Simple Income Strategy For Non InvestorsAuthor: Charles MargolisLast Updated: February 7, 2020 In the summer of 2011 the Dow Jones Industrial Average dropped 2,000 points in one month. I listened to a radio interview, about a broker selling all of his clients’ investments; he said he was literally “pushing the panic button.” While the Dow plummeted, bond prices soared and have remained elevated ever since. Bond prices went up because interest rates fell to historic lows; according to the Federal Reserve rates supposedly will not go up until unemployment drops to 6.5%.The broker who panicked in the summer of 2011 was worried about the stock market repeating a massive decline — it turned out stocks recovered. Investors who had exposure to bonds had less of a reason to panic, because they saw their fixed income investments soar 29% from late June to September, while the Dow sank 14.5%.In the following two charts the blue lines represent the Dow Jones Industrial Average, the red lines show the price of the iShares Barclays 20+ Yr Treasury Bond ETF. Source: Yahoo! FinanceTo further illustrate the wild headwinds affecting the markets let’s look further back: Source: Yahoo! FinanceTake a close look at the two charts. Notice that in the past 2 years, iShares Barclays 20+ Yr Treasury Bond ETF is up more than the Dow Jones. However, over the past ten years, the trends look much different. All this means is you should allocate consciously, because stocks and bonds have the potential to go in either direction. You must also realize that all the while stocks with dividends have been making payments and bonds (other than zero coupons) have been generating income.With this information at hand, there are two basic concepts I will cover here: A Savings Schedule, and Muni. / Treasury bond funds.Diversified Income & The BasicsIn my previous article I discussed a basic income strategy that included high yield, emerging market, utility and dividend income funds. Here I will go over three additional types of funds: Municipal bonds, Build America Bonds and U.S. treasuries. First let’s look at a savings schedule, it’s very basic, though many people do not have one and do not realize how beneficial such a simple device could be.Here is an example schedule for three levels of quarterly income: $500, $5,000 and $50,000. So we’re talking about individuals or organizations that earn $2,000, $20,000 or $200,000 annually. The chart below shows amounts, between 1% and 5% of quarterly earnings, that could be directed to a brokerage account. I will show three schedule types, fixed, variable and intermittent. In order to simplify the chart I will use one income level for each type of schedule, though they are interchangeable.Q1 (Winter)Q2 (Spring)Q3 (Summer)Q4 (Fall)total / % of annual earnings fixed schedule 4% of $500 quarterly$20$20$20$20$80 / 4% of $2,000variable schedule 2% & 4% of $5,000 alternated quarterly$105 $205$105$205$620 / 3% of $20,000intermittent schedule 2.5% of $50,000 twice a year$1,250 – –$1,250$2,500 / 1% of $200,000By dividing your finances into quarters you can begin to view your savings the same way businesses do. Many hard working Americans have no investment income being generated annually, for one reason or another. Keep in mind the most recent census information shows annual per capita income is $27,915, and median household income is $52,762.Income Funds (for non-IRAs) Once the portfolio is off to a start you can begin to search for funds and stocks to invest in. The smaller portfolio could begin with one investment in a high yield muni bond fund. The larger portfolios could diversify into multiple funds. Keep in mind many municipal bond funds generate tax exempt income, and are appropriate for non-IRA accounts. exampleshigh yield muni bond funds HYMB: SPDR Nuveen S&P High Yield Muni BondsHYD: Market Vectors High Yield Muni ETFCMU: MFS High Yield Municipal Trust(many are tax exempt, certain muni bonds are taxable)muni bond funds BKN: BlackRock Investment Quality Municipal TrustDSM: Dreyfus Strategic Municipal Bond FundMTT: Western Asset Municipal Defined Opportunity(many are tax exempt)BAB funds BBN: BlackRock Build America Bond TrustNBB: Nuveen Build America Bond FundGBAB: Guggenheim Build America Bonds(most are taxable)treasury bond fundsGOVT: iShares Barclays U.S. Treasury BondBIV: Vanguard Intermediate-Term Bond ETFTLO: SPDR Barclays Capital Long-Term Treasury(taxable)The MFS High Yield Municipal Trust is priced at $5.12 a share. Keep in mind, high yield generally translates to riskier holdings. Additionally, there are many, many funds like these to choose from. In the example below the $80 portfolio might allocate to MFS High Yield Municipal Trust, since it is more affordable. MFS High Yield Municipal Trust currently yields 5.6%, so a small investment in it would not generate a lot, however, over time more funds, working together should increase the potential for income.In the following example I will also add one stock. I will use Ford Motor Company, since it has been raising its dividend and is priced low: high yield muni fundmuni bond fundBAB bond fundtreasury bond fundFord stocktotal / %$80 $45 ––– $23 $68 / 85%$600 $100 $100 $100 $100 $100 $500 / 83%$4,000 $350 $350 $350 $350 $250 $1,650 / 41%Please note, many brokerages have minimum amounts necessary to start an account. Though some are flexible, you may need to call around, or negotiate to find one that might allow smaller amounts to begin with. Be very mindful of commissions and account fees (some brokerages have them, some do not, and some wave them if you sign up for electronic statement delivery.) More brokerages are offering commission-free trades on select ETFs.By 2023 the smallest portfolio, that receives just $80 a year could be generating over $100 a year in income. Considering the fact many people, who do not save or invest, generate no investment income, $100 is not insignificant. One of the biggest perils of investing is setting sights too high, and losing; think of it this way, you have to be able to make $100, before you can begin to consider making thousands or more.If it sounds basic, that is because it is; however, too many individuals and groups struggle because they are not implementing a simple strategy. What you do with the remaining 95% – 99% of your earnings (before taxes) is certainly up to you. However, keep in mind, a small amount of quarterly savings could help ease the burden of expenses in the golden years.If you have any comments on bond funds, or these examples please leave a comment below.Disclaimer: This article is not a recommendation to buy or sell, please consult a financial adviser to determine proper allocations (if any) to meet your financial objectives. I am long Ford, BBN, NBB, GBAB, BIV, & CMU. I am considering HYMB, BKN, DSM & MTT.