Building Retirement Income with Closed-End Funds - Special Guest Steve Selengut

Guest: Steve Selengut, Author of "Retirement Money Secrets"
Host: Brandon Roberts

Episode Overview

In this episode, we dive deep into a retirement income strategy that most people have never heard of but could dramatically change your financial future. Steve Selengut, who managed over $100 million for clients as an investment advisor, shares how he built substantial retirement income using closed-end funds - investments that have been around for 200 years but are largely ignored by Wall Street.

Key Takeaways

• Income First: Focus on generating actual cash flow rather than just growing account balances
• 10%+ Yields Available: Current closed-end fund portfolios can generate over 10% income annually
• Tax-Free Options: Municipal bond closed-end funds currently yielding over 7% tax-free
• 200-Year Track Record: These aren't new, risky investments - they've been around since 1825
• Quality & Diversification: Each fund contains 50-300+ individual securities for built-in safety

Chapter Breakdown

Chapter 1: The Foundation - Learning Income Investing Early (0:00 - 7:00)

Chapter 2: The Four Pillars of Safe Investing (7:00 - 11:00)

Chapter 3: Discovering Closed-End Funds (11:00 - 18:00)

Chapter 4: Why Closed-End Funds Beat Traditional Bonds (18:00 - 24:00)

Chapter 5: Building the Universe - How to Pick Winners (24:00 - 32:00)

Chapter 6: Making the Transition - From Index Funds to Income (32:00 - 36:00)

Chapter 7: Current Income Opportunities (36:00 - End)

Resources Mentioned

• Book: "Retirement Money Secrets" by Steve Selengut
• Community: Income investing community with monthly fund updates
• Coaching: One-on-one transition coaching (discounted for community members)
• Course: College-level income investing program in Q&A format

Bottom Line

If you're approaching retirement and worried about generating enough income from your investments, this episode offers a completely different approach than the typical "save more and hope for 4%" advice. Steve's strategy focuses on generating 10%+ income right now, using investments that have been around for centuries but are largely ignored by mainstream financial advice.

The key insight: Instead of worrying about your account balance going up and down, focus on the actual cash income your investments generate each month. With current yields over 10% for diversified portfolios, you might find you need a lot less money saved than you thought to maintain your lifestyle in retirement.

Transcript

Brandon Roberts (00:00)
You are listening to the Yield to Reason podcast, where we strive to help you build the most important part of your retirement strategy. Because a retirement plan built with robust income sources is a retirement plan built for success. I am Brandon Roberts. This is episode number four. And today we're diving deep into a discussion about closed end funds with special guest, Steve Selengut. It's time to give you some serious firepower as we set off on a journey to help you build the retirement you deserve.

and the one you actually want. Steve Seligut is the author of Retirement Money Secrets, a book dedicated to showing you how income-focused investing can change your life and your retirement prospects. Closed-end funds sit at the center of Steve's investment strategy, but it's not just a recommendation to buy closed-end funds and call it a day. Oh no, there's plenty of additional strategy outlined to boost income and protect you from the volatility of business cycles.

Professionally, Steve managed assets as an investment advisor for decades, employing these exact strategies to help his clients, who entrusted him with over $100 million of their hard-earned money, build substantial investment income. Steve, welcome to the Yield to Reason Podcast.

Steve Selengut (01:10)
Thank you Brandon. It's nice to be here.

Brandon Roberts (01:13)
So we've got way more questions than we realistically have time to address fairly, but we're gonna do our best. So I wanna start philosophically. I wanna get the story on what started you down the road of focusing your efforts on income-focused investing.

Steve Selengut (01:30)
It's a long road. It's a long road actually ⁓ It may even have started before I actually Had any money to invest My dad was a real estate developer Slash landlords, you know the whole the whole nine yards. He had a vertically integrated real estate You can almost call it an empire because that Lake Opec on back in the ⁓

1950s he was pretty much the only major developer in the area at that time so ⁓ long story short We were always encouraged to to work you know when we were off from school and stuff like that as children and He would take some of that money and he said I was putting this aside for you so that you learn how to develop income Other than salaries when you get older

That's basically what he said. Even if it was just watching the interest compound in your savings account, know, that type of thing. So anyway, he had developed these many streams of income. And I knew that and I saw the lifestyle it produced and so forth. So somewhere back in my head, it seemed to always be there. When I was, when I was my 25th birthday, I was handed a portfolio of stock.

literally certificates were dumped out on my desk you know in front of me and I was looking at pieces of paper that represented shares in General Motors ⁓ you know Esso other oil companies GE Sears Roebuck at the time and ⁓ and that was that was the result of money that my brother and I he had had a similar event

had given them him over the years that he are actually his his attorney had invested for us and at age twenty five he gave us all the money and was substantial in those days it was nearly was nearly six figures and that's in nineteen seventy real dollars something this is when ⁓ gasoline prices were still under a dollar you know what mean

Brandon Roberts (03:47)
So in real dollars, we're talking a lot.

Steve Selengut (03:56)
So anyway, it was a long time ago, it was a lot of money. My main interest was not losing it as much as anything else. The stocks themselves were all dividend payers.

Brandon Roberts (04:02)
Okay, okay.

Steve Selengut (04:07)
which was in line with his ideas and which became mine. ⁓ They were all big name companies that you recognized. ⁓ I handed them off to, ⁓ at that time, a rarity, a woman broker. They just weren't around back then. She wasn't a young woman, but she'd been doing it a while and she sort of took me under her wing, so to speak.

Brandon Roberts (04:25)
Okay? Yeah?

Steve Selengut (04:36)
and helped me with my objective of not losing it. we started, everything was invested, the dividends would come in, I'd be getting the dividends. In those days, you got checks in the mail. ⁓ So, and I'd give it back and I'd reinvest it. But we studied the markets, we studied how the prices moved, even with the best of the best companies, even with a General Electric, the price went up and down, the price went up and down.

the range was not it wasn't actually predictable but you knew it was going to go up and down and it always looked like it had a higher high and lower low or a higher high and a higher low so the trend was upward the economy trend was upward in those days all the time too so we said or I said why don't we set a target price sell them when they go up 10 %

watch them and when they fall down in their cycle their normal cycle down 20 percent let's say from their 52 week high we buy them back again and do it again and again and again and that's what we did and we expanded our base and we she said you gotta your portfolio is a big portfolio you need to have income focused securities in there there are these things called municipal bonds with tax free income i think you should start looking at those so my first

Fort Pierce Florida four percent coupon municipal bond was purchased and then we bought more individual municipals ⁓ not full you know not fifty grand at a time but you small small pieces three thousand five thousand so forth and another product we use for income were Ginny Mays government and national mortgage and they had these things called bond

unit trusts that you get back principal and interest so the income was flowing from everything I owned and I was trading

Brandon Roberts (06:41)
And this all started when you were in your 20s. Yeah.

Steve Selengut (06:43)
This was when I was 25, I started this

process. Within nine years, 1979 or so, it was a little bit before then, because in 79 I actually quit my job and started doing this. But by 1979, I was making five times my salary in income for my investing. to be honest,

Brandon Roberts (07:04)
Yup.

Steve Selengut (07:09)
it was as much from the profit-taking as it was from the dividends themselves.

Brandon Roberts (07:13)
Now let me ask you, let me ask you, this entire time you basically inherit this money or you're gifted this money and you start investing it and the, from where you come at this, thankfully having the basis of focusing on income all along. And then of course the advisor who suggesting let's do these various other things. Did you ever, ever stop and look at this and worry about how big the balance was?

Steve Selengut (07:19)
Yeah.

Right, right.

Well, what I was looking at was, we were looking at, and I hadn't even put it in the proper terminology yet, but everything we did was the highest possible quality. In those days, only the best companies paid dividends, and was high quality. We were diversified. We had something representing pretty much every sector you could imagine. So everything produced income, and we were taking profits. Today in my book,

Retirement Secrets, this is it, Retirement Secrets. In my book, four of the six basic principles are quality, diversification, income generation, and profit taking. This is how you minimize risk. This is how you keep yourself in a safer environment. All those things put together create that safety so you can

you can focus more on the income you're earning and the process of taking the profits and reinvesting, then you have to worry about the ups and downs of the market because when you study the market cycle, you see that there's always going to be ups and downs.

Brandon Roberts (08:59)
Yeah, and I just I asked that question because I want to underscore the point that here you have a sum of money and there's a lot of traditional advice that that talks about what you should do with that in the pursuit of you need to be allocated and certain things that are going to grow because you're young and you can you can afford the risk profile that that represents here you receive this money you don't effectively do any of that and instead start collecting substantial amounts of income way in excess of what you were earning

Steve Selengut (09:16)
Mm-hmm.

Hmm.

Brandon Roberts (09:27)
from your wage activity and it sounds like, don't want to put words in your mouth so you can say this or confirm this, but it sounds like you didn't really worry much about balance of the account. You were looking at the income coming in thinking, this is great.

Steve Selengut (09:44)
Right, that's what we were focusing on and I was probably the most fortunate thing I ever had was the initial advisor I had who said pretty much, agree with what your initial ⁓ impression was. I don't want to lose it, you know.

You've got this high quality portfolio. We're gonna get you income. We're gonna stay diversified. All these things she did. She didn't ever say, there's a new issue coming out. We should try that. You know, in the old days, in broker terms, they used to have this thing called the stock of the day. Merrill Lynch, think, is the one that actually put this into operation. And every day they'd have a phone meeting or something and the boss would get, we are bringing this one to market and...

every brokers got a call every client and sell him some shares of this particular stock the stock of the day and it didn't matter what the hell it was excuse me it didn't matter what that stock was what industry did whether or not it paid a dividend it was the stock of the day and that's what those guys were being paid to push down your throat and that's the way it works

Brandon Roberts (10:56)
Yep. ⁓

so where to close down funds enter this story?

Steve Selengut (11:01)
Well ⁓ Actually the first two closed-in funds that I used entered the story probably in the 80s And they were one cool what the symbols are still alive ADX and PEO and these are not recommendations of any kind. This is this is a history lesson

These things existed back in the 80s when I was looking around for securities and I was always looking for securities that paid significant income. And I was attracted to these two and I didn't know a closed-end fund from anything else. Mutual funds were not nearly as popular in the early 80s and mid-80s as they are today. There were no IRAs, there were no 401ks, there certainly were no ETFs.

and I had never heard of closed end funds and I don't think Rita had ever heard of closed end funds either. Rita being the advisor I was working with initially before I started my business. So this was after I was in business and so I discovered these two, ADX and PEO. One was petroleum and resources and the only thing it invested in, it was a fund and I knew it was a fund but I didn't know what a closed end fund was really.

Brandon Roberts (12:03)
Rita being the advisor that you had.

Steve Selengut (12:27)
But looking inside it had all the major oil things and back in those days these were the days when there were so many consolidations of all the individual oil companies around the country. Boone Pickens was consolidating all these things and one after the other would be taken over with huge gains. Well all of those companies were in this particular fund. So and it paid quarterly dividends of like five cents.

and then at the end of the year it would pay a special dividend that was more like five bucks okay so it paid enormous so what I did was I would buy it in January February whatever you know and I would keep accumulating it not to a huge position but same with ADX they both are the same type of thing and I wait until September after they announce

Brandon Roberts (13:03)
Hmm.

Steve Selengut (13:26)
their year end dividend, September, October, they'd announce it, the price would go up because that's what prices do. As soon as you announce a dividend, it's included in the price of your stock, any stock. So I'd wait until it got up there so that the percentage was close to what it would be if I held on to it, and then I'd sell the sucker and take the profit. Because then I didn't own the shares again, and after it paid the distribution,

price would go back down and I could start accumulating again for the next year. So that's what I was doing with these things. I didn't know they were closed-in funds, but they were in my equity side of my portfolio. Then, I got a new client, think it was just maybe 1989 or 1991, and in his portfolio there are these symbols, couple symbols that I didn't recognize, and when I looked them up,

I discovered that they were also very high yield, very high yield. And I asked him, said, tell me a little bit about these things you own. Usually I find people and they have stuff that's not paying any dividend at all and I usually convert them out of that into dividend stocks or income securities. But what are these? What are they? And he said they were closed end funds. So I started studying what closed end funds were and you know, this enormous light bulb goes off in my head and says, wait a minute.

these are income funds they have this one's got corporate bonds preferred stocks this one is a municipal bond collection it's got two hundred and thirty six different municipal bonds in it and it trades like stock so back in the day when you had bonds in your portfolio

you had to get quotes from the trading desk and they were always you know you have to pay a markup buying and selling this is why brokers used to say ⁓ each year they say you gotta sell these bonds that are and take the loss will replace them with a similar bond and you have tax savings well they were getting a two percent fee each each way you know I mean so so I discovered these these portfolios of

every type of income security you can imagine from loans and mortgages and da da da da da and I started converting the income side of my portfolios all of them to these types I got fired I got fired by this one guy in New York who I had mostly New York New York and New York State type municipal bonds in his portfolio and I took profits on them

and I converted them to municipal bond closed-end funds. were literally paying 50 % more than he was getting in income, in tax-free income. But on the statement that he gets from the broker, it says he's now in the stock market. And he calls me up and he rips me one because I've taken, what have you done to my portfolio? I'm all in the stock market. Whoa, calm down, calm down.

Brandon Roberts (16:32)
Mm.

Steve Selengut (16:42)
look at the names of those stocks look at what they own look at they represent these are all municipal bonds these are all still tax exempt not a that you get paid monthly tax exempt you know it's comp and i'm compounding it monthly and you know it's a diversified portfolio more diversified than i could ever do for you individually now i'm in the stock market any fanny fanny can't

it was a whole new thing to me and then finally everything was converted before the dot com bubble all my income was coming from closed end funds I still had dividend stocks making up ⁓ most of the rest of portfolio except for those two and then I started looking around in the equity side and I'd find a couple here and there and I'd

when i had cash in the market might be up and i didn't have a whole lot that was down twenty percent from the fifty two i'd buy a couple of the equity closed-end funds and i started really enjoying the income if they were producing because it's quite the same almost the same today today the equity closed-end funds in my universe which are a hundred different funds are paying over ten percent income

Brandon Roberts (18:04)
You, I do want to get to that, but I just want to point something out because you made a comment a minute or so ago that was excellent to a point that I bring up to people who are in pursuit of income. You mentioned that bonds, you said back in the day, but it's still pretty much this way today. They're complicated to buy, direct issues of bonds. They just are.

Steve Selengut (18:22)
yeah,

and there's still a fee on them too. Still a markup.

Brandon Roberts (18:25)
Yep, exactly.

And very few people who think they invest in bonds really invest in bonds. They just invest in bond funds, which have a whole host of complexities that can be quite dangerous and people don't realize what they're signing up for. Closed-end funds, as you pointed out, are a way to get what people typically seek out of bonds without all of that extra stuff that you can't decouple.

Steve Selengut (18:51)
Mmm.

Brandon Roberts (18:53)
And and all of the additional assistance that you realistically need when it comes to buying a new issuance or even a secondary market ⁓ Bond so excellent point, but you just mentioned something that that I do want to want to ask you about which is your universe so ⁓ as I understand it you have a have gone through the the painstaking task of of creating and maintaining a universe of closed-in funds based on how they have

Steve Selengut (19:01)
Right, right.

Brandon Roberts (19:23)
performed mostly income wise and distribution wise ⁓ and and do Give monthly reports on on how that list has gone Where did this come about?

Steve Selengut (19:25)
income wise.

I, it really developed way back in the day when we were doing ⁓ stock market. ⁓ I developed, I developed at that time what I called the investment grade value stock index. And that was, you know, all these basically New York Stock Exchange listed, rated B plus or better by Standard & Poor's. The Standard & Poor's way back then,

had this thing they called the monthly stock guide. Have you ever seen this?

Brandon Roberts (20:07)
⁓

I have actually

Steve Selengut (20:11)
Okay, so the monthly stock guide listed every possible security from all the exchanges and had a letter rating and B plus and better was considered investment grade And if you didn't if you didn't pay a dividend you weren't going to be a B plus rated company in that end book So it fit perfectly with our with our guidelines it the quality element, you know, and so we had a list

and we actually had a list of about two hundred and twenty five stocks that met our requirements be plus and better dividend paying new york stock exchange good long time in business ⁓ diversified mix of the whole nine yards fundamental fundamental things is what we looked at we didn't look at

P ratio is really kind of a fundamental also right and and debt to equity ratio so we you know we covered the basis ⁓ But we didn't look at long-term trends We didn't look at the history of price movement you know and stuff like that and let me tell you this just Because people some people make a mistake of how they analyze closed-in funds Nowhere ever does anybody ever record this distance between the market price of a common stock?

and its book value. pays any attention. It's what they call, in close-in business, they call it NAB. But nobody cares about that relationship between the stock price and the book value.

Brandon Roberts (21:41)
NAV as we would would normally refer to it. Yep.

So you're telling me there's no secret voodoo here. We can't look at the market price and the NAV and predict price movement.

Steve Selengut (21:56)
Exactly exactly so So there that's the developmental stuff so slowly I was moving more and more into the closed-end funds on the equity side And then we had and then we had the Great Recession 2008 when we had the big big hit and Coming out of it

During it, was not a problem, because everything was down I could buy and I was filling up my portfolio with these high quality companies and I didn't have any cash that wasn't invested, believe me. But when we came out of it, the way they brought us out of this recession was by lowering interest rates. ⁓ You'll recall that when we started that, low interest rates were considered, 5 % was considered a very low interest rate. Historically, interest rates ranged from

12 and 14 percent in the 80s to 5 percent maybe the lowest ever So for all those years, that's what we had and then all of a sudden Industry start going down and over the course of the next 12 years. They went to zero pretty much Damn almost almost to zero. Well, the prices of all the income stuff went up particularly the municipal bonds and I actually sold my entire personal municipal bond portfolio at profits

and didn't go back in for years. during that time the stock market pretty much just went up. If it went down, it went down a little bit for a little period of time. Nothing was going down 20%. And when you looked at your list of 225 companies, the ones that were down 20 % from their 52 week high, you looked at them and said, wait a minute, everything else in the world is up? This guy's down?

There's you know, it's not like the old days, you know when they all went down they want these the ones that are down Something's got to be wrong. I'm not buying them So that's when I started to switch totally to close-end funds because you have the luxury of buying a portfolio of stocks and You don't have to buy them You know you you set in your mind You know how much you want to diversify and how much money you want to put in each position in your portfolio?

if you noted markets and all time i just buy less of those stocks was eventually going down and you can add to your position so that's what i did i bought closed-end funds i said okay typically for this client starting a position with four thousand dollars i'll start with twenty five hundred for this big client usually start a position at nine thousand dollars i'll start six and that's what i did eventually i got everybody

after taking all that time, almost everything, I could take all profits on everything, put them into high yielding securities that were yielding twice as much income, even than the best of the dividend stocks. And we converted the entire portfolio. It got by, I guess the next real COVID was perhaps the first big time hit we took after

the Great Recession and that was only a two-month deal but still we haven't really had a significant correction for a duration like almost two years since 2008 to 2010 we haven't had one I was wondering if this one was going to get to that proportion but and we are still a little bit in a correction I consider I'm not like Wall Street I don't consider 10 % down a correction

Brandon Roberts (25:36)
Mm-hmm. Mm-hmm. Yeah.

Steve Selengut (25:48)
I get to 20 % for me to be a correction and we did get that low. But we're not there now. So that's the history of the development. Okay.

Brandon Roberts (25:55)
So if someone is... Yeah, yeah.

If someone is listening to all this thinking, okay, how do I make the transition? Because I drank the Kool-Aid of the Bogleheads or whatever it is. And I see a lot of people who are getting into kind of the retirement mindset. They're either right at the precipice, there may be little bit beforehand in planning, or they're already there.

And they're really, really nervous about what it is they should do because they spent a lot of time buying ⁓ index funds and they don't have an answer to retirement income inside an index fund. they're listening to this, they're hearing you. How do they make the transition into something like a closed end fund portfolio?

Steve Selengut (26:32)
Yeah. ⁓

The transition aspect is really a big part of my now coaching career. And that's pretty much the type of people I get for coaching. Look at my portfolio, how am I gonna transition from here to there? And ⁓ it's one of the first of the Q &As we did in my income investing community to talk about how do you transition? What do you look for in your existing portfolio?

How do you, what kind of portfolios? IRAs and rollover 401Ks and Roth's they're the easiest to transition because there's no immediate tax implications. It's the personal securities where people who have been in this buy and hold mode of operations for a long period of time. And I've literally gotten portfolios, two and three million dollar portfolios that have five securities.

you know your five indexes or five five funds or one or two stocks in a few of the others where you know they've got thirty and forty percent of portfolio in one security you know it's a nightmare my hair look at me pulling my think picture me pulling my hair out when i see something like that i would get i would get people who had a meeting with me two weeks from now and they send me their portfolio for review i'll send them an email i say hey man

don't wait for the meeting start selling some of the stuff you've got too much money invested that we could you know planes could fly into skyscrapers in this two week period and you'd lose an awful lot of money you know so it's just scary what you see

Brandon Roberts (28:26)
You mentioned

a community, so you have a community built around the Retirement Money Secrets book of people who...

Steve Selengut (28:32)
but

Around the process yes the process of getting from that What would you call? I guess you would call that four percent of your retirement mentality You know four percent of capital and tell or rather four percent of market value mentality to one that says I'm gonna make more than four percent That mentality yeah, yeah Yes, they join it

Brandon Roberts (28:53)
Yep, yep. So this is a community people join.

Steve Selengut (29:01)
They become members. And then they can actually do it themselves just by conversations with other people or by the Q &As that we're developing. We've developed a course. about three or four sessions away from having a complete, I would say, college level, if not master's degree program in income investing in recorded question and answer mode. So you're not...

listen you're not falling asleep to somebody lecturing you about how to manage a portfolio you're listening to dozens of people participating in discussion and answer the questions about transition leverage ⁓ income versus equity type securities and things like that so it's it's it's quite a deal

Brandon Roberts (29:53)
Now do they have to be people who go through your coaching program or can they just join the community?

Steve Selengut (29:56)
no no

they join the community they can use my coaching or not if they use my coaching it's half price you know but ⁓ my coaching revenues have been reduced significantly from two thousand and twenty four to so far in two thousand twenty five because fewer people really you know once once you once you get it once you do the transactions particularly in a volatile period like we've had this year

If you came in, let's say during one of the downturns, you experienced that profit taking almost immediately because we went back up again. If you started at one of the ups and started to go down, you experienced how you could add to your positions in preparation for the next upturn. So it's really been a very good educational period this first few months of 2025. So it's been a good experience. And the group is...

⁓ very very supportive ⁓ we don't tolerate any and we haven't had any you know all your stupid around you can't do that you know that that type of communication just doesn't just doesn't seem to happen so it's it's been good

Brandon Roberts (31:13)
And within the group, you mentioned your list. Yep.

Steve Selengut (31:17)
Oh the universes We're

back to that. I is now where we started Okay, what what are these selection universes the selection universe is like I said started initially with equity only equities when I was in in using individual stocks But when I started using closed-end funds for all these clients, you know, I had 110 million under management and it was all going first the

the 50 or so that was in the income asset allocation first that transitioned into closed-end funds so I had to I had to study CEF Connect and other places where I could find those that met my quality type and the quality ⁓ things change it's from individual stocks to groups of stocks and bonds they had to be

I want them to be five years in operation so I can look at the history of the distributions for five years to know they're stable. They have to have at least 50 positions inside so I know to diversify. I mean, I had somebody ask me, why don't you buy this closed-end fund called Cuba? So, oh, yeah, it's real good. It yields a lot of money. It's got one security inside, one company.

Brandon Roberts (32:39)
You

Steve Selengut (32:41)
It's not diversifying. So you have to pick through. I just noticed this. really shaved. I really screwed up my mustache. Anyway. So you have. Okay. So you have to pick and choose things. And it's a whole different set of quality tests and diversification tests. I have something in every possible sector.

Brandon Roberts (32:53)
Only the people who watch the video version of this will know. The audio version, no one's gonna. No one knew till now.

Steve Selengut (33:11)
in these universes. And then I keep track of how many positions are in them, what their price and yields are, what their distributions are, I color code if they've had a lower or higher distribution, and I keep track of all that stuff. And I had to do that just to manage it so that all my, I wanted all my portfolios under management be different from one another. I know a lot of times on Wall Street, you'll look at...

a person who has five different, I'll get somebody, a client's got five different portfolios with the same manager. ⁓ Every portfolio is almost exactly the same. No effort is made to diversify really amongst.

Brandon Roberts (33:52)
So the selection list, is that something that people go to you to buy? Is it part of coaching? Is it something that's part of this community?

Steve Selengut (34:01)
It's part of the it's free in the community you get it you get the monthly updates in the community actually we have some people that have adopted this it's just this Approach and are so good at that I when I went away for I went away for the month of April basically and I had You know three of the people in the group actually did the universes for me for the group, so there's there's there They're really really key. They're really catching on. They're really good ⁓

Brandon Roberts (34:25)
students become the teachers.

Steve Selengut (34:31)
So yeah, each month I go through every one. I look at every price. look at every, for example, going through this month, I just did it yesterday for equities and today for the income. The prices were up across the board. So let's say you're going through your list and you find one that's down a point from where it was last month. Everything else is up. So flag why. So then you go in and you do a deeper dive into that security and you see what's going

you know you try to determine if there's some flag that you want, whoa wait a minute I don't think this I don't think a newbie should go and buy this because there's something going on so that's the type of review I do every month to make sure ⁓ this month there was news on two of them that are going to liquidate the board has decided they're going liquidate two funds over the course of the next year so I take them out of the list because I don't want any new member

coming in and buying it because it's still paying a good dividend when it's going to go out of business, going to liquidate at net asset value and before it gets to that point it's probably going to trade maybe a little above that asset value. You know, that's the only time that asset value is important is when it's liquidating. So you take them out and then you find two to replace it with and so when I redo the universe is I send out a letter.

And I said, my overall experience has been it's not nearly as bad as you would have thought considering the economy. One would have a home. They have to be in distributions because of all the uncertainty. Well, they didn't. In fact, three of them raised it, and none of them cut their dividend this past month. How about that? So you point out all these things. So these things have been in business so long that they just are very stable.

Brandon Roberts (36:21)
Okay, so I realize this question is somewhat of a depends kind of answer because it's dynamic, but we'll preface this, or I'll preface this by saying it's, we're headed into the summer of 2025 as I ask you this question. Somebody adopts this strategy. What sort of yield should they anticipate being able to generate from the portfolio?

Steve Selengut (36:36)
Okay.

from just the portfolio itself, just the distributions, even at today's prices, equities are somewhat higher than they have been, income ones are still much lower than they were five years ago when interest rates were very low, they can expect to generate over 10%. If they take, make a diversified portfolio, if they owned every security, if they owned every security, some of them are yielding high 7%,

Even the tax-free income ones are right now the average of 50 of them is over 7 %

Brandon Roberts (37:25)
It's kind of, I'll add some commentary on that. That's quite mind blowing. As somebody who's followed municipal income for a while, that's high. ⁓

Steve Selengut (37:30)
That... Right.

Historically that's the highest and it's been several months now that they've been there it's crazy high for those securities and and that there's two really significant thoughts one if you're a high earner and you have most of your money in a Taxable account or a lot of your money in a taxable account You know putting a bunch of it in tax freeze at seven percent

keeps your bracket low, helps lower your bracket a little bit, or at least the amount of money that's subject to the high. It sure doesn't answer the problem. And they are at the lowest, almost the lowest level of what we call the risk pyramid. Because states, if they have problem, they raise taxes and they pay their bills.

Brandon Roberts (38:06)
Yep. Or does it add to the problem at least?

Steve Selengut (38:23)
So they're considered very very safe compared to corporate bonds

relatively more safe certainly more safe than an individual bond because these are portfolios in that area must be an average of three hundred different municipal bonds in every in every ⁓ individual cf imagine at seven percent tax-free

Brandon Roberts (38:45)
7 %

tax-free 10 % ish taxable. That's all these I mean put that in your 4 % indexed withdrawal rate and it just

Steve Selengut (38:53)
Yeah, and then, and you know,

and let's make it clear. These are not new kids on the block. These things didn't just come out like ETS which just came out in the 90s. They're only 25 years old people. These things came out in the 1825 area. know, couple hundred years ago these things were around. They were alive and kicking back then before.

Brandon Roberts (39:19)
Mm-hmm. Yep.

Steve Selengut (39:22)
before mutual funds were around, they were around. So these aren't anything new. They're just something that Wall Street chooses not to make people aware of.

Brandon Roberts (39:34)
There's several additional ⁓ rabbit holes we could probably go down with that, but in the interest of keeping this podcast at its normal run length, which we're already over, I think we're gonna have to call it there. ⁓ Steve, thanks a lot for joining me. For people who are interested in Steve's book, Steve's coaching, ⁓ the community that he has created, we'll have links in the show notes for you to follow to get more information on that.

Steve Selengut (39:38)
That's one of them. ⁓

Brandon Roberts (40:03)
Absolutely an open invitation exists for you to come back We can dive a lot deeper into a bunch of different subjects on this and I hope to do that ⁓ At some point in the future That's all the time we have for today. I'm afraid but have no fear I'll be back next week with more tips and tricks to help you build a solid income with your retirement plan and until then Please remember real wealth doesn't just add up it writes checks