The Math: From $25 to $100/Month
You currently have $5,000 invested generating $25/month (6% yield). To reach $100/month, you need to add $10,000 more capital and increase your blended yield slightly.
Target Portfolio Calculation
By adding Tier 3 assets (REITs, BDCs) to your existing Tier 1-2 base, you can safely increase your blended yield from 6% to 8%.
Introducing Tier 3: The Income Sweet Spot
In Module 1, you stuck with Tier 1-2 assets (SGOV, SCHD) for maximum safety. Now you are ready to add Tier 3: Sector Specialties.
What Makes Tier 3 Different
Tier 3 assets are required by law to distribute most of their income to shareholders. This creates reliable, above-market yields without the speculation of Tiers 4-5.
🏢REITs (Real Estate Investment Trusts)
- • Must distribute 90% of taxable income
- • Yields typically 4-6%
- • Examples: O (Realty Income), VICI
🏦BDCs (Business Development Companies)
- • Lend to mid-sized businesses
- • Yields typically 9-12%
- • Examples: MAIN, ARCC, HTGC
Your 5-Ticker Starter Portfolio
Here is a balanced allocation across tiers designed to generate $100/month with $15,000 capital:
Add another $3,000-$4,000 in any of the Tier 3 holdings to reach $100/month.
Diversification Principles
1. Sector Exposure
Do not put all your Tier 3 capital in BDCs or all in REITs. Spread across sectors:
- Real Estate: O, VICI (sensitive to interest rates)
- Credit: MAIN, ARCC (sensitive to default risk)
- Dividend Growth: SCHD (sensitive to market volatility)
2. Payment Frequency Mix
Build a dividend calendar so income arrives every month:
- Monthly payers: SGOV, O, MAIN (12 payments/year)
- Quarterly payers: SCHD, ARCC (4 payments/year, different months)
With 5 holdings on different schedules, you will have at least one dividend hitting your account every month.
3. Risk Balance
Your portfolio should maintain a weighted tier average below 2.5 for stability:
Portfolio Risk Calculation
Your Action Plan
Research Your Tier 3 Picks
Read about O, MAIN, and ARCC on DivAgent. Check their dividend history and payout ratios. Understand what each company does.
Add Capital Gradually
Do not dump $10,000 in at once. Add $2,000-$3,000 per month over 3-5 months. This dollar-cost averages your entry prices.
Track Your Dividend Calendar
Use the Portfolio app to see when payments arrive. Note the pattern: some months will have 2-3 dividends, others just one.
Keep DRIP Enabled
At $100/month, you are still in accumulation mode. Reinvest everything to compound your growth. We will switch to cash in Module 3.
Monitor Performance
Check your portfolio monthly. Are dividends arriving as expected? Are share prices stable? This builds your risk awareness.
Common Mistakes to Avoid
Chasing the Highest Yield
Do not jump to 15% yielding BDCs or Tier 5 assets yet. Build your foundation first. Patience compounds.
Over-Concentrating in One Sector
50% BDCs is risky. If credit markets freeze, all your BDCs drop together. Keep sector allocations under 40%.
Ignoring Ex-Dividend Dates
Buying the day after ex-date means you wait a full quarter for your next payment. Time your purchases strategically.
What Success Looks Like
After completing this module, you should have:
- 5-7 holdings across Tiers 1-3
- $100+/month in dividend income
- Diversification across sectors and payment schedules
- Clear understanding of your risk tier allocation
- Confidence to continue scaling to $500/month