We caught up with the brilliant and insightful Steve Selengut a few weeks ago and have shared our conversation below.

Alright, Steve thanks for taking the time to share your stories and insights with us today. We’d love to hear about how you got your first non-friend, non-family client. Paint the picture for us so we can feel the same excitement you felt on that day.

I started investing when I was 25, in 1970, before the internet, money market funds, IRAs, 401ks, etc. I was working for a life insurance company in NYC, commuting by bus from Lake Hopatcong, NJ. The income was less than my para-legal wife was making locally but I was learning a lot about investing through my job in the Pension Investment Department.

My investment portfolio was entirely “blue chip” at-the-time equities, all dividend paying and all on the NYSE. The “tech” companies of the day were IBM and GE! I studied the charts, discovered the cyclical nature of the markets, and began to trade at “targeted” profit levels in what I dubbed “Investment Grade Value Stocks”. Eventually, the list of IGVS companies would grow to over 200 priced between $10 and $90 per share. A friend of mine developed an unweighted index so I could compare my selection “universe” to the market averages.

By 1979, my portfolio had grown to just under seven figures and was comprised of 70% IGVS equities and 30% tax free municipal bonds. My income from dividends, interest, and capital gains was between 4 and 5 times my working income, and without the overhead of commuting and the required “suits”.

My exit plan was simple, show my portfolio growth numbers to some successful business owners and convince them to let me manage their investment portfolios… but I exited the company first (had all the income I needed) took the necessary tests and became an RIA (Registered Investment Advisor).

My dentist and a Long Island based restaurateur became my first clients in 1979 and I never looked back. When I sold my business in 2023, both the dentist and the restauranteur (Domenico’s in Levittown NY) were still my clients and are still with my old firm today.

Great, appreciate you sharing that with us. Before we ask you to share more of your insights, can you take a moment to introduce yourself and how you got to where you are today to our readers.

Before becoming an “Income Independence Coach”, I was a professional investment manager/advisor/RIA and IAR for 44 years. Today, I coach individuals and other financial professionals on creating investment portfolios that will bring them and/or their clients income independence.

As an investment manager, I was responsible for creating more than enough spendable income for each family to cover their expenses of any kind that were not covered by work or business. As the clients aged, I provided a growing stream of retirement income. By 2012, nearly all of my clients were dedicated, “income-focused”, investors, and the income was being provided by diversified portfolios of Closed End Funds (CEFs), the oldest form of fund investment available in the markets. CEFs are “pass-through” trust vehicles required to distribute 95% of their net income to their shareholders.

It is this “eyes on the income ball” focused investing that sets me apart from virtually all professional advisors today… and the financial services industry itself. Investors have been “brainwashed” into the idea that growth in market value is the only thing that is important. They are taught that “total return” or “returns” are the be-all and end-all of investing. But you can’t actually spend either of them.

When I was a portfolio manager, while showing prospects the growth and income numbers from my own portfolios, I would assure them that I would never put anything in any of their portfolios that I did not own myself. Nothing would ever be purchased that did not produce some form of income, and no position would be anywhere near 5% of the total portfolio. I committed myself to making more in profits each year than they were paying me in fees. In 2021, I generated more than four years worth of fee coverage in capital gains alone!

I’ve written three investment books: A Millionaire’s Secret Investment Strategy; The Brainwashing of the American Investor: The Book That Wall Street Does Not Want You to Read and, most recently, “Retirement Money Secrets: A Financial Insider’s Guide to Income Independence”. For “Secrets” readers, I provide coaching and CEF research services, as outlined at my website: theincomecoach.net… and a free copy of “Brainwashing”.

Coaching services include private Q & A Sessions, risk minimization portfolio reviews, and transition to income focused investing planning sessions. I also have a monthly updated set of CEF selection universes, based on the content of my own personal portfolios. These four universes (equities, taxable income, tax free income, and income ETFs) contain roughly 270 securities that are either in or qualified to be in my personal portfolios.

My income focused approach to investing can be used by anyone. CEFs contain precisely the same securities that are found on the exchanges and within both ETFs and Mutual Funds. The “mindset” change, and income growth, can be mind-blowing. This approach will grow market value when the interest rate and market cycle forces align properly. BUT, when they don’t, the income and working capital continue to grow unabated.

I am proud to no end about the contributions I have made to the income independence of thousands of past clients, coaching and selection universe clients, and members of my Facebook investment groups.

Can you tell us about a time you’ve had to pivot?

Prior to the “Great Recession”, my client portfolio mix was individual IGV (Investment Grade Value) stocks and a variety of old GNMA products, tax free Bonds, Corporate Bond Trusts and a growing number of taxable and tax free income funds. Stock trading was the second stream of income I used to grow both total income and total working capital. The income CEFs had pretty much replaced all other forms of income-purpose securities.

Income CEFs trade like stocks, So, in effect, you could buy and sell bonds, mortgages, real estate, corporate and government paper with no wait, no mark ups, no commissions, and no accrued interest. An income investor’s nirvana. At the time, I only owned a dozen or so equity CEFs. But then interest rates tumbled and stock market prices began an almost uninterrupted 12-year rise to unprecedented levels. I couldn’t find stocks that went down to my purchase levels. AND, Standard & Poor’s stopped publishing their monthly stock rating guide.

Time for a major shift in gears! As much as I loved trading individual “Big Board” equities, I loathed the lower money market rates that were becoming the new “standard”. So my recent experience trading income CEFs, led me to the conclusion that I could do the same thing with equity CEFs while making considerably more distribution income than either the money market or the individual companies were providing. Also, equity prices were moving way beyond my comfort level.

Equity CEFs are managed portfolios that own and trade hundreds of individual equities with the primary objective of paying significant income to their shareholders… something that Microsoft, Amazon, and Google will never do. With income CEFs paying in the 7% to 9% range, I could now add equity CEFs to portfolios that contained the same trading possibilities while paying nearly twice the average payment from dividend stocks!

Within a few months, all of my individual equities were sold and replaced by CEFs. From that point on, as shown in the Retirement Money Secrets illustrations, both income and working capital started to grow at rates never experienced before.

Where do you think you get most of your clients from?

In the early days of my career, word of mouth advertising, two radio shoes (Stu Taylor and Adrianne Berg), and a slew of trade shows from NYC to Atlantic City brought in most of the new clients. An investment advisor or two and an accountant also helped. But the relatives and friends of my existing clients were the primary source. When I sold the practice in 2023, with $110 million in working capital under management, the average client had been with me more than twenty years. The average relationship size was about $750k.

The “Brainwashing” book was first published in 2001, and it and a later 2nd edition accounted for a quick burst of clients, but neither effort was nearly as successful as “Retirement Money Secrets” has been… for coaching and selection universe clients. I have nearly as many clients in those two areas as I had in total in May of 2023.

“Secrets” is geared more to the DIY investor, but it involves a major change in mindset to achieve a dedicated comfort level. Fortunately, the mindset change is of the rapid onset variety and once the new user gets started, the double income stream smiles take over the entire being. More than 3,300 books have been sold world wide since the September 2023 launch. I hear from new prospects nearly every day.

Contact Info:

• Website: https://theincomecoach.net https://retirementmoneysecrets.com/
• Facebook: https://www.facebook.com/steve.selengut
• Linkedin: https://www.linkedin.com/in/privateinvestmentmanagement/

Image Credits

Sandra Selengut