A Safe 3-Stock Portfolio That Pays 5.9%

The S&P is roughly 54% more expensive than its historical average. This means that you’re roughly paying 54 cents more for every dollar you put into the stock market to get the same amount of earnings that you would’ve received if you’d invested in the market in the past. This is the point where most new investors get terrified and simply run away. “The market’s too expensive,” they think, and instead put their money in bonds (low yields) or cash (no yields). Or they invest in real estate (which historically underperforms the stock market by a huge margin). Any of these options would be a big mistake.

Instead, we need to think more creatively about the stock market. If it’s pricey now, that doesn’t mean we need to avoid stocks—it means we need a new strategy. First, let’s consider bonds. To do this, we can buy the iShares Barclays 20+ Year Treasury Bond ETF (TLT), which currently pays a 2.2% dividend. We can juice our income even more and diversify away from stocks by buying junk bonds. One way to do this is to get the iShares iBoxx High Yield Corporate Bond Fund (HYG), which is now paying a 5.5% dividend. Let’s do what billionaires do and hedge our holdings. We can do this with a fund like the Eaton Vance Tax-Managed Buy-Write Opportunities Fund (ETV), which has recovered nicely after the big market turmoil earlier this year. Currently yielding 8.8%.

Source: InvestorPlace

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