Yield is the combined distributions of an investment and is part of total return. For a mutual fund, it's the combined dividends the fund takes (realizes). These are the taxable events, that if you choose not to reinvest, end up in your cash (sweep, or money market) account. Mutual fund yields are calculated like this:

Annual Yield = Dividends / (NAV + Capital Gains Distributions)

The last 12-month's income yield was 5.2% and the total return was 4.1%. These are hypothetical because they don't account for past fund switches or allocation changes.

This investing model is different than the regular models because its goal is to evolve to maximize income, not beat any benchmark index.

Here's how the numbers work out: If you invested $100 a year ago at the beginning of last month, and the total return was 4.1% and the yield was 5.2%, then now you'd have ~$5.20 in cash to spend, the fund would be worth ~$98.90 (meaning you could sell all or any amount of this at any time for any reason, which you CANNOT do with real estate, annuitites, Limited Partnerships, individual bonds, private stock, gold, etc.). Then the number of mutual fund shares you owned would be the same, and you'd have ~$5.20 of income to report on your taxes (assuming the mutual funds were not in a Roth IRA, no municipal bonds were used, etc.). How much in taxes would vary as the composition of dividends, capital gains, and interest income would be random based on what the funds actually distributed.

This may not look like much, but on average it's twice the yield on all of our other investing models (and even more compared to what most everyone else is getting). The most important thing is (if you set it up correctly) the number of mutual fund shares you owned will most always be the same after you get paid, as it was before you got paid! Good luck trying to find something that performs this function, with these returns and low risk, for this price!

One also must factor in risk and total return when considering how high or low yield is. This model's income is extremely high considering the low risk (because of the extreme diversification) and relatively high total return. Taking that into account, this compromise between high yield, low-risk, and high total return is better than anything else we've ever seen (if someone has a better investment strategy to get higher yields with less risk, then we'd be doing that too).

These yields were a lot higher in 2010, but after banning fund families that abuse leverage and derivatives, play shenanigans and other tricks that make the fixed-income parts of the portfolio not be conservative, it's down. The bright side of that is that the yields are much more stable, the funds a lot more conservative, and thus more suitable for retired investors.

This is as good as it gets, and is ideal for investors that don't want to sell shares to raise money to spend on living expenses. If you do your research, you'll see it's extremely difficult to get this rate of income without selling anything; all while realizing low-risk, great returns, and the other advantages of using only open-ended mutual funds (low costs, liquidity, transparency, etc.).

If you're retired and need money from an investment portfolio to live off of, then this may help make it last a lot longer. This is because the more income distributions a portfolio sheds without selling shares, the fewer shares you'll need to sell to get a paycheck, and the fewer shares you sell, the more money you're going to have later. Also the more conservatively a portfolio is constructed, the longer it will last too, especially when the markets are down. Once you sell shares, they do not grow back (if you're spending all of the distributions instead of reinvesting them, which is what you do with this model portfolio).

Capital gains taxes are also kept to a minimum when you don't redeem shares for income. There's no profits to report if you don't sell and realize any gains.

So two of the main tricks to not run out of money when you reach an advanced age is to not sell shares, and never invest in any form of "self-destructing bonds" or these bond ETFs or mutual funds, as explained in the Money eBook.

While on the subject, here's the way we like to think about the value of paying an advisor to construct an investment portfolio for the purpose of producing a sustainable retirement paycheck: Take the TOTAL amount of their fees, expenses, and commissions and divide that by the amount of income realized over the past year (don't count share sales as income, just dividends and capital gains distributions).

If it's more than 20%, then you'd probably do a better job of managing your money yourself using our CHIM, you'd probably get a higher yield with a higher overall rate of return with less risk, you'd end up selling many less shares, worrying about trust, ethics, security, and privacy issues would be history, and you'd save all of their fees and commissions - forever!

For example, if you have a $1M portfolio, pay 1% in fees, and are getting 5% income (without selling shares), then you're paying 20% of your income in fees. More than 20% and we think you'd be better off doing it yourself, and not paying any of their fees anymore. More than likely, you've only been getting ~2% income yield, because they've been selling shares, so this would yield 40% of your income going to pay the advisor. This is way too high, so just DIY!

Download this Word docx that explains why all of this is critical these days

Also while on the subject: Why fixed annuities are not the answer
(and why you shouldn't fear buying bond mutual funds when you think interest rates are about to go up). There's more math and evidence that this is the best way to get retirement income on the fixed annuity page (click the link)

The Asset Allocation Models Include:

• All of the 57 model allocations described above.