As I’ve written before, to generate sustainable passive income we use a two bucket system.
One bucket is for 10 years of living expenses.
And the other bucket is to replace what you spend from the living expense bucket..
So it flows like this:
Long-term Bucket flows into……Living Expense bucket flows into… …Your Checking account
For the living expense bucket we invest in bonds. And a common question we get is “Can I invest in a
bond ETF instead?”
Very few people (including most financial advisors) have experience buying bonds.
So what they’re really asking is “Can I invest in something I’m already comfortable investing in?”
And the answer is NO, you cannot use a bond ETF instead.
To be clear, we use both bonds and bond ETF’s at Financial Zen, but for very different purposes.
We buy bonds for a predictable cash flow stream.
We buy bond ETF’s to strap the seatbelt on your portfolio.
Luckily, investing in bonds is WAAAAAYYY easier to understand than investing in stocks.
So over the next few days, I’ll give you everything you need to know to get comfortable investing in
actual bonds and why they’re used for a different purpose than Bond ETF’s.
And then you can use that knowledge to impress your stock trading friends…
…Did you know bond traders are considered the smartest traders on Wall Street?
They’re the Ivy League talent.
Stock traders are more like state school material. (I went to a state school, so I can say that.)
