Issue #2: Diving Deeper into Our Income Model

Welcome back to our Income Model Newsletter! In our first issue, we covered the fundamental what, why, and how behind our synthetic income approach—crafted for clients looking to achieve a steady income even through market highs and lows. This time, we’re diving into more of the strategies, tools, and terminology that power the Income Model.

A Brief History of the Model

The Income Model began in 2012 with the goal of offering a reliable income that would sit above market norms while also remaining resilient during market downturns. Steady annual cash income returns in the 8-10% range have been maintained consistently, even in economic conditions where typical yields hovered around 5-6%. A second key aim was to help clients stay calm during market turbulence by providing a dependable “income cushion.” The model’s steady cash flow is what I like to call “getting paid to watch the horror show,” and it’s designed to bring clients a sense of confidence amid market sell-offs.

Understanding ETFs and Their Role in Our Model

One of our primary tools is the Exchange Traded Fund (ETF). These are versatile, professionally-managed funds similar to mutual funds but with key differences. Unlike mutual funds, ETFs trade throughout the day, providing more flexibility and usually lower management fees. Introduced in 1993 with the launch of the S&P 500-based "SPDR," ETFs now cover a vast array of sectors, commodities, and indexes, giving us options that range from broad-based indices like the S&P 500 and NASDAQ to niche markets like single stock-based ETFs.

Key ETF Terms:

• Dividend Income: The portion of profits companies or funds distribute as cash to shareholders. Our model strategically reinvests or distributes this income based on individual client needs.
• Allocations: Our portfolio allocations include eight ETFs representing individual stocks (~40% of the portfolio), two index ETFs (30%), and four specialized ETFs.

Income Model Strategies: Rental Property Analogy

Think of our Income Model like investing in a rental property. If you purchase a $100,000 property and rent it out, you can expect to earn around 10% annually. However, there’s an alternative: leasing a property for a lower cost, making minor improvements, and then subleasing it for higher rent, increasing your net income on a smaller investment.

We can apply this analogy to our ETFs. By investing in highly volatile ETFs from YieldMax, we capitalize on fluctuations in stocks like NVIDIA, Tesla, and others. As prices fluctuate, we collect “rental” income in the form of dividends and premiums, generating returns that reach upwards of 3-5% monthly.

Portfolio Breakdown and Volatility Advantage

Here’s how we build and manage our portfolio for maximum stability and growth:

• Individual Stock ETFs (40%): Comprising high-volatility, high-quality names like NVIDIA, AMD, and PayPal, these ETFs are chosen for their predictable cash flows and market resilience. With volatility, we “rent” these positions to speculators, capturing income as their demand rises, generating 4-6% cash income monthly.
• Index ETFs (30%): Our model includes the S&P 500 and NASDAQ 100 ETFs, which contribute steady income from their substantial price movement. These positions capture broad-market gains, generating 4-6% monthly.
• Specialized ETFs (30%): Four ETFs complete our portfolio, including high-yield private debt, market volatility, and variable-rate bonds. These generate predictable cash income returns of 1-1.5% even when markets stagnate.

Our strategy balances volatility with stability, ensuring steady income with lower exposure to riskier assets. This structure has allowed us to offer clients a regular monthly distribution of 1-1.5% or more, adding flexibility for those taking or reinvesting dividends.

Wrapping Up: Income for Life

Through this innovative approach, our Income Model has continued to enhance clients' retirement income while preserving capital. By combining a robust blend of income-generating ETFs, volatile positions, and specialized funds, we offer a sustainable alternative to traditional retirement models. Whether you’re seeking regular payouts or reinvesting for growth, our model is built to help maintain and even improve your quality of life.

Next Issue: We’ll take a closer look at how individual ETFs are selected, the factors that affect dividend yields, and how clients can personalize their income strategy within the model.

Thank you for your continued trust, and please reach out if you have any questions or suggestions for future issues.

The information presented in this newsletter is the opinion of Stirlingshire Investments Inc. and its subsidiaries, Stirlingshire BD LLC and Stirlingshire RIA LLC and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but no liability is accepted for inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. This material is provided to for informational purposes only and should not be construed as a recommendation. Investors should carefully consider the investment objectives, risks, charges, and expenses associated with any investment. Please contact your Stirlingshire Investment Adviser or Broker for recommendations tailored to your specific circumstances. Stirlingshire RIA LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Stirlingshire BD LLC is a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation. Forwarding, copying, disseminating, or distributing this newsletter in whole or in part is not permitted.