Is Your Income Strategy Losing Money?

Is Your Income Strategy Losing Money?
 
Over the past few years, we’ve had many blogs on the risks that conservative investors are taking on – most of the time without ever realizing it — how people are being told that they’re earning an income, while many are losing principal, or even being sold into things that they can’t get rid of without substantial losses. Many conservative investors think they are protected from losing money because that is what they’ve asked for. When they ask about the performance of their plan, they might be told about the “income“ they are earning, without being informed in clear language that, due to paper losses, combined with the expenses and fees of the managed account, their wealth is performing at less than half of the speed of the "income," or even shrinking rather than growing.
 
Wall Street was on fire in 2023 and 2024, earning more than 50% cumulatively. (Stocks are only up 4.6% so far this year. Click to learn more in my June 23, 2025, blog.) So, if your plan isn’t worth a great deal more than it was in 2022, it’s time to understand why. Why didn’t your plan have 50% or more gains, at least in some of the funds/slices of your strategy? Has your wealth more than doubled over the last decade?

What’s the easiest way to measure performance? Simply ask your broker-salesman for a performance chart of your plan, including fees, compared to the S&P500 for the past 3, 5 and 10 years. That will include the spectacular performance of 2023 & 2024, the correction of 2022 and the pandemic. It should also be easy to see if a simple S&P500 index fund, with no cost at all at an online discount brokerage, performed better than your complicated, expensive plan.
 
Here are the things we will cover in today’s blog.
 
Are You Really Earning Any Income?
The Risk of Income-Producing Stocks
Annuities: You Can Lose Up to 9% The Minute You Purchase It.
Bonds & Treasuries
Money Market Funds & Certificates of Deposit
What is Safe?
Fixed Income Without Paper Losses Masterclass Oct. 18
 
And here’s more information on each point.  
 
Are You Really Earning Any Income?
Our brokerage statement will show us almost everything we need to know about our plan. However, since the information might be located on different pages, we might not be adding up the complete picture. When we think about income, we must subtract the fees and any paper losses in order to understand whether or not we are making any money. One page of our brokerage statement might show us all of our paper losses, another will show us how much we paid in expenses and fees, while yet another tells us how much income we’re making. If we are only looking at the income and not factoring in the fees and paper losses, then we are not aware of just how little we are earning – or how much we might actually be losing.
 
Paper losses are far more problematic than we are being told. They reduce our wealth and our FICO score and prevent us from accessing our money. They might be more permanent than the moniker indicates. Holding to term is going to be impossible in many long-term bonds, either because the payback date is longer than we will live, or due to the elevated credit risk, which increases the probability of principal loss due to debt restructuring. I’ve seen conservative investors sold into 85-year term junk bonds. Do you know what you own?
 
The Risk of “Income-Producing” Stocks
A few of the most infamous examples of trying to earn a small amount of income while putting our principal at great risk are found in the 2017 GE dividend rate cut, the GM bankruptcy, the PG&E bankruptcy restructuring, and the MF Global bankruptcy. Click on the blue-highlighted words to access additional information on those. With over half of the S&P500 at or near junk-bond status, it’s best to understand that most of the time, the higher the dividend, the higher the risk. If you are a conservative investor who doesn’t want to lose any money, it’s quite important to know the financial health of the company before buying into an income that could be less than 4-5%.

In our sample pie charts, we are using international value replacement funds. Some of those funds offer higher credit quality and higher yield. So, we’re getting paid more to take on less risk. The pie chart system itself helps us to capture gains at the high and add more at the low – increasing performance – something that is impossible to do in a target date retirement plan or an account with hundreds of holdings.
 
Additionally, the fund company matters. In the case of the MF Global bankruptcy, gold investors were distressed to discover that their gold fund investments were part of the bankruptcy. Investors were eventually made whole, but it took four years of fighting and waiting. Some investors are jumping into funds with enticing names, without realizing how risky a new fund company really is.
 
How hundreds of stocks might not be diversified at all…
We might think that having hundreds of different companies protects us, when in fact we might be in the same kind of company (large value size/style with very high debt, flat or negative sales growth and low margins). 18 pages of holdings often adds up to a lot of large cap companies, with very little exposure to anything else. We could have one page with 10 funds that would be far more diversified at lower cost. Another concern of the 18-page, hundreds of holdings plan is that the fees might be killing our returns.
 
Email [email protected] if you’d like to personalize your own nest egg pie chart with our free web apps, or if you might be interested in an unbiased 2nd opinion of your current wealth plan.  
 

Sample wealth plan of a 30-year old who is overweighting 20% safe.

Annuities: You Can Lose Up to 9% The Minute You Purchase It.
Annuities are very popular. At the same time, as FINRA.org, warns, “Annuities are complex and can be costly. Make sure you understand all the fees, expenses, charges, and any features or added benefits (often sold as “riders” at an additional cost) before making a purchase.”
  
A good salesman might assure us that our money will be safe and cannot lose. However, are we being told that the minute we purchase certain annuities we can lose up to 9% of our principal? (They call it a surrender fee.) Annuities can have hidden fees, pay high commissions to brokers, and typically underperform the market. Other risks of annuities are as outlined below.
 

• They are not FDIC-insured. If the company fails, we may end up with far less than we bargained for.
• Many insurance companies had to be bailed out in the Great Recession (2008).
• Debt and leverage are far higher today than they were in the Great Recession (2008).
• The surrender fee means that we don’t have access to our money for up to a decade. This can be a problem if an unforeseen event occurs or if we get concerned about the financial stability of the company that owns the plan.
• Many of the annuities end up with a company different from the one we purchased it from.
• According to the Financial Stability Report of the Federal Reserve Board, “Life insurers continued to hold a significant share of illiquid and risky assets.”
  
  

 
Bonds & Treasuries
The weakness in long-term bonds and treasuries were at the root of the problem in 2023, when we saw 5 banks fail. The problem didn’t go away. (We’ve had another 3 fail since then.) It’s just that the Federal Reserve did some financial engineering to prevent other banks from failing.
 
Long-term bonds (including long-term treasuries) are carrying credit risk and duration risk. This doesn’t go away with interest rate cuts for a number of reasons.
 

• Interest rates are not expected to go as low as they did in the last cycle.
• Many companies are carrying elevated debt and leverage; if their credit score drops, they’ll have to borrow at higher interest rates even if the Fed Fund Rate has been cut.
• When the terms are quite long, they don’t have to pay you back for decades. Will you even be alive in 45 years? There is also a greater risk that they will need to restructure their debt during that long period of time. Investors who purchased bonds or stocks are at risk of losing some or all (frequently with stocks) of their principal when companies declare bankruptcy.
• Over half of the S&P500 is at or near junk status.
• The USA has been downgraded by all three rating agencies to AA+. We are no longer a AAA sovereign.
• Illiquidity has been a problem for bonds for over a decade. We’re even starting to see a tighter market in Treasury bills over the last few months. (Illiquidity means that there’s nobody on the other side who really wants to buy the bond or T-bill from us.) As you can see in the chart below, S&P500 stocks are easy to sell – much easier than the Dow Jones Industrial Average. Bonds are some of the least liquid assets of all.

 
Traditionally, bonds and T-bills were considered safe. However, due to duration and credit risk, they are not as safe as they were in the past. Bonds have lost more than stocks over the past three years, as you can see clearly in the performance charts below. The safe side is where we want to preserve our wealth – not lose our money.

Money Market Funds & Certificates of Deposit
Money market funds are funds. That means they are not FDIC-insured, and they can go down in value. These funds can get into trouble in recessions. When interest rates get cut, the yield of the MMF goes down. So, in addition to these being riskier than FDIC-insured certificates of deposit, if interest rates get cut (as they are expected to do over the next couple of years), you could be getting paid less to take on more risk.
 
Certificates of deposit can charge us if we need the money before the term is up. So, it is important to determine when we’re going to need that money before we buy the C.D. Also, due to heightened credit and duration risk, it’s important to keep the terms short and the creditworthiness high in all of our fixed-income investments.
 
It’s also important to observe FDIC insurance levels. Uninsured deposits are not protected by the FDIC. In addition to short terms and high creditworthiness, rolling maturity dates ensure that we always have access to our money to take advantage of opportunities that might arise.
 
What is Safe?
So how do we protect our principal while earning a little money? Every year what’s hot and what’s safe changes. If you had attended one of our Financial Freedom Retreats between 2009 and 2016, we were strongly suggesting that you consider safe, income-producing hard assets, namely real estate. Real estate more than doubled over that period; it was a great idea. Now with real estate prices at an all-time high, investing is a lot trickier (though doable with a creative template – something we teach in our Real Estate Masterclass).  
 
After the Great Recession, with interest rates at zero, there wasn’t a lot of income to be made. Today, it’s easy to get a safe 4% ROI, but it is tricky. (Many fixed-income investors are experiencing those problematic paper losses.)
 

• Never reach for yield.
• Be more concerned of the return of your money than the return on your money.
• Understand the importance of keeping your wealth and having access to it. Most people do not buy low because they can’t.

 
Again, this is not forever. There will be future opportunities (which is why we want to keep our money and have access to it). It’s also important to remember that if we have $1 million earning 4.2% that’s about $42,000 each year. Of course, it’s only that amount if we are not being charged a management fee or investing in something that has paper losses.
 
Fixed Income Without Paper Losses Masterclass Oct. 18
Please join me for our masterclass on how to earn a reliable 4% income without paper losses on October 18, 2025. This is the Saturday after our October 11-13, 2025, Financial Freedom Retreat. We spend one full day on what safe at the retreat, which is a key preparation for the masterclass. So, it’s important to attend the retreat before the fixed-income masterclass.
 
We offer a special bundling package for attending both together. You might also consider purchasing a 12-month all-access pass to all our online master classes and retreats (3-4 of each per year). The cost of the-all access pass is a savings of 72% off the retail price. Email [email protected] or call 310-430-2397 to learn more now. If you register for the October retreat or purchase an all-access pass by June 30, 2025, you will also receive a 50-minute private coaching session (value $400).
 
Here are a few more important blogs on purportedly “safe” income-producing strategies.

Should You Have a Managed Portfolio?
Paper Losses.
Why are So Many "Safe" Investments Losing Money? 

Bottom Line
In my private coaching practice, I am seeing a lot of conservative investors who are told they are earning income without the broker-salesman revealing that their rate of return is under 2% or may be negative when you factor in all the paper losses and the fees. It is very important that we know the basics of investing, and to read the fine print rather than having blind faith in whatever we are being told.

Stocks are high. Real estate is high. Bonds and other fixed-income assets can be risky and illiquid. (Even some banks with Ivy League analysts have failed). The economy is expected to slow down this year, which could make things more challenging. So now is a great time to know exactly what we own and why, and to fix the roof while the sun is still shining.


Register now to join us at our online Financial Freedom Retreat Oct. 11-13 2025 where you'll learn how to protect your wealth, save thousands annually in your budget and how to hedge in a volatile Debt World. If you'd like a life-changing adventure of a lifetime, be our guest at a royal manor house in Cornwall, England, March 12-19, 2027. (With just eight rooms available, this exclusive, private, bucket-list adventure sells out a year in advance!) Call 310-430-2397 or email [email protected] to learn more. The 2025 Restormel Retreat was a magical and royal experience. Click to learn more. 

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Learn how to:

* Invest in hot industries, such as Nvidia, artificial intelligence, and quantum computing,
* Hedge against a weaker dollar,
* Invest and compound your gains,
* Green your retirement plan,
* Easy and efficacious nest egg strategies,
* Get hot and diversified (including in artificial intelligence, quantum computing and crypto),
* Evaluate stocks,
* Avoid capital gains and financial predators,
* Keep an age-appropriate amount safe, and,
* Know what's safe in a Debt World.

You'll even discover how to save thousands annually with smarter big-ticket choices. Yes, it's a complete money makeover. 
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Email [email protected] or call 310-430-2397 to learn more and register. Learn the 15+ things you'll master and read testimonials in the flyer on the home page at NataliePace.com. Register with friends and family to receive the best price. ​

"Ten minutes into the first day I was already much smarter about investing than I ever thought I would be in my life and I knew I was in exactly the right place at this retreat. I am amazed at how EASY and FUN it is to make my money work for me and those I love. I think this kind of information should be compulsory in schools. I wish I'd learned this sooner." CM

If you’d like an unbiased 2nd opinion on your current wealth plan, email [email protected] for pricing and information.
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Receive the best price and a 50-minute private coaching session with Natalie Pace when you register by June 30, 2025. Visit NataliePace.com to learn more. Call 310-430-2397 or email [email protected] for pricing, additional information and to register.

Join us for our Restormel Royal Immersive Adventure Retreat. March 2027. Email [email protected] to learn more. Click for testimonials, pricing, hours & details. Register now to receive the best price, the best room and eight private, prosperity coaching sessions. There are only 8 rooms available. This retreat includes an all-access pass to all of our online training for a full year for two. Considering the perks, you're receiving a 65% discount to learn the life math that we all should have received in high school, and the room is free! Email [email protected] to learn more. The best rooms at the 2025 retreat were sold out in 2024! Yes, it's a great idea to register and start transforming our lives now!

Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money (6th edition) and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is (2nd edition) are the most recent releases of these books. Follow her on Instagram. 
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.​​

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly-traded companies, funds or projects mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect an age-appropriate, diversified wealth plan, which has been designed strategically, with the assistance of financial professionals who are familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge, patience and diversified strategy.  
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Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.