The PLAN framework: how I decide what to buy (and what to avoid)
Four questions I ask before putting a single dollar into any income investment.
Every ETF I evaluate, every dividend stock I consider, every position I’m thinking about adding — it goes through the same four questions. I call it the PLAN framework.
I didn’t invent these questions. I developed them over years of making investing mistakes that cost me real money, and then slowly figuring out what I should have asked before I pulled the trigger. PLAN is the shorthand for those four lessons.
P — Payout sustainability
The first thing I look at is not the yield. It’s whether that yield is sustainable. A 60% annual yield means nothing if the ETF is going to cut distributions in six months or if it’s eroding NAV to manufacture income.
What I look for: 12+ months of distribution history. Is it consistent? Growing? Declining? Has it been cut? I also look at the coverage ratio — is the ETF actually generating enough from its strategy to support the payout, or is it returning capital?
If the payout isn’t sustainable, nothing else matters.
L — Liquidity and structure
How does this ETF actually make money? What’s the underlying strategy? Who manages it and how do they implement the options overlay? Average daily volume matters too — if I can’t get in and out without moving the price, that’s a problem.
I want to understand exactly why this thing pays what it pays. If I can’t explain it in two sentences, I don’t own it.
A — Alignment with my income goals
Does this position fit where I am in my 3-Bucket System? A high-yield, high-risk covered call ETF might be appropriate for Bucket 2 but completely wrong for Bucket 1. A growth ETF that pays no dividend has no place in my income engine.
Every position needs a job. If I can’t clearly articulate what job this position is doing in my portfolio, I don’t add it.
N — NAV trend
This is the one most income investors skip — and it’s where they get burned. The NAV (net asset value) of an income ETF tells you whether you’re actually building wealth or slowly liquidating it.
The brutal math: If your ETF pays you 40% in distributions but its NAV drops 35% over the same period, your real return is 5%. That might still be acceptable — but you need to know the real number, not just the distribution headline.
I look at 1-year, 2-year, and inception-to-date NAV trends. A declining NAV isn’t automatically a dealbreaker — some strategies are designed that way. But I want to know what I’m buying into, and I want it to fit my overall picture.
Using PLAN in practice
When I’m evaluating a new ETF — AIPI, CONY, whatever’s making the rounds — I run through these four questions before I look at the yield number. In that order. If it fails on Payout sustainability, I stop there. If it passes all four, it earns a spot on my watchlist.
For paid subscribers, I run this framework explicitly on each ETF I cover in the deep-dive issues. You see my actual scoring, my actual reasoning, and whether I ended up buying it or passing.
Next week, paid subscribers get a full PLAN analysis on one of the most talked-about ETFs in the covered call space right now.
Want to see me run PLAN on my actual holdings — with real scores and real reasoning? That’s what paid subscribers get. $9/mo.