investors want retirement safety while others want explosive growth.

One of the more common requests I get is the desire for a structured and dependable income.



Although this may be accomplished through an income annuity or similar product, some investors shun annuities because of their possible time commitment some products may have as well as potential early withdrawal penalties.

There are, however, other ways to accomplish the need for income. One such strategy is what I call the “The Stock Rental Income Strategy.”




The portfolio is structured holding about 20 or so large stocks that are scheduled to pay dividends. Dividends are payments by companies to shareholders.

The companies held are not just any companies, but the largest of the large, with an emphasis not only on size but on dividend history, financial strength, product lineup and other factors.

Companies that have been around a long time, sell products that many people use and are familiar with, and a long history of rewarding shareholders are sought out and then reviewed also for financial strength and strength of product.

Once selected, the aim is to hold these stocks as a basket, with each paying dividends which would yield a variety of checks throughout the year. If all the companies continue to pay their dividends, a steady stream of checks is hoped for.

The work for the client and advisor does not stop there, however. Both parties then sit down and discuss how the portfolio should be viewed as to how its balance may move and how advisor and client should regard those moves.

This means we review what the name “stock rental portfolio” means and why it was named such.

The idea of this portfolio sprouted from discussions with many investors who had rental properties and from an idea a portion of my own holdings gave me.

When I meet a client who has rental property, when queried with they liked about owning such rental property, they usually responded, “the rent checks that come every month.”

When asked if they minded if their rental property dropped in value by five percent or so, the response also was a common one: “Not if I get the rent checks.”

Since this mindset gave the property owner some sort of peace of mind, if a portfolio could be constructed in a similar fashion (furnishing dependable income checks every so often) and the investor could adopt the same mindset with this portfolio (not minding a possible reduction in over value), as long as the checks arrived, the client would be happy.

Although there are many facets in setting up such a portfolio as the “Rental Stock Portfolio,” the strategy may be an option for those looking for income yet wish not to worry so much about moving balances.

As with any portfolio based in the markets, there are risks and they are as follows: Dividends are not guaranteed and can be decreased, increased or eliminated at any time.

Dividends do not guarantee against losses.

Dividends may be taxable in certain types of accounts and stocks which pay dividends does not mean losses, either partial or total, are not possible.

Please review the prospectus of any company you are considering and consult with your investment professional before making any investment decisions.

Investing involves risk. You can lose money. This is not a solicitation to buy or sell any security.

This article expresses the opinions of Marc Cuniberti and are opinions only and should not be construed or acted upon as individual investment advice. Mr. Cuniberti is an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Marc can be contacted at MKB Financial Services 164 Maple St. #1, Auburn. 530-823-2792. His website is http://www.moneymanagementradio.com.


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