Principles and Tools

The core idea here is straightforward: diversify across income-generating asset classes to strengthen the portfolio’s income resilience. While traditional diversification often aims to safeguard portfolio value during market declines (a goal I approach with skepticism for this specific strategy), our singular focus here is generating maximum, sustainable income.

The tool is simple, both during initial portfolio construction and ongoing accumulation phases: allocate cautiously across various income assets (stocks, preferred shares, bonds, REITs, covered call ETFs).

We maintain a strong preference for high-dividend stocks, adjusting allocations to correct any imbalances that arise.

The Role of Different Asset Classes in the Strategy

The portfolio leverages distinct asset classes to achieve its high-yield objective while managing volatility. Covered Call ETFs such as JEPQ and JEPG act as the “Engine Room,” providing contracyclical and unstable monthly income through option premiums. This premium income is highest when market volatility is high, helping to offset capital drawdowns during bear markets. This steady cash flow is strategically complemented by Core Equity Holdings like Petrobras and Icade, which offer high, often double-digit, dividend yields to reward the investor for enduring their significant share price volatility. By blending options-derived income with traditional dividend payouts, the strategy ensures that the investor is consistently compensated for volatility through multiple, diversified income streams, ultimately funding new long-term investment capital.