What’s the best way to increase the cashflow from my portfolio?

First, we must ask why?

There are generally three reasons.

1. I need funds for Required Minimum Distributions. (RMDs)
2. I want to make the portfolio safer
3. I need funds to live on.

Required minimum distributions can be taken as cash or as in-kind distribution. You can transfer stock directly to a personal account. The transfer price is the current price, no gains or losses. The tax consequences are identical as a cash transfer. Ideal for positions that you want to keep.

Adding income securities to a portfolio may be looked at as adding insurance against losses. The ultimate safety is a money market fund of short-term U.S. treasuries. The buying power of this fund, even adding in the income, declines every year due to inflation. The cost of insurance to protect a portfolio of any kind reduces total returns substantially. That is why the professionals speak about their clients wanting de-worse-ifacation. Volatility is the price you pay for successful investing. But there are exceptions. Get insurance by building portfolios with Safety, Quality, Value and Confirmations. We use these and add Growth.

There are two approaches to building a portfolio that provides income to live on or RMDs. Have income producing securities in the portfolio or sell small amounts of growth securities on a regular basis. For the last 100 years the amount of dividend income companies provide has been falling. The public wanted more safety and more growth. The cost, lower dividends. Building an after-inflation income portfolio can give you very poor results.

There is a new, very popular way of increasing income, selling the future growth of a portfolio. This approach sells options on future growth. You may get some of the growth, but you may get most of the losses. We are investigating an approach that promise no losses.

On the other hand, we have a classic approach that provides excellent results using our growth portfolio as an income source. We use a technique that works best with a portfolio of individual securities. Some of the companies in our portfolio are paying a cash dividend. All are repurchasing shares which is somewhat like a dividend reinvestment plan. The total of the two is called Shareholder Yield. The average shareholder yield for the buy list is about 10%. A client could sell 10% of their shares, take the cash and still have exactly the same percent ownership of their companies as they started the year. Usually, every month we sell some shares to raise funds for distribution. We do not sell a little from each stock holding. We simply sell from the least attractive security which improves the portfolio. The money distributed is taxed at a rate estimated to be only 15% of typical dividend rates. You only pay taxes on the gains in the stock sold and you pay at capital gain rates. Sales of funds are sales of all securities in the fund and do not change the portfolio.

Whether the account is for growth, income or both, we have succeeded in our goal of growing portfolios significantly faster than the S&P 500, the S&P 1500, and the Nasdaq 100, with less risk.