A common question I get asked is: “What’s the right allocation between stocks and bonds for my portfolio?”

Now, there is no right answer to this question. I believe the standard formulas such as a 60/40 allocation or using 100 minus your age can work well if you have a large account.

For example, if you have $1 million, that would be $400,000 in fixed-income investments. Even at 3%, that would provide an income of $1,000 a month. But, with a $1 million account, you would withdraw 3% or 4% a year from the account in addition to collecting income.

But some of us don’t even have $1 million accounts. And regardless of your situation, I believe most people would be better off with a different approach.

Now, I am not providing specific advice. I am simply considering different scenarios that could provide a framework for thinking about this question.

Why 60/40 May Not Be The Answer

Many investors believe a 60/40 allocation protects principal. Even if stocks lose 20% of their value, the portfolio would drop just 12% and the bond portion could even deliver a small gain.

There’s just one problem with this…

The 60/40 model has performed well over time because interest rates have been dropping for the past 38 years or so. It’s unlikely that will be the case for the next 38 years. This fact significantly changes the risks of the 60/40 portfolio.

In fact, in the future, bonds could carry even greater risks than stocks.

With the risk of losses from bonds, investors might want to rethink the idea of income investing altogether.

Dividend stocks could be an alternative, but stocks could also suffer large losses. In fact, stocks could also go nowhere for decades. That’s happened in Japan, where the Nikkei Index showed no gains in 30 years.

Now, I’m not necessarily saying that will happen here in the U.S. – just that a diversified portfolio of dividend stocks might be riskier than you realize. The iShares Select Dividend ETF (NYSE: DVY), for example, lost more than 60% of its value in the 2008/2009 bear market.

That could be the most important point to consider related to dividend stocks. A dividend yield of 4% is not much consolation when prices drop 20% or more.

There’s A Better Way…

This leads to the question of how to generate income in a portfolio.

All of these risks indicate that it could be useful to think about income in the short term. By using short-term strategies, the risk of large losses is minimized.

It could also pay to think beyond traditional stocks and bonds. That’s where my strategy comes in…

You see, several years ago I began looking for a way to identify trades with a high probability of success. My goal was simple: minimize risk, maximize income.

I studied under some of the foremost trading experts in the country after I left the military. And it was thanks to that experience and my military background that led me to create the Income Trader Volatility indicator (or ITV for short).

I won’t give away the details of the ITV indicator just yet. We’ll save that for another day. But several years ago, I submitted my research on ITV using actual trades to the Market Technicians Association.

And in 2015, I was awarded the prestigious 2015 Charles H. Dow Award, which highlights outstanding research in technical analysis.

The reason for this award was simple. You’d be hard-pressed to find an indicator that’s as reliable as ITV. In fact, the trades identified by it have made money for Income Trader subscribers more than 90% of the time.

Now, I should be clear about what my strategy does… and what it doesn’t do.

This is not for risky traders looking to make a quick buck. My readers and I are trading for income — not for crazy triple-digit gains.

The good news is that there are plenty of opportunities to get paid. My strategy allows investors to generate immediate payouts from stocks they’d like to own anyway – at a certain fair, discounted price.

If you’re thinking about enhancing the income-earning potential of your portfolio, I highly encourage you to check out my latest presentation right here.