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From the Forums — Income Sig Distributions
In The Kelly Letter Income Sig forum, JP asked in “Income Sig Distributions” what he should do with distributions before he needs them:
I’m planning to start the Income Sig plan since I’m nearing retirement.
I understand that distributions and profit skimming will be transferred to SVOL, where I can withdraw funds for living expenses. I don’t anticipate needing to withdraw any money from the plan for the next 3 to 5 years.
Should I continue moving money to SVOL, keeping it there to grow until I need it? Or should I simply do the quarterly rebalancing and only transfer funds to SVOL when I’m ready to make withdrawals from the plan?
Move the money into the repository account, where it will buy shares of SVOL and reinvest distributions.
You’re starting on a good schedule, giving your repository account time to bulk up before you need it. Ideally, when the time comes to draw from it, you’ll have a well-prepared repository account ready to cover your monthly needs and support you through down markets when Income Sig may not generate a profit skim. Dry spells are inevitable in the stock market, but a fully stocked repository account will carry you through them.
From “Is Income Sig Too Good To Be True?” in Note 44 sent 11/10/24:
Income Sig does not make steady payments, but sporadic ones that are heavily influenced by large profit skims from time to time. Averaging makes this appear steady, but it’s not.
Even in a plan that produces an overall bountiful income, it’s possible to go through lean periods when it seems that the plan is not working. For these periods, careful financial management is necessary along with a well-stocked repository account. “Hang in there, honey, we’ll eat in the future” is not a recommended approach. …
There’s also a chance the market could make it fine for you to rely on Income Sig from the moment you retire — even if that’s when you started the plan. If TQQQ rose steadily for two years or so after you began the plan, you’d be able to bulk up your repository account while also taking income. We can’t foresee the market’s path, however, which is why it’s best to start the plan in advance of needing funds.
I hope this helps!
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Small Fry, High Fly
Small Caps Lead the Year’s Best Week
The S&P 500 peeked over 6,000 on Friday as our growth portfolio eclipsed the $9,000,000 mark.
Both the Dow and the S&P 500 notched their best weekly percentage gains since early November 2023, and the Nasdaq delivered its best week in two months and second-best of the year. Here’s the tally:
Large-Cap Gains (%)
Week Ended 11/8/24
– – – – – – – – – – – – – – –
5.7 Nasdaq
4.7 S&P 500
4.6 Dow
Best of all for patient small-cap investors was that small caps rose their most since April 2020.
Investors consider them to be in the best relative position for an environment likely to include fewer regulations, lower taxes, and new tariffs. Small caps are less able than their larger-cap siblings to get around regulatory burdens and high taxes, and are less dependent on imported goods and materials. Thus, they should benefit more from regulatory relief and reduced taxes, and suffer less from new tariffs.
Here’s how small caps fared last week:
Small-Cap Gains (%)
Week Ended 11/8/24
– – – – – – – – – – – – – – –
8.7 IJR
8.6 S&P 600
8.5 Russell 2000
Let’s hope this is finally the push that takes small- and mid-cap stocks back to their historically outperforming ways, after a multi-year hiatus brought on by pandemic shutdowns and higher interest rates. Smaller companies are raring to catch up, reaching for hand-holds in better conditions.
They were so strong last week that our non-leveraged 3Sig plan stayed fairly tight with our leveraged 6Sig and 9Sig plans:
369 Gains (%)
Week Ended 11/8/24
– – – – – – – – – – – – – – –
8.0 3Sig
8.5 6Sig
10.8 9Sig
This is partly a function of 3Sig sporting a 91% stock allocation, compared with 66% for 6Sig and 9Sig, but was more a function of small caps leading the week by a big margin. The S&P 600 rose 8.6% compared with 5.4% for the Nasdaq 100. It was nice to see the little guys running circles around megatech for a change.
From Note 44 sent November 10, 2024
Posted in 3Sig, 6Sig, 9Sig, Small-Cap Stocks
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An AI podcast About Yesterday’s Kelly Letter
I thought you would enjoy an AI-generated discussion recapping yesterday’s Kelly Letter.
It’s not only a fascinating milestone on AI’s developmental timeline, but a good overview of the state of the stock market before the election:
The Kelly Letter
12-min AI Podcast
I hope you found this insightful. Please feel free to comment below.
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