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Speaker 1: You don't want to go into ventures that where you

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can lose everything. You want to broaden your diversification, so

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you want to have high quality types of investments which

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themselves are diversified and well managed, actively managed and so on.

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A diversified portfolio, let's say, of diversified portfolios. So it's

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a fund type environment.

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Speaker 2: You are listening to Carrie Let's's Financial Survival Network where

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you get valuable information you just can't find anywhere else

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to thrive in today's trying times. You need the Financial

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Survival Network now more than ever. Go to Financial Survivalnetwork

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dot com and get your free newsletter and gift. Financial

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Survival Network now more than.

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Speaker 3: Ever, and welcome.

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Speaker 4: You are listening to and watching the Financial Survival Network.

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I'm your host, Carrie Let's. Well a investing in the

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he's perilous times, definitely risky or it can be. You

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need a focus strategy that will keep you safe and

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keep the money flowing. And that's why we have a

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special guest for you today. He is known as the

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Income Coach. He's been doing this for forty years. His

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name is Steve sellingut State. It's great to have you

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on the show. So how did you become the income coach?

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Speaker 1: Well, Carrie, it's a I guess it's a long story.

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I actually became a private portfolio manager back in nineteen

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seventy nine when I started a business where I was

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managing portfolios for other people in addition to my own.

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And then that kind of grew up for forty years

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until I finally sold that business in May of twenty

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twenty three, almost two years already, and wrote the book

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called Retirement Money Secrets, And with that I developed an

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income coaching business, and I actually going, you know, income

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independence coaching, or I try, I try to bring people

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to a point where it doesn't really matter which way

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the market goes or which way interest goes, their income

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will keep right on growing regardless. And uh, it's what

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I call income independence.

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Speaker 3: Interesting.

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Speaker 4: Interesting, And so how do you achieve this income independence?

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Speaker 3: Here?

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Speaker 4: It sounds great, but if it isn't practical, then what

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good is it?

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Speaker 3: Right?

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Speaker 1: Exactly exactly, it's it's it's simple and maybe a little

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complicated at the same time. The simple principle.

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Speaker 3: Are four.

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Speaker 1: I mean, basically, what you want to do is, particularly

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as you get older, you want to try to minimize

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your financial risk as much as possible. You don't want

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to go into ventures that where you can lose everything.

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You want to broaden your diversification, so you want to

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have high quality types of investments which themselves are diversified

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and well managed, actively managed and so on. A diversified portfolio,

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let's say, of diverse fied portfolios. So it's a fund

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type environment, but not your normal fund type of environment.

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I don't use mutual funds, and I only use a

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select a few ETFs, and then only for very large

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client portfolios do I recommend them. So, and then there

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are two other items. The third item that you want

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to make sure of is that you have significant income

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and a growing amount of income coming into portfolio. And

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the fourth and final thing is that you don't just

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sit back and set it and forget it, like perhaps

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phaps your advisor wants you to, but you take profits

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when they appear. The stock market doesn't always it goes up. Yes,

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it has gone up, yes over the over the decades,

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but it hasn't been a straight line and it will

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probably never be a straight line. And when a price

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of a security goes up, I take my profits and

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I move on to another one. It might be a

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quite similar one. It might even be the same one

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within a reasonable number of days. But I constantly take

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my profits, thus adding to the capital that I have

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that produces the income that I'm trying to grow.

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Speaker 4: Okay, So, like you said, the market always goes up,

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but enough of the tree does not grow to the sky.

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Speaker 1: Right depends right now, it's right about the sky in

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the stock market, but not the bond market.

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Speaker 4: But anyway where you can only go so far, so

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far exactly, so forty years of experience, knowing what you

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know now, if you could go back to your your

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fifteen year old self when you started in the business,

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and tell yourself what you've learned, what to avoid, give

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yourself one piece of advice.

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Speaker 3: What would it be? What would it be?

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Speaker 1: The main thing I wish I had done sooner in

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my career, and that would go back to when I was, yeah,

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thirty four or so or twenty five when he actually

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started investing, would have been to discovered closed end funds sooner.

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If I had done that, I would be worth multiples

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of what I am today.

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Speaker 4: Okay, which I'm sure is not insubstantial. So you'd be

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worth even more, all right, Closed end funds. I know,

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there's something about them. Sometimes they trade, you know, there

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were funds that were set up on like mutual funds,

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where there's a fixed number of ship nothing else gets issued,

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and then they go out and they buy securities whatever

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it might be, whatever the name of the fund was,

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that's what they would buy. And oftentimes these closed end

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funds sold the discounts to the underlying stock portfolio that

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they owned, which was like if they were a Dow

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s and P five hundred closed end fund, you could

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buy the SNP at sometimes a ten to twenty percent discount.

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I don't think that happens so much anymore, right, So,

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like that's obvious, right, So how did people miss this?

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Speaker 1: Okay, Well, there's a couple other things about closed end

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funds that are important to appreciate. They're different from the

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other funds out there, and you just pointed out one

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significant one that they don't have. The their price isn't

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manipulated to equal their net asset value every day like

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they are with ETFs and.

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Speaker 3: Mutual funds.

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Speaker 1: But the other significant difference is that they are required

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as passed through trusts, which is what they are created as,

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to give ninety five percent of their net earnings to

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their shareholders. So they're a different breed of animal. They're

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not designed to grow in market value, not designed to

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grow in price. They're designed to produce income for their shareholders.

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It's in an ideal world, this is the way stocks

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and the stock market would behave a little bit more

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closely to this, where they would pay their shareholders at

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a rate that somehow relates to what they pay their

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chief executive.

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Speaker 3: Those questions for you, Steve, how do you pay that out?

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Speaker 4: Did they pay it out and it's a stock divin end,

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they pay it out as cash?

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Speaker 3: Can you reinvest that? And we're talking just how do they.

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Speaker 4: Pass along these profit But so are they trading profits

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or dividends?

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Speaker 3: How does that work?

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Speaker 1: They're both. They're trade they're trading profits, they're they're premiums

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on options, trading in some instances, their dividends, their interests

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and principle on mortgages for example, and so forth, all

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kinds of different securities inside. They typically pay monthly distributions

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and the current the current rates right now, at today's

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prices are a little over ten percent for income focused

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ones and nine percent or better in the stock market.

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Speaker 4: So I like that ten percent, So you're basically maybe

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you're keeping up with the true rate of inflation, not

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the stuff that they're telling us.

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Speaker 1: But right, except for good restaurants, I think you probably are.

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So yeah, so close. Influence are different in in in

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those ways and the and their biggest difference, of course

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is they throw off a lot more income. So there's

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a lot of chances, uh, to reinvest it. You can

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read it, you reinvest it automatically. But I'm not a

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big believer in automatic reinvestment. I like to do it selectively.

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I don't like to buy. I don't like to buy

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into a security at a price higher than my cost

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basis for that security. I like to particularly with these,

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if you reinvest selectively, you can you can pick to

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add to ones that are down in price, so you

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can actually increase your yield while reducing the cost basis overall.

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And one of the strategies I use.

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Speaker 4: Okay, we're not asking you for advice here, even though

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I know you're licensed and all that. But Well says

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a few examples of of such funds.

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Speaker 3: Okay, recommending, Yeah, I'm not.

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Speaker 1: I'm not recommending. There there are I'm gonna give you out,

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I like, I'm gonna give you some numbers here, okay,

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on I call these, I call my the spreadsheet I

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use to choose my you know, the ones I've selected

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from a website called cef connect, which lists and analyzes

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all four or five hundred of them. I've selected one

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hundred and one hundred and five or so that are

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income focused, that invest in things preferred stocks, bonds, mortgages,

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et sea, and I And there's over one hundred of them.

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For example, black Rock a black Rock Floating rate fund,

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black Rock Blackstone Long and Short fund, and then there's

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calamos and the symbols on those which well, these are

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not recommendations. I'm being forced to tell you these names.

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But there are over one hundred of them, and these

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are just samples. The black Rock fund called BGT that

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you could look up at cf connect, the Cowa Moost

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Fund CHI you could look it up at seef connect

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and see what you think about it. I would not

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buy anything unless you do complete amount of researcher on it.

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Speaker 4: Hey, so that's a quick question for you. Because these

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things kind of came up in the twenties. I think

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they started.

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Speaker 1: The eighteen twenties.

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Speaker 3: Eight.

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Speaker 4: Yeah, they've been around, so I know they've been around

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for a long long time. Where are they still making

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any new ones?

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Speaker 3: Here?

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Speaker 4: They are doing it? What may get a higher fee

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for these these companies? The fund managers? They get a

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hire yes, sure right.

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Speaker 1: The managers charges that they put on the website, and

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each one which we never pay. You know, all the

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all the yields I mentioned are net of all expenses. Right,

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they do charge you know, two and a half three

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four percent, sometimes too much to be included the government.

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Uh like they're not going to be in your four

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to one k. Of course, the government won't let anything

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in there over two.

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Speaker 4: Percent really, So so I'm just looking at one here

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that I just popped up at random, the new Vene

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Real Estate Income Fund. It's total market value two hundred

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and twenty one million, distribution rate eight point nine percent,

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which means if you put in one hundred bucks, you

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get eight dollars and ninety cents back, And it's trading

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at a discount to net asset value of ten point

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two percent. It's expense ratio they're really high, three point

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sixty four percent. Is this something I should think about?

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Speaker 1: Absolutely?

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Speaker 4: What's the the symbol or why'd you ask me that?

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Hold on a second, let me find it. Ah, let's see.

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Of course it's a sponsored company. I'm just looking at Kiplinger.

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Let's see what we got here. Let's do a little

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Google search here, and uh darn it, give me one

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second here, really pretty good at this, stupid sorry, I'm

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doing this like real time here, so yeah.

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Speaker 1: Me me too, And I'm gonna look at it and

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see if connected.

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Speaker 3: Tell me. Here we go J j R S j

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R s Y S j R S.

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Speaker 1: Yeah, j R S is is as you might have guessed,

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it's on my list. Oh okay, and I've traded it

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for many, many years. But if you look at it,

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you just you just mentioned a couple of the basics,

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but you can click on. If you look at the distributions,

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you'll see that it's paying a regular quarterly distribution since

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at least two thousand and two.

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Speaker 4: Yeah, and that's a good thing, right, Yeah, it's twenty

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three years.

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Speaker 3: Yeah.

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Speaker 1: So when you look at it and you're doing your

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research on any of these funds, which you must do,

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you want to look at the distribution history over time. Okay,

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you want to look at what's inside this particular one.

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It's in real estate, so it owns stocks of some

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companies and preferred stocks of other real estate companies. It

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has only eighty five positions in it, which I'm saying

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only that's a lot of different companies, you know, so

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your diversification, your investment is pretty safe. And you can

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also find that's fifteen nineteen twenty five thirty about thirty

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five percent of the portfolio is invested in the top

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ten companies, so thirty five in ut and sixty five

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which with less than two percent invest of the assets.

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So it would be comfortable. It would certainly be. In

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addition to most of my portfolios. This one happens to

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be since it's mostly stock, I consider it in equity fund,

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not an income fund. Okay, but still at that yield,

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it's a nice nice thing.

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Speaker 4: To be in investing in reates and stuff like that. Yes,

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so these fund's been around, a lot of them, you're

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investing in a long time. Do you only buy them

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at a discount or you buy them at par or

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will you pay a premium for them?

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Speaker 1: Okay, I you have to understand that these let me

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ask you, let me put it in another way. Do

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you care what the intrinsic value of a share of

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Microsoft is.

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Speaker 3: Well, it seems for changeable, do.

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Speaker 1: You think, But but do you think it trades it?

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It's about its book value. There isn't There isn't a

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stock out there that trades the book value. Those infos

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business those in funds are exactly the same. They are

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a function of supply and demand. For let's say a

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real estate investment that paygy eight percent, you know there's

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more supply than demand. It's it's going to trade at premium.

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Otherwise it's going to play a discount. But let's talk

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another thing. The securities that make up all the all

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the shares of these companies, that make up the net

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asset value. Some of them are interest rates sensitive, particularly

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in the income sector. So you could have a fund

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which has a thousand different treasury in it, you know,

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guaranteed by the federal government. If interest rates go up

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substantially or even a little bit from what they were

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issued at, they're going to trade on the markets. They're

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going to trade below they're.

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Speaker 3: A face valor.

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Speaker 1: So the net asset value is going to go down,

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and it could go down substantially, and at that point

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you'd say Okay, if if more, if there's more demand

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for that fund now that it's paying eight percent at

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this discount, you know, this internal discount, that demand might

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actually pull the price of this stock above that asked

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value when all the securities inside of it are trading

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at a discount.

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Speaker 3: Okay.

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Speaker 4: So, but like you've been studying these things for forty

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years now, when you see them at a discount, is

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that an alarm bell or red flag? Or is that

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a good thing? Or it's irrelevant?

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Speaker 1: I consider it irrelevant, okay, because it's the natural state

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of affairs. It depends on the prices of all the

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securities inside that fund, and everything from the situation in

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the Middle East to you know, planes flying into buildings.

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Two problems at the border are going to impact the

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prices of the securities out there being bought and sold

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every day in the financial markets. So I and I

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don't buy securities to keep them. I consider securities differently

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than most people. I have, Like I said, in my

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own portfolios and in the portfolios that I manage for

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people for all those years, I had a lot of

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positions in each of them, and I treated those positions

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just as I would if I were running a department store,

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and I had all these goods and services on my

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shelves people would want, and I'd have I'd had a

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markup on them of where I would take my profit.

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I would sell these things. And that's how I operated

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an investment portfolio. So if we if I have that

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JRS in my my portfolio and I assign that I

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have a five percent markup on it, and I can

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sell it at a five percent profit, I'm going to

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do that sale immediately, and I'm going to buy another

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closed end fund that has similar securities or maybe even not,

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and put it into my portfolio, onto my shelves of

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my department store, and put a markup of that five

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percent on that one, and hold it only until it

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goes up in that price, and then I'm gonna sell it.

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So some of these things I might be I might

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be holding these things a matter of days or.

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Speaker 4: A matter of my So I like in the system here,

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So what kind of returns have you realized over time

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using this?

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Speaker 1: I you know, I my my standard thing is that

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ten percent a year in actual realize gains in my

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working capital are reasonable expectation Because I know I'm I

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typically don't I don't. I won't even buy a closed

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in fund is plus it's pay an over six percent,

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and that's under any market conditions, even when interest rates

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are in the zero area like they were recently. So

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I know I'm going to do that, and I know

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I'm going to trade. For example, this year, I have

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seven months income the equivalent of seven month income just

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in capital gains this year.

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Speaker 4: Yeah, so you're not even though you're an income coach,

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you're not really holding on to it for the income,

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are you.

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Speaker 1: I'm doing both. I mean there's two stream There are

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two streams of income. Stream. One is the distributions. And

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let's say we go into a twenty twenty two or

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worse and the market goes down for eighteen twenty four months,

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the income from the distributions is going to pretty much

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remain the same. The profit taking opportunities are going to

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be few and far between. So you may have years

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where you're relying strictly on the income from the distributions

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and without the bonus of the capital gains that you

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can either spend or reinvest. So it's not always as

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good or as easy as it was this year.

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Speaker 3: Yeah.

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Speaker 4: Well, so twenty twenty one was he figure out you're opportunistic, Right.

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Speaker 1: Yeah, how many times have you seen let's say you

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invest in the stock market and you hold them, you know,

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the even the fang stocks or the Dow forty or

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wherever it is you own them, how many times have

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you seen them being a great big ego building profit

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or ego building profit position and then it disappears like

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it did in nineteen eighty seven and two thousand, two

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thousand and eight, March of twenty twenty. It happens all

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the time. There are always corrections, and my goal is to,

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you know, to leave as little as possible on the table.

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Speaker 4: So you figure you're shooting for ten percent return on

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your portfolio annually, I.

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Speaker 1: Expect to make a ten I don't use the word

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return in the industry. Return means the change, you know,

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the growth in the market value.

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Speaker 3: Right, you're saying total return.

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Speaker 1: And that's total return market gaining market value plus any

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income you received. I'm saying gain in working capital mean

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an amount of amount of money I have invested in

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the securities in my portfolio, and that that grows by income, production, deposits,

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and profits.

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Speaker 4: So is this something you want to put like into

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a retirement account.

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Speaker 3: You're not paying taxes on it.

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Speaker 1: Oh, it's perfect, particularly in a roth ira. I mean,

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if you can put ten income producing securities in a

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roth ira, even if you don't take the profits, it's

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going to double every seven seven and a half years.

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Speaker 3: Right, great, if you get added even two.

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Speaker 1: Or three percent in profits each year, it's a virtual

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gold mine. Much put it in a rawira. Exactly have

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money machine?

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Speaker 3: All right? Well, I like it.

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Speaker 4: Steve, tell us where we find you, how we connect

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with you on the interwebs.

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Speaker 1: The interweps. The best place to do it is to

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00:23:45,799 --> 00:23:49,359
pay the cheap price of ten dollars or twenty dollars

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00:23:49,920 --> 00:23:54,000
for the Retirement Money Secrets Book, and it'll tell you

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where you can go, how you should approach it, where

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you can go to find these types of security and

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00:24:00,680 --> 00:24:04,720
research them, and also how to contact me if you

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want help. And my website is the Incomecoach dot net.

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Speaker 4: All right, excellent, Well, we really appreciate you coming on here.

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00:24:13,440 --> 00:24:16,160
Got any questions for Steve or myself? Shooting me an

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00:24:16,160 --> 00:24:22,799
email klatcarrieluts dot com and the link is in the

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00:24:22,839 --> 00:24:27,400
show notes to his book. And while you're there on

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00:24:27,480 --> 00:24:30,319
financial survival network dot com. Please sign up for your

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00:24:30,319 --> 00:24:33,759
free newsletter. Steve been a real pleasure. Thank you so

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00:24:33,880 --> 00:24:34,680
much for coming by.

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Speaker 1: Thank you, Carrie, good talking to you.

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00:24:36,960 --> 00:24:41,079
Speaker 2: Thanks for listening to Carrie Letz's Financial Survival Network, your

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00:24:41,160 --> 00:24:45,000
solution to today's trying times. For the latest, go to

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00:24:45,160 --> 00:24:49,599
Financial Survivalnetwork dot com. Financial Survival Network

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00:24:49,880 --> 00:24:51,559
Speaker 1: Now more than ever,