TLDR Reddit Mentions | ChartExchange

TLDR: I’m sharing my income investing strategy to show alternatives to ETFs and common stock. Preferred stocks and exchange traded bonds have high income and low volatility. As a drawback, they have no growth and a lot of taxes. It’s an active approach, but has worked well for me. BANC-F or RITM-F are a good first senior security investment to research.
I have $510k invested in high yield securities generating $40k annually in interest and dividends. This is the high income, low volatility portion of my portfolio. Separately, I have broad based index funds. The high income investments are not common stock. There isn’t going to be organic dividend growth. I started investing during the “lost decade” and like to keep a portion of my portfolio in investments that will have reasonable returns even if the S&P 500 has a decade of compressing valuation multiples.
In mREITS, I have RITM-F, TWOD, ADAM-O, and PMTV. For BDCs I have GAINI, HTFC, MFICL, RWAYI and TRINZ. I also own a hodgepodge of OXLCZ, KMPB, C-N, CNOBP, and ATLCZ. I started a very small position in MLPI that I’d like to grow to a 5% allocation over time. Most are limited duration either through a maturity date or an interest rate reset that should lead to a call redeemed at par. With the SPY down 1% on Friday, my portfolio was up 0.03%. It’s low volatility.
BANC-F is at the top of my list, adding to the position last week. Depending on the purchase price, it’s a 7.75% qualified yield with a high reset rate in September 2027. I suspect it’ll be a 14 month low volatility investment and then it’ll be called. It’s the top holding for PFFA.
I’m building a position in KMPB. It’s at $24 right now and I think it’ll be at $25 or redeemed in March. That adds an annualized 5.3% to the current yield, so closer to a 9% total return over 9 months (12% annualized).
It’s important to at least read the summary terms of a prospectus to get the basic terms: dividend rate, call date, maturity date, potential reset rate, etc. I get the summary from https://www.quantumonline.com
**Generating Alpha:** I have typically been able to add a couple of % to annual returns trading market inefficiencies that in theory shouldn’t exist. Preferred stocks and exchange trade bonds have low liquidity that leads to market inefficiencies. Often the last trading day of the month or quarter I suspect an ETF is rebalancing leading to 1-2% moves sometimes in shares of different classes within the same company.
Or a company issues a new preferred share. They bring it to the market through investment bankers with the banker taking a 3%. A couple of days before general trading starts, the investment banker has extra unsold shares, so they dump a high quantity on the gray market for a 2% discount. I buy those, hold for a month, and sell after the extra supply has been absorbed by the market.
I capture dividends. As an experienced investor, I can’t believe this opportunity actually exists. Every beginner has the idea to buy a stock before exdividend day, sell after, and move on to the next stock before their exdividend. Then someone explains how dividends work and how the share price adjusts down. But I swear I see fixed rate securities that “trade dirty” with accumulated dividends, go through a $0.50 exdividend date and trade down $0.40 and then within $0.30 in a couple of days. GAING is the latest example. I bought at $25.15 on Monday, the bond went exdividend on Wednesday and I sold for $24.97. The dividend is $0.44, so I did the equivalent of buying at $25.15 and selling at $25.41, +1.0% with an inconceivably high annualized return. That shouldn’t happen, but it does regularly. My best guess is that because it generates taxes and is on low liquidity securities that it’s hard to arbitrage away. I make dividend capture trades in a Roth IRA.
I often trade in 100 share blocks. Breaking a 1,000 share order into 10 small trades gets a better fill. It’s clearly a high frequency trading algorithm that’s jumping ahead of the bid and ask. I view this as further proof that my investments are capturing an illiquidity bonus. I do not think I’d be able to make the trades I make with $100k positions making it a waste of time for large trading firms.
**Writing puts:** I aim to write one put per year secured by the margin of the portfolio. When Implied volatility I pick out a share price deep out of the money that I think is supported by fundamentals. I’d be willing to buy shares at that price. Then I generally let the option expire worthless or take delivery of the shares. I prefer to sell options expiring in January, so that I don’t owe taxes until April of the following year. When writing puts, I like that I immediately receive the premium which I put into whatever investment is on my buy list.
An example is in February of this year, I wrote 2 Jan ‘27 $100 RDDT puts for $15.50. Breakeven is $84.50. Max profit is 18.3%. I immediately received $3,100. The stock had recently dropped from $250 to $130 spiking the IV. $84.50 breakeven was deep out of the money. I could close that position today for $1,070 today, more than a $2k profit, but I intend to hold until expiration, either banking the remaining $1k, taking delivery of shares, or rolling the position. Last year, my option writing was on KSS and the year before that on GME. High IV stocks. GME strike price was below cash value of the company. By limiting myself to one or two put writes per year, I can wait for my ideal trade to be available. I’m using otherwise unused margin, so I feel no pressure to trade.
I monitor the high yield option adjusted spread to determine when to move back into perpetual preferreds.
https://fred.stlouisfed.org/series/BAMLH0A0HYM2#
If we get a spike in the spread and I think the next move in long term interest rates is down, my buy list is: ATH-D PEB-H CLTD-A BFH-A RLJ-A INN-E. Hotel REITs are sensitive to the economy, so they can be disproportionately impacted by credit spreads widening.
**Taxes:** This income strategy creates a lot of taxes. The bonds are in a Roth IRA. The rest is in taxable. The dividend capture strategy is in a Roth. The REIT preferreds are eligible for section 199a dividends, reducing the tax rate by 20% (not 2000 bps). In another account that is in index funds, I try to tax loss harvest. For example, if I have $10k in VOO and there is a market correction, I sell and buy VTI. The tax loss gets offset by the gain of put writing. The tax gain gets deferred until retirement. The tax drag is real though. At one time, I redirected contributions of a taxable brokerage to VTI just to stop adding taxable income.
My ultimate goal is to double the size of this account in 10 years (Rule of 72) and use the income for discretionary expenses in retirement. It might require a Roth conversion ladder or the IRS rule 72t to access enough funds. The combo of rule of 72 and 72t in the tax code led to the username.
I’m open to feedback and love to swap new investment ideas. It’s a hobby that I enjoy.

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