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Investing is often viewed as a delicate balance between risk and reward. For those aiming to earn passive income, dividend-focused stocks can be very attractive, offering the potential for steady cash flow without needing to sell assets.
Still, not all dividend strategies are created equal. Some promise high yields but come with risks, while others focus on stability and long-term goals. ETFs have become a popular tool for investors looking to diversify their portfolios and earn income, but even within the ETF world, the choices can be difficult to make.
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The question then arises: How can one build a sustainable, low-risk dividend portfolio that meets their financial goals without exposing them to needless volatility?
This question has also put one Reddit member at a crossroads. The individual, with $1 million cash to invest and goals of generating $100,000 in annual dividends, is considering a three-ETF strategy to achieve this objective.
The investor is nearing retirement in five years and is looking to supplement his living expenses–which are about $60,000 per year–while also hedging against inflation.
His proposed portfolio includes [JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ)], [SPDR S&P 500 High Dividend ETF (NYSE: SPYI)], [The Simplify Volatility Premium ETF (NYSE: SVOL)], each allocated at 33% and dollar-cost averaged over the next few years.
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Let’s see what Reddit investors in the r/Dividends community recommended the poster do.
Chasing High Yield Comes with Significant Risks
One of the most consistent themes in the comments is the warning against chasing high yields without considering the fundamental risks.
“The way dividends go aiming for a 10% yield from the word go is highly unrealistic. With dividends, you are supposed to chase quality, not yield, and quality is not going to give you that yield,” a Redditor said.
