Steven Bavaria is back! - The Income Factory | Member Questions Answered!

[@JohnsFishTales]

Much better job with the interview this time. You let your guest speak without interrupting which shows you’ve improved your communication skills.

[@Lawyerup904]

Big fan of the Income Factory after reading it about a year ago. Mostly in bdcs, reits, mlps, but will start adding cef positions soon. Thanks for the video!

[@ianwilliams3254]

I love how Steven just politely went quiet whenever you talked down to him. Why on earth would you try to teach this guy about covered call strategies? This guy has been investing and writing about investing for decades

[@TheProjectOverload]

Excellent interview, Adriano. Your approach truly sets your channel apart from the rest. We value the direct conversations you have with authors and fund managers, offering unique insights into covered calls and investments overall. Income investing certainly has the potential to thrive during downturns due to income still being generated and opportunity to reinvest at lower share prices. Covered call income factory works for me.

[@aperson1181]

the high yields are not guaranteed

[@PassiveIncomeInvesting]

I appreciate that!

[@blktauna]

@@aperson1181 keep looking for yields that remain steady. Thats the reason you pick those utilities and credit funds. Those types of investments are very steady.

[@mikegraham5020]

So glad you had Steven on. I read his book about 4 years ago, around the same time I started following your channel, and the combined knowledge really changed my life. I am retiring early next year with a great performing portfolio. I agree Seeking Alpha is great but they have hardly any Canadian coverage which is sad.

[@jumbothompson]

Steven is right. Market goes down and you can continue to build your income factory even faster that way. That's the big psychological advantage of income style investing. If I was holding growth stocks or stocks focused on certain sectors I might not be too happy during a 20% downturn.

[@jeffklugman9757]

the risk in a covered call strategy is a prolonged bear market. at first your covered call income will benefit from the increased volatility during the market drop. but then if the market becomes quiescent and volatility drops while your underlying capital is diminished. your calls are not going to generate the same income.

[@TheMp4510]

Thank you. Excellent interview.

[@TheEgyptianStories]

I watched the video, but I found it a bit frustrating. As a viewer, I was hoping to hear more from Steven Bavaria, but there were frequent interruptions and a lot of focus on your own story. It would have been great to let Steven share more of his insights!

[@jacquesfournier4616]

Good interview. I am a retired passive income investor with a 13% yield so I don't invest in 50% or plus income etf. My main concern is about the option market...will it continue to pay returns if there is a crach in the stock market...is there some research on that subject somewhere or more info on the option market?

[@dwaynecunningham2164]

Great interview and discussion, guys.

[@anomanderrake8693]

great interview! I bought the book years ago now already. I'm Canadian and many things did not apply to me at that point in time, but I really, really, really loved the idea. :)

[@jasonstupak4535]

Great interview, thanks Adriano!

[@rkirby7183]

The problem with covered call boosted income is that when stocks have a 10% to 20% selloff (which isn't unusual), the value of the covered calls in the portfolio also go to zero since no one needs a call at a price much higher than the current market. This increases the downside volatility compared to debt income, whose downside is moderated because interest rates get slashed when there's a down market. You can look at historical graphs to verify for a particular investment.

[@dacxem]

That’s not how covered calls work. Premiums are paid up front.

[@momentomori1747]

​@@dacxem In fact, as a seller that is a good thing, because you can close out your calls for next to nothing and sell new covered calls at the lower strike price to make more money. We saw with JEPI that the increased volatility during the 2022 downturn actually resulted in a much higher yield and thus more income, likely due to higher premiums on their options income from the ELNs they hold.

[@gush5465]

How about the leverage in some of these CC ETFs like HYLD and HDIV ? 20% leverage in a down market won't make it even worse ?

[@momentomori1747]

@@gush5465 The leverage will definitely cause more volatility to the down side in bad markets. I'm not sure why they need it when etfs like SPYI can manage a 12% yield with no leverage vs HYLD's 25% leverage for the same yield.

[@rkirby7183]

@@gush5465 Yes of course. I wasn't promoting one over the other. But now I don't understand why both regular CC ETFs and leveraged ETFs and CEFs go down more than the underlying during a correction. (Of course this doesn't matter in the "Income Factory" mindset, but it is concerning.)

[@Labbernese77]

Great interview

[@johnbuckley1427]

This strategy works in tax advantaged accounts; however, the strategy creates a tax burden in a brokerage account. 40% state and federal tax (5% state) leaves you will a 4-5% net return, which you can live on, but it doesn’t leave anything over to reinvest. Therefore, with NAV erosion that is common in many CEFS it still results in lower capital base and exposes you to sequence of return risks. You must reinvest a portion of the income to sustain the strategy long term, so you need to live on 2-4% to make this work, Qualifed dividends in a standard brokerage account only have a tax burden of 20-25% federal and state (5% state) and despite lower yields with market appreciation you come out ahead because of the lower tax burden. The bottom line is that you still need a growth component in your portfolio even in retirement, these assets that either degrade over time or remain stable cannot represent your only invest vehicle due primarily to the tax burden.

[@kookiebush]

What are 3 of the best credit cef's or etf's?

[@wallysta]

@@kookiebush EIC & ECC are worth considering. They invest in Equity & B rated tranches of CLOs. Watch some youtube interviews with Tom Majewski, the PM who explains them and the risks involved very well.

[@momentomori1747]

The 3 I'm looking at are FSCO, EIC, and XFLT.

[@caseyjones3839]

Most comercial breaks ever. Finnaly gave up and left. My time is valuable

[@fredrickthegreat3895]

Apples to oranges, covered calls are not comparable to credit investing CEFs. Covered call ETFs do not do well in a falling market. Compare the max drawdown between a CLO and the underlying index of a coverd call ETF. Not to mention the Sharpe ratios which cannot be applied to covered call ETFs due to the capped upside. Don't get me wrong, covered call ETFs do have there place in investing, but they are good when they are good. In a falling market nobody is buying calls, you will just see ROC payments eat away at your NAV. On another note, I am all in on the income factory's premise and love the book.

[@nadonadia2521]

What about taxes being paid each year because of receiving dividends.

[@international_dividend]

You still don't understand that average gains of 8-10% annually from the market or 8-10% annual gains from an income factory credit approach is the same thing - in this case, there is no 'best performing asset class' as returns are the same. That is Steven's main point!

[@mysticjedi6730]

I am all in on HGY on the tsx. Anyone know of silver yield funds in canada you like? With yield?

[@AdventuresWithDanaJodie]

I respect Steven's past investment ideas and bringing attention to those different types of investments, but I'm not sure he's opened to anything new.

[@blktauna]

why would he want 'new' when his current strategy achieves exactly what he's looking for?

[@TheEgyptianStories]

I recently joined the "Inside the Income Factory" investment group on Seeking Alpha, and I was happy to discover that Steven shares his personal portfolio. I can assure you he is open to exploring various types of investments, including some that are quite new 🙂

[@Antandthegrasshopper]

He said that he already invests in CC via the CEF funds. I guess he doesn’t want to invest in S&P or NASDAQ related CC funds.

[@ophirmayer1]

Finally a sane person, and not a trump Bro, interviewing

[@ophirmayer1]

Flawed analogy. Ford can't just sell chunks of its factory at will.

[@international_dividend]

Bitcoin won't become a currency for so long as it is viewed as an 'investment', and remains subject to wild swings. No one wants to be the guy that ends up spending $100,000 for a pizza. So it will remain an asset class, like gold, but the early dreams of a currency are long gone.

[@Buckaroo801]

Don’t ever get tied to one philosophy….

[@takeachance-n7z]

I am also an income investor and follow you. However, the underlying assumption is that the economy will continue and I think that under the new administration that will seriously disrupt the entire economy.

[@momentomori1747]

The good thing about credit investing is that you don't rely on the economy to do well. AAA rated CLO tranches, for example, have survived events like 2008 relatively unscathed in terms of defaults. Mainstreet capital has never cut their dividends, as another example. It doesn't matter if the stock prices drop as long as your income doesn't.

[@blktauna]

@@momentomori1747 yes these investments are outside the general fluctuations

[@soundsnags2001]

Man, I had respect for him setting limits on opinions in his realm of knowledge - and then he had to go and use the tulip analogy. What a dork.

[@takeachance-n7z]

Our income stocks will show massive decline in market price when the general market declines. This decline will far exceed the income we receive from the investments.

[@smallbear7252]

I would agree, however the general market decline may not come soon. As far as the money supply is growing, the market will grow. The money supply more likely will continue to grow until the USD loses world credibility. This more likely will not happen very soon. When the USD goes down, commodities may go up.

[@randalxu4889]

It is very unlikely this is the case unless you bought the wrong ETFs. Covered call ETFs reduce the risk, especially during market decline. It cannot be riskier than the underlying itself.

[@mmmyeahh]

learn how to trade

[@takeachance-n7z]

@@mmmyeahh You obviously do not understand the income factory methodology.

[@davidanderson7460]

for example an etf of preferred shares BEPR fell $7.30 or 53% in 1 month during the covid crash and in that same time paid .07 distribution so it lost 103 times what it paid out in that month. I always have a few spy puts about 120 days out and with a low delta say 15 or less but in a market crash that delta will change fast ,,,,insurance