Investor's $200K Debate Sparks Drama On Reddit

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Many investors struggle to counterbalance high yields against long-term stability when acquiring stable, reliable monthly revenue.

Some investors prefer investing in JEPI, EOI or BST because while they generate lower yields, they offer wider diversification and a combination of growth potential and reduced volatility. On the other hand, other investors are tempted by $GOF’s 13% yield, just like this Redditor has been.

With $200K available to invest, the Reddit member sparked a dramatic debate on the discussion board with over 2.6K users after posting his dilemma on the r/dividends community.

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Should he invest in $GOF for $2,166/month or diversify his portfolio with JEPI, EOI or BST and go the safer route? He mentioned he’s impressed by $GOF’s 13% yield but has doubts about long-term stability, a concern that has received plenty of advice in the comments.

“GOF’s yield is tempting, but I’m concerned about concentration risk and NAV erosion,” he wrote.

If he diversified his portfolio and chose the safer route, he said it would lower his revenue to around $1,250 to $1,333 per month.

“The diversified approach would lower my yield to around 7.5-8% ($1,250-1,333/month) but might offer better stability and growth potential,” the poster said.

Let’s analyze the community members’ recommendations for the investor.

See Also: During market downturns, investors are learning that unlike equities, these high-yield real estate notes that pay 7.5% – 9% are protected by resilient assets, buffering against losses.

Diversify Across Several Platforms

The very first comment to the Reddit post suggested that the advice-seeking investor diversify his acquisitions. After all, the put-your-eggs-in-one-basket approach is said not to always have a good outcome, at least according to some investors, including this one.

“I am an income investor; the majority of my total return comes from income rather than price movement. Therefore, income is a top priority for me and I avoid going all-in or investing even 25% in any single asset. To some extent, having more cash flow streams is better than having just a few,” the Reddit user said.

The Redditor even explained to the investor why diversification is better through a simple example.

“For example, if someone holds 50 positions generating 2% of their income each, the reduction or elimination of dividends/distributions from one or two of those positions won’t significantly impact overall income generation,” he explained.

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Don’t Rely Too Much on High-Yield Investments

Many investors on Reddit seem to advise against riskier investments and this post has received a few such recommendations.

One commenter explained that he owned a good chunk of high-yield investments but because they are riskier than low-yield investments, he decided to limit it to under 10% of his portfolio.

“I hold a lot of GOF (roughly 8% of total portfolio). Such a high yield and ROC scare me a bit, so I limit it to under 10% of the total portfolio. I also like PTY as far as CEFs go and I have a large amount of real estate (O, WPC, CCI and ABR) to go with a mix of growth and income/growth ETFs. I found a mix that helps me sleep a little better,” the Redditor wrote.

Mix High-Yield CEFs With Other Conservative Investments

A few investors in the r/dividends community advised the poster to blend high-yield CEFs with a few other conservative options.

“I am glad to see you are open to CEFs. I personally like them because their primary focus is on generating income. You listed equity CEFs, but these funds also invest in fixed-income assets like corporate bonds, mortgage-backed securities and preferred stocks, providing a way to diversify away from equities,” one Redditor said.

While not many comments specifically mentioned JEPI, EOI or BST, this one Reddit member mentioned all of them and shared a bit of his experience.

“I’ve had BST since Nov. last year and have continued buying. Only because of the recent downtrend is my cap. Gains < 0% and it’s been paying pretty steadily. EOI, I’m not familiar with. JEPI seems to have a pretty good history. I owned it for a bit, then split those funds into JEPQ and something more conservative from my LTS (long-term strategy) watch list,” the Redditor said.

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This article Investor’s $200K Debate Sparks Drama On Reddit – ‘$GOF’s 13% Yield Is Hard To Ignore But Should I Diversify With JEPI And EOI?!’ originally appeared on Benzinga.com

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