Success Stories: How Others Have Profited From The 25% Cash Machine

Caren Cornett

Well for Caren, her concept of the right world was anything but normal. She didn’t want to get a job and leave her kids to be raised by somebody else.  It’s not that she couldn’t have found a good job, or didn’t want to work.  On the contrary, Caren is a very intelligent; do-whatever-it-takes kind of person who was fully prepared to make the tough decisions after her husband’s sudden passing.

The prevailing issue in Caren’s life at that time was that one of her children is autistic, and must be monitored at all times. For those of you who know about caring for an autistic child, you know it’s a full-time job that can completely wear out even the strongest two-parent family.  So consider how difficult the task would be for a single parent who was also working full-time, and who also had the responsibility of taking care of two other children.  For Caren, being away from her family 50 hours a week just wasn’t an option.

Fortunately, Caren’s husband had the foresight to have purchased a life insurance policy that paid a lump sum of $400,000.  Caren’s goal was to put that money to work so she could live off it until she figured out how to structure her life going forward. And to do that she figured out the best way to put that life insurance money to work, so Caren consulted the treasurer of the church we both attend.  Knowing that I was in the profession of managing assets, the treasurer contacted me to see if I had any advice that could help Caren figure out how to proceed.

The treasurer told Caren about the return-on-assets she could expect from traditional income investments like money markets, CDs, Treasuries or mortgage-backed securities.  After hearing about the 5% return her money would likely generate, Caren immediately knew that she wouldn’t be able to live on that level of income without selling her home and moving away from her vital neighborhood support system of close friends and family. Getting 5% on $400,000 was only going to generate $20,000 per year, or about $1,650 per month -- and that just wasn’t going to get it done.

Caren really wanted to take a course of action that would allow her to hold on to her home.  She knew that if she wanted to generate more monthly income from the $400,000, she would have to do something with her money other than buying CDs or bonds.  She also knew that getting a better return involved more risk than those guaranteed investments, but it was a risk she was willing to take.

In preparing for my meeting with Caren, I researched every available class of security I knew for the highest dividend or bond yields available. I knew that trying to meet income needs by trading the market or relying on some exotic covered call strategy was going to involve too much risk and way too much turnover within her portfolio. The sum of my research resulted in me designing an income portfolio of stocks that paid out an aggregate yield of 10%. I presented my findings to Caren, and told her about my strategy for generating the income she needed.

And apparently I made a good impression, because in July 2002 she gave me the go ahead to start investing her money.

I positioned her $400,000 insurance money into what I currently call a  “strategic high-income portfolio.” With a yield of 10%, Caren’s account would generate annual income of approximately $36,000 per year, representing a 9% current yield on her money. That would translate into monthly income of $3,000 per month—almost double what she was going to get from conventional fixed-income investments.

Caren was still due some follow-on residual sales commissions from her husband’s real estate business, so she elected to take out only $2,500 per month in income. She then had me reinvest the remaining portion of her monthly dividends to try and compound the growth of the principal. I spread the money out among forty stocks, putting $10,000 in each stock so that no single holding represented more than 2.5% weighting of the total portfolio.

Today Caren’s account is worth $500,000 and it’s yielding 11.5%.  That’s a cash flow of $57,500 per year -- and I'm proud to say that she is now receiving a monthly check of $4,300 per month. Caren is what I call my “poster child” success story, and I love to share her tale of triumph with everybody. 

Dr. Richard Jones

Another success story I like to share illustrates how my strategic high-income strategy can serve other very-real client needs.  Dr. Jones, a retired physician from Southern California, has been a long-standing subscriber to ChangeWave Research.  He has attended most of the trade shows that I have spoken at during the past five years.

In one of my workshops he heard about what I had done for Caren and he approached me after my talk to discuss his own circumstance. His terminally ill sister required in-home nursing care that he was paying for out of his own pocket. Initially, Dr. Jones opened an account with me in his sister’s name with a deposit of $200,000 as a way to set up an incremental income stream for future nursing care expenses.

We started back in March 2004, and Dr. Jones instructed me to initially reinvest all the dividend and interest income until the cost of daily nursing care rose to a level where a monthly withdrawal would be necessary to pay for the added expenditures. Fortunately, 2004 was an especially good year for strategic high-income investing, as well as for the market in general. By year’s end, the value of that $200,000 had grown to $235,000—a return of 17% in just seven months.

At Dr. Jones requested that I merged that account with another account valued at $50,000, bringing the new combined account total to $285,000 by mid-2005. In a very short time this account grew to $300,000. Then, in September 2005 Dr. Jones requested that I start sending him a monthly payment of $2,500. His sister’s condition had worsened, and she now required round-the-clock nursing care.  This was the very thing we set his account up for, and when the time came, Dr. Jones was financially prepared.

Sending out $2,500 per month meant extracting $30,000 a year from the account, or 10% of the value of the underlying assets. Fortunately, the portfolio I put together was yielding over 11% per year—more than enough to cover the monthly payments. Once again, my style of high-yield investing provided a wonderful solution to a problem that anyone could be facing now or in the future -- and that’s making sure you have enough income to deal with life’s serious challenges.