A compelling case for dividend-focused investing as an alternative to real estate. Clear math, strong yields, and zero landlord headaches make this worth considering for passive income seekers.
Thanks so much for the article… I’m new to stocks and dividends. My questions are… how do investors afford to buy so many shares of each of these stocks?? Are they using margin? Also, what are the taxes applied to this income when you withdraw? Are there any tax advantages? I would really appreciate your feedback.
Great questions. Some use margin. I typically don’t. I buy consistently in increments. Thinking of investing like paying your bills is the best way. Sometimes I buy a few times a week or a month. Doing this adds up. Before you know it you’ll have a few hundred shares. For me I plan to live off dividends soon so I invest in a taxable account. So there’s taxes. But if this isn’t a plan, you can invest in a Roth IRA. As long as you’re 59 1/2 and had the account for 5 years, you can withdraw your dividends tax free.
Thank you for the article and the great information about each of the ETFs. We own some rental properties and also a commercial building and can relate to some of the headaches of being a landlord. What are the tax implications for the $8300 a month and are there any strategies that you might recommend? Thanks!
Mike thanks for dropping by and glad you enjoyed the article.
Covered call ETFs’ distributions are return of capital, a portion of your own initial investment.
As a result, this is not considered income or capital gains, so it doesn’t create a taxable event at first.
But if you sell it does. If held long enough, your cost basis goes to $0, and then would be considered long term capital gains.
So, your distributions would be taxed at a lower rate. Return of capital or ROC is basically taxes deferred, so investors typically like to hold them in taxable accounts instead of something like a Roth.
A compelling case for dividend-focused investing as an alternative to real estate. Clear math, strong yields, and zero landlord headaches make this worth considering for passive income seekers.
Thanks so much for the article… I’m new to stocks and dividends. My questions are… how do investors afford to buy so many shares of each of these stocks?? Are they using margin? Also, what are the taxes applied to this income when you withdraw? Are there any tax advantages? I would really appreciate your feedback.
Great questions. Some use margin. I typically don’t. I buy consistently in increments. Thinking of investing like paying your bills is the best way. Sometimes I buy a few times a week or a month. Doing this adds up. Before you know it you’ll have a few hundred shares. For me I plan to live off dividends soon so I invest in a taxable account. So there’s taxes. But if this isn’t a plan, you can invest in a Roth IRA. As long as you’re 59 1/2 and had the account for 5 years, you can withdraw your dividends tax free.
Thanks so much for answering my questions.
Thank you for the article and the great information about each of the ETFs. We own some rental properties and also a commercial building and can relate to some of the headaches of being a landlord. What are the tax implications for the $8300 a month and are there any strategies that you might recommend? Thanks!
Mike thanks for dropping by and glad you enjoyed the article.
Covered call ETFs’ distributions are return of capital, a portion of your own initial investment.
As a result, this is not considered income or capital gains, so it doesn’t create a taxable event at first.
But if you sell it does. If held long enough, your cost basis goes to $0, and then would be considered long term capital gains.
So, your distributions would be taxed at a lower rate. Return of capital or ROC is basically taxes deferred, so investors typically like to hold them in taxable accounts instead of something like a Roth.
Many first-time home investors learned during the pandemic that tenants can also miss rent payments, exposing them to unexpected financial risk.
True. I had a friend a few months ago stated their tenant hadn’t paid rent in 3 months. Not sure if he resolved it yet.
That takes time, you may need a lawyer, that's another issue.