Introduction

The reason I host this portfolio on eToro is so that you have the opportunity to copy that portfolio if you choose but the main advantage is that it is live. That means it updates as soon as the markets are open.

I use to be frustrated with Youtubers that would talk about the top 3 stocks to buy each month but then never address it again when they were wrong or lost money on a pick so this is a fully transparent way to show you how it’s going at any time.

eToro also does a great job of keeping a track record of how your strategy is doing. It measures your monthly return and 2-year return, gives you a risk score and shows drawdowns so I am pretty happy with hosting it on there for the benefit of you guys the viewer.

For a certain type of investor, income/dividend-type portfolios are a perfect fit. Perhaps you have calculated your monthly outgoings already and are looking for a portfolio that will help you to cover one or more of your bills so that you can live comfortably and stress-free.

This portfolio that I will be managing aims to provide reliable income on a quarterly basis that you can spend in any way that you choose.

Unlike alternative dividend ETFs or ‘copy portfolios’ that you might see here on eToro, this portfolio does not sacrifice capital appreciation growth for focus on dividend income.

Simply put, if you wish to invest your money somewhere that will provide regular income at least on par with a bank’s average interest rate, experience lower volatility than the typical growth stock fund yet still have a sustainable capital appreciation over the long run, then you are aligned with my own aims and this portfolio will be a good fit for you.

Due to the hedging nature of this portfolio, the monthly returns are very unlikely to shoot the lights out with sky-high percentages. With this in mind, the portfolio should make a more stable investment and is aiming for lower drawdowns than the majority of offerings on this platform.

Dividends

Yield

The portfolio is aiming to pay out around 4% per annum. Due to the fact that copiers can copy at any time and therefore can’t be calculated in the way that companies would conventionally pay out dividends to shareholders, this is instead calculated by taking the current portfolio holdings and paying 1% of that figure.

The total yield of the portfolio will likely be higher than 4%, and that’s due to the types of stocks we are dealing with now. The additional payments will be reinvested into the portfolio and compound your investment.

Payment dates

The payments out to copiers will occur 4 times per year. The dividends will be paid out in the middle of the month, although this is not a set day due to weekends or other interfering factors. The rough target is on the 15^th of the month.

The months that you can be expected to be paid are:

• January
• April
• July
• October

There is no ex-dividend period as you would find with normal stocks so if your copy investment with me has been finalised then you are entitled to the dividend payment.

Please allow a couple of days for the transaction to go through, the copy dividend is not a simple administrative process and can take longer for some copiers than others.

I will send a message on the eToro Newsfeed as I initiate every dividend transaction and I will also send out an email when it has been paid so that you can go and check your available cash balance.

Target Allocation:

• 55% Dividend ETF
• 10% Utilities, Energy & Materials
• 12.5% REITs (Real Estate investment Trusts)
• 12.5% Financials & BDCs (Business Development Companies)
• 5% Covered Call ETFs
• >5% Cash Flexibility

Rebalancing will occur semi-annually or when allocations have drifted too far from this range.

Natural Dividend Payers

As you can see there is a great focus on what I call Natural Dividend Payers here. If you are not sure what that is then watch the video or read the write-up in the link as it’s a key idea for The Dividend Experiment.

Natural dividend payers tend to have lower volatility and higher yields, though the cost of that is lower rates of growth. For this reason, I have kept the majority of the portfolio in a low-cost dividend ETF, currently, that is $SCHD.

Because this is already such a big proportion of the portfolio, I don’t feel the need to invest in individual Consumer Cyclical stocks, Industrials, Tech, etc. I think the benefit of the diversification of the ETF paired with the higher-yielding Natural Dividend Payers outweighs the benefit and risk of investing in individual companies that don’t fit those criteria.

Cash

My personal philosophy is that more often it is better to invest available cash rather than trying to time positions or waiting for an opportune moment. That being said, there have been and likely to be occasions where the portfolio is holding a larger than expected amount of cash and this is simply waiting to either be distributed to copiers, used in the next investment, or in the process of rebalancing. My target is to keep this cash that is ‘waiting’ to under 5% of the portfolio. The more we have invested in the market the better in my opinion.

Volatility

This portfolio is aiming to be an income portfolio above all else and something important that income investors should be considering is to minimise the volatility of the portfolio. Although it doesn’t matter if there are huge swings in the portfolio if you aren’t selling… we still don’t want to be forced to sell in a down market.

As a lot of investors looking for income are also looking to spend that money they may well be moving money around or selling off parts of the portfolio depending on their current lifestyle.

I aim to reduce the amount of volatility to keep the portfolio value at a steady increase over time. This does mean that we won’t be shooting the lights out with huge returns but that isn’t the goal with a portfolio like this anyway.

If you are looking for even higher (and riskier) returns, this portfolio would make a good complement to other Popular Investors™ that are copied by Copytraders and can be thought of as the ballast in a ship keeping your overall holdings steady as well providing regular income.

I am aiming for a risk score below 5 at all times and realistically should be around 3 to 4 for the majority of the time.

ESG Concerns

Due to the already imposed limitations of providing income at an above-market level rate coupled with the limiting amount of investing instruments available on eToro, sadly no adjustments will be made in concern to ESG.

This also means that the portfolio is unlikely to be fully compliant with sharia law or Halal investing requirements.

Final Considerations

Due to the nature of this portfolio, it is reasonable to begin copying at any time, however, the minimum investment period should be one year (preferably longer) to receive the full benefit of this type of portfolio.

It is possible and you are free to stop copying at any time, however.

Withdrawing early puts you at risk of short-term price fluctuations which are not accounted for during portfolio construction.

The minimum copy value is now $200. Investing more in this portfolio will naturally provide a higher income.

Hope you enjoy your time copying this portfolio and gaining value from it.

If you have further questions please email me at:

TheDividendExperiment@gmail.com

eToro disclaimer:

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

eToro is a multi-asset platform that also includes investing in stocks and crypto assets, as well as trading CFDs. CFDs are administrative financial instruments. Because of the leverage, they run some risk of losing money quickly. 67% of private investor accounts lose money when trading CFDs with this provider. You’ve heard if you understand how CFDs have become and if you can afford to take the high risk of losing your money. CopyPortfolios is a portfolio management service from eToro Europe Ltd. CopyPortfolios should not be classified as Exchange Traded Funds (ETFs) or as hedge funds. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong. ​Take 2 mins to learn more​.

Affiliate disclaimer:

Some of the links on this page are affiliate links meaning that I may be compensated if you were to follow the link and sign up. This comes at no extra cost to but helps to run The Dividend Experiment website and YouTube channel