One of the biggest dreams of any investor is investing enough to start seeing a monthly income check from their investments. I know for a fact that when you receive that first monthly check for over $1,000 for doing practically nothing it’s amazing.
It might surprise you to know that it’s actually easier to get paid monthly by stocks than you might expect. In this article I am going to show you how I generate a monthly income from only 3 stocks while minimizing risk.
The easiest way to generate a monthly income from the stock market is to invest in monthly dividend paying stocks or ETFs. The goal of this article is to show you how to do this in a manner that maximizes your return while minimizing your risk.
To efficiently do this we are going to look at three hidden monthly distribution ETFs in the stock market; KBWD, FOF, and BIT. By investing evenly in all three of these you will get a constant stream of income while exposing yourself to a very small amount of risk.
To put it simply, you will generate money constantly with a very small chance of losing money.
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Without further ado, let’s jump right into how you can easily earn a monthly income from the stock market.
First Safe Investment for Monthly Income: $KBWD
Payout Period: Every month on the third week
Dividend/Distribution rate: 7.25%
Website: KBWD Invesco
Sector: Mid-Cap Companies in the financial sector of the U.S
KBWD stands for Invesco KBW High Dividend Yield Fund and it does just that. KBWD yields a distribution rate of 7.25% while hedging against downside risk. This is a huge payout ratio for an ETF with a marginal amount of risk.
KBWD invests 90% of its pooled assets into publicly listed mid-cap financial companies with high dividend yields. By investing in KBWD you are exposing yourself to the U.S financial sector, which is one of the safest sectors in the United States.
Further, KBWD will take the extra 10% and spread it out across companies that Invesco identifies as a hedge. This indicates that even if a couple companies in the KBWD ETF start to fail the 10% hedge will increase in value. This at the end of the day will protect your investment.
I hold KBWD and it has served me well. I have my dividend payments DRIP back into the ETF and over time this has led to a considerable snowball.
Second Safe Investment for Monthly Income: $BIT
Payout Period: Every month on the second week
Dividend/distribution rate: 7.90%
Website: BlackRock MultiSector Income ETF
Sector: High yield corporate and U.S government bonds.
The BlackRock Multi-Sector Income Trust ETF ($BIT) is a monster, in a good way. BIT invests directly in bonds, both corporate and treasury. This means that by investing in BIT you are exposing yourself to the bond market but at a 7.90% dividend rate….
This is huge as one of the major drawbacks of bonds for the average investor is low payout rate and the amount of research time it goes into picking the right ones. BIT solves both of these problems by providing an investment vehicle that solves both of these problems.
How BIT does this is by investing in mid-risk corporate bonds that the fund has identified as low risk while also investing in safe bonds such as treasury. The result of this ‘bond-sandwich’ is a huge return of 8% while minimizing risk.
BlackRock has two major goals with BIT; First, to achieve a high monthly net income using bonds. The second, is to provide capital appreciation over time.
I would say that they accomplish both of these goals perfectly. I hold BIT in my dividend paying portfolio and look forward to receiving my check every month.
Third Safe Investment for Monthly Income: $FOF
Payout Period: Every month on the second week
Dividend/distribution rate: 7.86%
Sector: Closed-end management funds with high potential capital appreciation
When you invest in FOF you are investing in funds that are typically closed to the average investor. These funds have a set amount of shares available to them and as such are considered closed end funds.
These closed-ended funds are primarily management investment companies who in turn invest in private equity or other high net earning investments. As such when you invest in FOF you are investing in the largest and most successful private equity companies and BDC’s in the United States.
This is a very attractive thing as private equity alone has been responsible for some of the largest returns in the industry in recent years. Because of this your dividend/distribution rate is almost 8% while having minimal risk on investment.
The goal of FOF is to invest in companies and funds that have high potential capital appreciation along with a high monthly payout. This in turn gets pushed to your account in the form of a monthly distribution.
Further, by investing in FOF you are spreading out your risk across nearly 110 individual funds. This means that your investment is safe with FOF.
I hold FOF, and it has been one of the largest contributors to my monthly dividend check. I am extremely happy with my investment with FOF and I expect to hold FOF for a very long time.
Why These Three Stocks?
This is the secret to why I chose these three stocks. They all work in tandem to prevent your portfolio from having too much risk. Let me explain.
Your three investments for a monthly check are
- KBWD: Financial Sector
- BIT: Bonds Sector
- FOF: Private and Public Equity Sector
Each of these three investments invests in a different part of the U.S market and each investment will go up when the other goes down. As such they form a hedge against inflation (FOF with equity), depression (BIT with bonds), and large scale GDP growth (KBWD with finances).
As such if you spread out an investment across all three of these ETFs you are exposing yourself to almost the entirety of the U.S market with a hedge built in. For me it has been a secret weapon to achieving a monthly income check from the stock market.
Finally, since all three of these investments are ETFs in essence you are spreading out your total investment across several hundred companies. This lessens your risk tremendously and has the added benefit of having other professionals do the market research for you.
Easily explained, these three stocks will earn you a monthly income check in the range of 7-8% per annual investment. That means that if you invested $25,000 you will receive a monthly payout of $167 each month without risking any of your initial investment.
Let that compound over time and pretty soon you will be a millionaire and by not doing anything!
There you have it. That’s how you can easily earn a monthly income from the stock market while minimizing risk and maximizing potential profit. Further, I gave you a portfolio where the overall risk is hedged against each other.
This means that your chance of losing money is slim, and there is only upside potential.
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Until next time, I wish you the best of luck in your investment journey.