For those following my blog it is nothing new, that I am concentrating on passive income investments. Beside P2P lending I am concentrating on investments who are able to pay me any kind of income. A huge part of this are dividend shares in my portfolio.
Honestly, it takes quite some time to find the right investment opportunities, also I am following an quite easy strategy. Today I would like to share another idea from Luis Pazos, expert for REITs and high yield investments, with you, who published a blogpost in german. It is named “Dividend Strategy – A fast and easy portfolio for everyone“.
Of course I translated it into english and tried to find point it out right. If you have any questions about do not hesitate to comment below. If I am not able to answer it, I will get in touch with Luis to get the right answer.
Portfolio income from a worldwide diversified depot
Since ever readers and interested people are wishing to invest easy but receive high income from their investments. All over the world taxes play a quite big role, whereas the wish was to built this portfolio as tax-easy as possible. Furthermore the portfolio should be diversified among several asset classes.
This vision and idea was born in April this year from Luis at a financial fair in Germany, called Invest. So he found a way to built a high income paying portfolio with fast investment opportunities. And everything in about 20 minutes including the opening of the depot.
Step #1 Opening an account to trade with
There are several providers on the market making it easy to open up a depot. The idea behind the blogpost from Luis was to make investments and receiving dividends easy as hell. Therefore he established a portfolio with high income investments and funds.
Unfortunately the software Trade Republic requires a german bank account and a german mobile number. Additionally investors have to be registered for german taxes to use the app. Also the offer is currently limited to german users, the idea of Luis for a portfolio out of stocks and funds with a high income is valid. I guess you can copy the portfolio with any depot from any bank in Europe or the US.
If you choose degiro, ING Diba or which bank ever, you will be able to open up an account to trade with. To increase your income please watch out for fees and costs. Neither the depot itself nor the costs for trading should be huge. International brokers like LYNX or CapTrader are offering quite interesting accounts, which might be useful in your country.
Get to work and invest your capital
Checking the shares on the stock market Luis found mainly individual shares, US Closed-End Funds (CEF) and canadian trusts. Investing just into income assets was a quite bad idea at the time, when Luis published to blogpost.
While investing into companies with a dividend income you should be sure, that those clearing in your account is free of costs. Otherwise it might be uneconimical to copy that portfolio income idea.
Adjusting the portfolio income as an investor
Establishing portfolio income in a very short time-period makes things not very easy to find. Therefore Luis made some inital general conditions therefore.At the first sight is does not astonish, that stock picking is excluded here. Investing in Exchange Traded Funds (ETF) is easy and very wide diversified. So Luis decided to scan the ETF for the following general conditions:
- dividend interest: minimum 5% per year for the whole fund
- dividend payments: during the year e.g. monthly, quarterly
- asset allocation: as wide as possible among several financial instruments and geographical plaxes
The result were a lot of funds from BlackRock, which would be a concentration on just one provider. Therefore Luis decided to diversify referring to the modern portfolio theorey from Markowitz, which leads to a basket of five funds.
Investing your capital for years to generate income
At first you of course have to deposit some money at your account. If there is the possibilty to make saving plans you are supposed to use it. Especially if you are saving money every month to this account.
Here you will finde the investments from Luis blogpost, which nearly meet the above mentioned conditions:
- Dividend Shares Industrialized Countries: STOXX Global Select Dividend 100 ETF
- Dividend Shares Emerging Markets: EM Dividend ETF
- Real Estate Shares Industrialized Countries: Developed Markets Property Yield ETF
- Bonds Emerging Markets: J.P. Morgan $ EM Bond ETF
- Company Bonds Worldwide: Fallen Angels High Yield Corp Bond ETF
Some of those ETFs are just tradeable in Germany. But you can find equivalents when searching for the name of the ETF in GBP or USD – whatever you want.
And here are the hard facts of this portfolio:
- 200 shares from companies, about 300 REITs and additionally more than 800 bonds
- Dividends are coming monthly, quarterly and half-yearly
- The weighted average interest is currently 4,7% per anno
- The Total Cost Ratio is 0,53% per year
And that is it. You are just buying those Exchange Traded Funds into your account every time your deposit is huge enough. As Trade Republic just charges german user one Euro per transaction it is easier to buy. But every broker has special deals, where you are able to save a lot of money. So just adjust your investment buys to their offers and your cost ratio will stay low.
Administration of your high-interest account
Just imagine you made your investment deposit and made those above mentioned orders. You now do not have to invest any time again into your depot. Your portfolio income will reach your account reguarly and dividends will flow to your account.
And if your broker offers saving plans you are able to automate this process as well. You adjust once the monthly transaction to deposit money and adjust once the order, and your wealth with grow every month.
Depending on your broker you just have to administrate the documents for your taxes once a year. Nothing more.
To reduce your risk of a loss you are usually able to make a so called stop-loss. Therewith you can place an order if the fund draws down to a certain level. But usually this is not necessary as the investment into an ETF is diversified among a lot of assets. Market timing might be possible, but is not the idea of a timeless and fast-installed portfolio.
Portfolio income is a good idea for investors
Of course, this blog is mainly about P2P lending. But you should always not just invest into P2P loans. Diversifying your assets is the key to minimize your risk. This it what it is all about in my case. Get rich quick is not my vision, but get wealthy soon.
Therefore I invest into several asset classes with a wide asset allocation. The idea of Luis of being an investor of 200 shares, 300 REITs and 800 bonds within less than half an hour per year sounds really great.
Thank you Luis for sharing your experiences and amking the research for funds. I already added this kind of portfolio income to my whole investment. This will make my financial statement a success the next years and saving even more will increase my dividends.
If you want to follow that strategy just copy it. I guess Luis wants to inspire investors about the easy and fast investments in substanstial assets. As long as investors are able to cover the risk of an investment and maximize their interest income over the years, it is a real advantages of investing like this – passive income at its best!