How Much Do I Need to Invest to Make $10,000 a Month

A wealth coaching client recently asked “How much do I need to invest to make $10,000 a month in income?” We explored several options to accomplish this based on her net worth and chosen level of risk.

To see how much you need to invest to make $10,000 in monthly income, or any other amount, simply multiply the desired monthly income by 12, and then divide the result by the expected investment yield.

For example, a $10,000 monthly income is $120,000 income a year. If the expected yield is 6%, you need to invest $2,000,000 to make $10,000 a month in investment income.

As you can see, the amount you need to invest to generate a desired amount of income depends on one major variable: investment yield.

This means the more you increase investment yield the less you need to invest to reach a desired income level.

Call me a nerd, but I’m excited to write this post because establishing income streams to replace or supplement retirement withdrawals is the core principle at Retire Certain. This is because we’re in a time when it’s beyond challenging to generate investment income given low interest rates, low stock yields, and possibly not having saved enough retirement savings to live off retirement withdrawals with the 4% rule.

In this post, we’ll explore different ways to invest to make $10,000 a month from investment income, first with stocks and bonds, and then with alternative income sources.

I’ve invested in every strategy listed here. While I have an AFC® credential, I write mostly from the school of hard knocks here at Retire Certain after almost 40 years of investing my own money and also hiring several financial advisors over the years. Over the past 10 years, we’ve gradually replaced job income with income streams from both traditional and alternative assets.

(You can also scroll down to watch my video on how much you need to invest to make $10,000 a month if you prefer video.)


Investment Income Vs Capital Gains Vs Investment Returns

Many investors looking to live off investments confuse investment income, capital gains and total investment returns. Before we explore how much you need to invest for $10,000 income, let’s get really clear about exactly what investment income is.

Investment Income

Investment income comes in the form of dividends, interest, and other payouts you get when you own investments. Besides stock dividends and interest, other common alternative income streams include real estate rent, income from covered calls, MLP distributions, REIT distributions, and even small business distributions from lending or from profits.

Some investors casually refer to investment income as cash flow.

What Are Capital Gains?

Capital gains happen when an investment increases in value after you buy it. For example, if you buy an investment for $5,000 and it increases to $10,000 you have a $ 5,000 capital gain. A lot of investors and even financial professionals refer to a capital gain like this as income. It isn’t income; this example is a capital gain. Capital gains build wealth. Growth investing is the objective for investments made with a primary goal of an increase in value.

Click here to read my post  How Much Money Do You Need to Live Off Investments where I explain this more.

What Is Investment Return?

The third equation related to investment income is called investment return. Investment return is commonly used for measuring investment performance. Many investors, however, get investment return confused with yield. “Investment return” is also known as ROI, or return on investment.

Investment returns include any amount an investment has increased (or decreased) in value plus dividends or (other income) plus compounding of both dividends and capital gains when they are reinvested.



investment return formula

To clarify this important point, in this post, we are looking at ways to get income from investments of $10,000 a month. This does not include capital gains from investing.

When considering investment return, note that taxes and fees are not factored into the numbers in this post since they vary greatly but they will likely offset investment income and should be considered in your income planning.

Click here to read How Much Money Do You Need to Retire where I address how to handle extraordinary expenses such as taxes and fees.

Now that we have clarified investment income vs capital gains vs investment return, and addressed investment risk, let’s look more at how much investors need to invest to make $10,000 a month in income alone.


How Much Do You Need to Invest to Make $10,000 a Month in Income?

Let’s take the example from the first of this post and look at the 2 main elements

  • How much you need to INVEST to make $10,000 a month
  • How much yield you need to EARN on your investments

We saw that by investing $ 2,000,000 in investments that pay 6% income a month, you will make $10,000 a month in income.

The amount you need to save is derived from the yield.

This means that simply by increasing the investment yield you will need less money saved to generate $10,000 a month income.

The huge problem income investors face is that bond yields and most stock yields (dividends) are so low that after inflation, fees, and or taxes, the yield is negative.

So, let’s look at investments with higher yields with something of a cautious eye.


High Dividend Stocks

If you’re invested in the stock market, a 2% yield is probably about what you are getting in yield unless you are invested in stocks specifically with a higher dividend focus.

Some services provide stock selections yielding as high as a 9% dividend yield. More commonly, however, dividend focused investing and funds range between 2.50% to 4% dividend yield.

So let’s see how much you need to invest to make $10,000 a month if your investments are optimistically yielding 3.5% in “high income funds” or stocks.

$10,000 x 12 months = $120,000 income a year

$120,000/.035 = $3,428,571

Holy Moly! What a difference the yield makes for how much money you need to retire using an income method. We went from needing to invest $2,000,000 to investing over $3,400,000 to make $10,000 a month just by changing the yield from 6% to 3.5%.

riskThe key then is to increase the yield without increasing risk to an unacceptable number.

This equation is all too familiar to me: It’s the same math I did in the mid-2000’s which led us to begin investing in alternative investments and creating multiple income streams from real estate, oil, small business and stocks.

Next, let’s look at some alternative investments with higher yields than the S&P 500 or stock income funds.

How Much You Need to Invest to Make $10,000 a Month from Alternative Investments?

There are several ways to increase investment yield from what I call “slightly alternative investments”. These securities are all highly regulated and are bought and sold just like stocks.

Higher Dividend Stocks

A diversified portfolio of individual dividend paying stocks in the 5% range is very doable these days, as addressed earlier. Again, however, most stock income funds yield in the 3% range, but higher yields from decent quality stocks can be found.

It does, however, take time to find safe high yielding stocks. How can you invest in high dividend stocks without spending hours of analysis finding them?

There are many services that provide analysis and recommendations for high yielding stocks for proactive individual investors who don’t want to do all the work. There are also wealth managers and financial advisors who specialize in high dividend stocks.

Again, income focused stock mutual funds and ETF’s (Exchange Traded Funds) also exist, but most of them have dividend yields much lower than 5%. The trade off is that funds provide instant diversification that is harder to achieve from individual stocks. Since stocks with high dividends can be riskier than most blue chip stocks, diversification is an excellent way to lower risk.

As touched upon previously, be cautious of fees and taxes eating into the yield. Dividend investing through funds not only results in lower yields most of the time; it results in fees that are higher than most high yielding stock recommendation subscriptions.


Closed End Funds

A lesser known class of funds exists called closed end funds. These funds usually have higher payouts than more common “open end” mutual funds.

It is not unusual for closed end funds to pay out income in the 9% range and higher. The payout rate varies based on prevailing interest rates, asset pricing, and the type of fund.

Several negatives that many people don’t realize is that closed end funds often:

  • Pay out capital gains, not just dividends
  • Have high fees
  • Sell at a premium (or discount) to the value of the stocks (or other securities) in the fund
  • Pay out investor’s capital when they don’t have the dividends or capital gains to make the expected yield

investor doing researchThis isn’t to say all closed end funds are bad. I invest in closed end funds from time to time after doing the necessary research.

In fact, it warms my heart to write that my dad taught me about CEF’s (closed end funds) in the early 1990’s.

The beauty of closed end funds is that you can frequently buy assets at a discount as Dad taught me. Also, many investment firms have closed end funds that are almost the exact same as more expensive (higher fees) than closed end funds. The CEF’s, however, can trade at a discount! This gives proactive investors an inside edge, which is always good to find.

Remember to do your research. The items listed above are all easy to investigate with all the online financial research and newsletters available for high yielding investments.


Buying Stocks After Bear Markets

Buying stocks after bear markets is more of a strategy than an alternative investment but it’s important to mention because it is a great, yet often overlooked way to increase income from quality stocks.

As addressed earlier, the S&P 500 was paying 3.6% after the last bear market in March 2009. This is 82% higher than the S&P 500 dividend yield is as of this writing.

Here’s a video on How Much You Need to Invest to Make $10,000 a Month


As you probably know, the S&P 500 yield is an average for all the stocks that make up the index. This means that some stocks in the S&P 500 were paying much less and other stocks were paying much more than the 3.6% average yield.

We can assume high dividend stocks similar to those paying 5% today would have been paying more than that in March 2009 assuming the same increase from the S&P yield to the currently available yield of higher dividend stocks calculated as follows:

3.6% March 2009 yield – 2% approximate current yield = 1.6% (Increase in S&P yield March 2009 vs approximate yield average recent past 10 years)

This is an 80% increase in yield over March 2009. Based on this, it seems very reasonable that yields for stocks that are comparable to those paying in the 5% range today, dividends could increase to 7% after a bear market since an 80% increase over 5% is 9%.

Let’s be conservative and assume you will be able to get a 7% yield (instead of 9%) from decent quality high dividend stocks after the next bear market.

All this to demonstrate that simply buying high yield quality stocks after a bear market will probably result in a significantly higher yield.

One of the keys to investing in stocks after a bear market is having the cash to invest. Click here to read my post What Percentage of Cash Should Be in My Portfolio for more about this.

bulls and bearsWhile it feels scary to invest in stocks after a bear market, it is actually less risky since you’re getting the same companies that cost a lot more before a bear market. This is logical.

And math can confirm that logic since you can look at PE ratios and other factors to evaluate stock investments (funds or individual stocks) before buying them.

Click here to read my related post How to Evaluate an Investment.

Of course, bear markets and recessions tend to happen around the same time so a lot of companies experience lower profits and need to cut dividends or worse. Investors have to be especially cautious near bear markets, but then, I think this is always the case.

Remember, since the yield equation is based on investment cost, investors naturally get a higher yield when quality securities are bought for lower valuations; this occurs after bear markets.


Dividend Aristocrats for Income from Stocks

A lot of dividend investors are excited about the Dividend Aristocrats. As of this writing, 17 of these stocks have dividend yields of less than 1%!

NOBL, the ETF which represents the Dividend Aristocrats yields only a little around 1.45% as of this writing. This is in line with both inflation and the S&P 500 dividend yield. (1.)

While the name implies the focus of the Dividend Aristocrats is income, these stocks are considered high quality because they are known for their growth as evidenced by increasing dividend payouts to investors annually.

Of course, sometimes companies drop off the Dividend Aristocrat list when dividends are cut due to slowing profits, reminding us that even investments perceived as the highest quality can and do sometimes fall from grace.

And then there is also stock market risk in general, particularly sequence of returns risk as investors near and enter retirement.

Preferred Stocks for $10,000 of Monthly Income

Preferred stocks are another popular income investment among financial advisors and more proactive investors.

Preferred stocks are like a combination of stocks and bonds. They are like stocks because they can increase in value but they are like bonds because they pay out fixed dividends.

One good thing about preferred stocks is that they are a little less risky; In the event of a company needing to cut the dividend, the common shareholders get cut, if needed, before preferred shareholders.

Plus, in the rare and unfortunate event of liquidation, preferred shareholders get their equity out before common stock investors (but after bondholders).

Preferred stocks typically yield more than most common stocks.


Bonds to Generate $10,000 Monthly Income

There are many different kinds of bonds. The amount of income investors make from bonds depends on the type of bond, prevailing interest rates and the bond’s maturity.

Riskier high yield bonds pay much more than U. S. Treasury bonds. The spread between high yield bonds and Treasury bonds varies, however, based on several factors. Long term bonds typically pay more than shorter term bonds, for example.

Intermediate 10 year Treasury notes as of this writing pay only about 1% interest, for example, which is similar to an S&P 500 index fund.

This means it would take a lot of investment capital to make $10,000 in monthly income! It’s worth noting that bond income was previously considered the staple of retirement income. The loss of stable and higher bond income is one of the reasons I write about alternative retirement plans.

Low interest rates signal a need for retirement planning to evolve, yet it is still done the same old way for the most part. Again, this is what led us to create diversified multiple income streams.


Covered Calls for Monthly Income

A more advanced investing method is selling covered calls on stocks you own. It is another way to significantly increase stock yields.

It’s important to note that basic covered calls strategies work best in sideways or bull markets.

This simple conservative option income strategy can make a lot of sense for an investor who owns stocks already anyway and wants more income from those stocks.

Covered calls can work best for stock investors who want income more than so than capital gains since they already have stock market risk anyway.

Click here to read my related post Living Off Covered Calls.

Covered calls capitalize on the time decay that naturally occurs after the call option is sold by stock investors.

The first month I sold covered calls I got a 7% return (call income and capital gains) because I was selling covered calls in a strong bull market on high growth stocks with high option premiums. I was hooked. After over a year of successful covered call writing, however, I was humbled. Stocks began a broad market decline, making a covered call strategy much harder to implement successfully.

While many covered call strategies yield over 3% a month, I like to use a more conservative estimate of 1% to 1.5% a month covered call income. This equates to 12% to 18% return a year, which is very hard to find elsewhere

Covered calls can be structured so they generate more income than capital gains, or vice versa. While this sounds like a very advanced investing strategy, it is fairly easy to implement.

For our estimate, let’s use a 15% annual yield to see how much you need to invest to make $10,000 a month using a covered call income strategy.

$120,000/.15= $800,000 investment capital

It’s worth repeating that simple covered call strategies work best in sideways or bull markets.

This is because, with covered calls, you must own the stocks to sell the call options against. Those stocks are subject to stock market (and other) risk.

Contrary to popular belief, however, covered calls are no riskier than simply owning the stock. In fact, covered call strategies are slightly less risky since the underlying stock cost is offset each time you sell a call option against the stock.

Plus, covered calls can generate very good “mostly” passive income. Click here to read my related post Is Passive Income Real? 

Covered Calls on Dividend Stocks and ETFs

Covered calls can be sold on dividend paying stocks and ETF’s.

♦Income Stream Tip♦  Selling covered calls on dividends allows an investor to use the same capital for investment income twice. 

By estimating annual covered call income of 15% plus another 4% dividend income, the total annual income from the same investment could be 19%.

For example, AT&T frequently yields over 6%. It is even in the quality Dividend Aristocrats.

Higher yielding stocks also tend to have higher option premiums since they are perceived as higher risk. This means that the covered call income will be higher on high dividend stocks since you are keeping the call option premium.

So, 19% seems like a reasonable income estimate based on the math adding the covered call income of 15% to the 4% dividend yield.

Let’s see how much capital you need to invest to make $10,000 a month with covered calls on dividend stocks.

$120,000/.19 = $631,579

This means if you successfully sell covered calls (in bull and sideways markets) on your dividend stocks the amount you need to invest to make $10,000 a month is only $631,579.

Before we get too excited, let’s remember that, unfortunately, not all investment or income strategies work all the time which leads to the next Wealth Tip.

Wealth Tip♦  Diversification in BOTH income streams and investments is important to keep financial stability.

While diversified income streams are for more advanced investors who don’t mind the effort, the higher income can be worth the effort.

There is also a great probability that everything will not always work. This is why we have diversified income sources from stocks, real estate, and online businesses now.


Monthly Income from MLPs

Master Limited Partnerships are in the oil service industry.

There has been a lot of change in the MLP sector over the past couple of years for several reasons.

First, oil prices sank to low prices (relative to historical prices) and many oil companies struggled to stay in business; others cut dividends. This was before oil prices soared back in 2022.

Also, many MLP’s changed their tax structure which led to consolidations and mergers of MLP’s and related companies.

oil barrels | MLP incomeThere have also been environmental and political disruptions, as well. Many major oil companies are making major macro shifts away from oil.

Price volatility, macro changes, and consolidation usually bring some form of opportunities, along with increased risk.

MLP’s tend to pay higher dividends than stocks.

Plus, as a commodity, oil is considered a defensive investment by many.

I don’t know how the MLP industry will play out, nor anything else here. I just do my research using probabilities, estimates and facts, and then invest within the goals and risk tolerance as defined in our overall wealth plan and acceptable risk.


REITs for Investment Income of $10,000 a Month

Through REITs (Real Estate Investment Trust) investors can invest in commercial real estate. Much like MLPs, REITs have gone through a major transition.

The increase in remote workers and the online sales explosion have significantly hurt much of this sector.

A well chosen, decent quality REIT portfolio yields in the 5% range or more nowadays. A more conservative REIT portfolio yields 3% to 4%, and a riskier REIT portfolio yields 6% or more.

There are also REIT ETFs and mutual funds.

Covered calls can also be sold on many REIT ETFs thereby significantly incerasing investment income.

Now you have several ways to calculate how much you need to invest for $10,000 a month income based on various potential yields.


High Yielding Investments and Risk

It’s easy to get caught up in the lure of high yielding investments. Therefore, it’s important to address risk since risk management is at the core of my work at Retire Certain.

Every investment is risky. When you invest in anything, there is a chance the value of that investment will decrease in price. Such a loss can have irreparable damage to an otherwise solid retirement plan.

Investors can easily get caught in a trap when it feels like investments are less risky due to years of rising asset prices, in seemingly “safe” investments in stocks, bonds, or real estate. After years of rising investment prices, it’s more important than ever to lower risk.

This is why investing should always begin with clarifying how much risk you’re willing to take. Then make investment decisions from within your defined risk.

While the focus of this post is on investment income, it’s important to remember the asset you’re using to generate income is almost always subject to declining, possibly substantially, in price.

The good news is that investors that choose to not sell at a loss (“wait out the declines”) won’t have a “realized loss”. They will, however, experience a drop in net worth until their investments eventually increase back to their earlier value. Of course, that’s assuming they will, as some investments never recover to prior highs.

Before you think I’ve taken all the fun out of getting that $10,000 a month income from investing, the next point is on a positive note. It’s important for me to always address risk, however. Risk is often overlooked or ignored.


Investment Income During Bear Markets

The great thing about income investing is that the income usually keeps coming even if the investment generating it decreases in price. As such, investors with a primary goal of income may not be concerned if the assets generating the income drop in value. I feel I must, however, address this “risk reality” in order to be a responsible financial coach.

By first having an overall wealth plan defining your investment goals and acceptable loss based on your age and other risk factors, primary objectives and risk can be managed.

Click here to read my related post What Percentage of Cash Should Be in My Portfolio?   


Summary – Investing for $10,000 a Month Income

Don’t get caught up in the lure of high investment income just to make $10,000 a month from investments. Begin with a personal wealth plan that defines your acceptable risk and investment goals to make wise decisions that will keep your money safe.

Next, check the overall market valuations based on comparison to history before investing anything, anywhere, ever.

Then do your research among the various ways to make $10,000 a month investment income. or any other amount you’re seeking.


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The information on this website is for education only and is not to be construed as personal financial advice.