This Simple Strategy Could Pay You $50,000 In Yearly Dividends

This Simple Strategy Could Pay You $50,000 In Yearly Dividends

One of the biggest risks you'll face as an investor is the temptation to listen to people at the extremes.

In income investing, these so-called "gurus“ break down into two camps. The first are the indexers, who argue that all you need to do is buy a fund like the Vanguard S&P 500 ETF (VOO), which, as the name suggests, simply tracks the S&P 500. Sure, the yield is a crummy 1.5%, but you need to stick with it, work for 40 years, save as much as you can, and live off the low payout.

Unfortunately, if you follow this "advice,“ you'll have to save north of $4 million if you want a $50,000 dividend stream to live on without selling down your holdings. Let's be honest: almost none of us will be able to save that much, no matter how long we work.

Then there's the other camp, which points to ultra-high-yielding stocks and bonds with dividends of 14%+. At that rate, you need just $360,000 to get $50,000 of dividend income.

The trap most followers of this approach fall into is that they simply spot a big yield and plunge in, forgetting that the double-digit-yield space boasts many payouts that are unsustainable.