Reddit Erupts: Investor With $1 Million Locked For 12 Years Asks 'What's The Safest Way To Get Passive Income Without Risking It All?'

For many, receiving a trust fund is a life-changing event, providing financial stability and opportunities for growth.

However, managing such a lump sum requires attentive planning, especially when the plan is to generate passive income without risking the principal.

This is the predicament a 35-year-old found himself in when he received the news that he would soon inherit $1 million from a trust. The catch? He cannot touch the principal for 12 years but can invest it and keep the dividends or interest earned.

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The Reddit user has a full-time job and no significant debt besides a mortgage. He says he is financially comfortable but wants to maximize the potential of this $1 million trust fund, but his main concern is balancing growth with safety as he aims to generate passive income through dividends.

“I’m seeking advice on what would be a good way to invest so that I can receive dividends each year as well as hopefully grow the account as well,” he wrote in his post in Reddit’s r/Dividends community.

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The Reddit community offered a wealth of advice, so let’s dive into that.

How to Invest $1 Million to Get Passive Income? Reddit Advises

Invest in Dividend-Focused ETFs

One of the most prevalent suggestions in the comments was to invest in ETFs that focus on dividends.

“[Schwab U.S. Dividend Equity ETF SCHD] would give you around $35,000 every year in dividends with an average yearly growth of 6%-10%,” a comment reads.

Replying to this comment, a Redditor agreed and recommended the poster another approach, depending on what his goals are in the long run.

“If you want solid current income with growth, this is the answer. If you don’t need $35,000 a year now and want long-term growth 10+ years from now, [Vanguard S&P 500 ETF VOO].

“70/30 split VOO and SCHD if you want some extra dividend income,” another Redditor suggested.

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Consider High-Yield Funds If You Want Immediate Income

Some commenters recommended high-yield funds in case the poster is feeling adventurous and is willing to take a bit more risk than some investors.

“If you just want a high current income and don’t care if your balance goes down over time then one of the yield funds like [JPMorgan Equity Premium Income ETF JEPI],” a Reddit user suggested.

One Redditor highlighted what he would do if he were in the poster’s situation.

“I would just go with SCHD/VOO/ or JEPI. They should give you a nice dividend every year,” he wrote.

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Another comment reads, “JEPI, [JPMorgan Nasdaq Equity Premium Income ETF JEPQ] 50/50. Get $75,000 a year after taxes.”

One particular comment stood out due to the many suggestions for funds and what the commenter has achieved so far. This Redditor also advised the poster to reinvest all dividends he receives.

“Remember, 75% of certified financial planners can’t beat the S&P 500 every year, so you can’t go wrong with VOO. Very low expense ratio. I would add JEPQ, JEPI, SCHD, [Schwab U.S. Large-Cap Growth ETF SCHG], [Simplify Volatility Premium ETF SVOL], [Amplify CWP Enhanced Dividend Income ETF DIVO], [iShares Core Dividend Growth ETF DGRO], [Putnam BDC Income ETF PBDC], [Virtus InfraCap U.S. Preferred Stock ETF PFFA], [Vanguard High Dividend Yield ETF VYM], [NEOS S&P 500 High Income ETF SPYI], and [iShares Bitcoin Trust IBIT]. Personally, I have a seven-figure trading account. What I do is put 25% into VOO, and the remainder in the ones that I just listed. Reinvest all dividends and enjoy your early retirement,” the comment says.

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