This is a direct follow-up to my last piece:

How Ordinary Folks in the U.S. Can Win in the Stock Market

Now it’s time to get into the nitty gritty!

My favorite vehicles for cash-flow investing belong to a legal category called regulated investment companies. You may never have heard of these before, but if you’ve ever had a 401(k), there’s a high probability you’ve owned one of more of them. (The funds available on the typical 401(k) plan’s menu are all regulated investment companies.)

That being said, the RICs that I like for cash flow all trade in the stock market — which means you don’t need a 401(k) to access them. All you need is a brokerage account, which costs nothing to open and can be set up as a Roth IRA.

(The reason to set it up as a Roth IRA is that if you wait to tap into the cash flow until 6 months before your 60th birthday, you’ll be able to tap into it tax-free from then on. And in the meantime, the cash flow accumulates in your account tax-free, and since you’re not tapping into it anyway, you can have the incoming payouts automatically deployed to buy more of the assets that delivered them, thus creating an ever larger stream of cash flow over time. I’ve spoken to folks in their 60s who have a Roth IRA, and they’re all happy they have it. I have a lot of experience helping people open Roth IRAs, as well as opening my own, so if you have any questions, hit me up in the comments.)

For me, there are three main draws to regulated investment companies. First, they’re incentivized to pay out at least 90% of their taxable income each year to shareholders. (Doing so exempts them from paying corporate tax. That’s the incentive.) Second, they’re an economical way to diversify your sources of cash flow — especially when you don’t have a lot of money to invest in the first place. Third, they possess advantages that individuals like you and me do not. They have access to cash-flowing deals and techniques that aren’t available to the general public and/or require a lot of money. For this reason, I think of the regulated investment companies I like as “hedge funds for ordinary people”.

My hedge funds for ordinary people fall into three distinct categories: ETFs (exchange-traded funds), BDCs (business development companies), and CEFs (closed-end funds). Today, I’ll be talking about the category you’re most likely to be familiar with: ETFs. (If you’ve ever owned an ETF, as I’m sure many of you have, then yes, that means you already have experience owning a regulated investment company.)

Before we go on, let me make one thing clear: I receive zero compensation from any of the companies whose funds/stocks I introduce to you. If I talk a fund/stock up, it’s because I own shares of it and like it. And if you’re worried that I’m just trying to drive up demand for funds/stocks that I own, don’t be. If a rush of people go and buy something after reading about it from me — thereby driving up the price — that’s actually detrimental to me. It means that if I want to buy additional shares myself, I won’t be getting as much bang for my buck. So if anything, I’m taking a risk by telling you about these RICs.

And with that, let’s get into it!

(1) InfraCap Equity Income ETF (ICAP) & InfraCap Small Cap Income ETF (SCAP)

Note: ICAP & SCAP are the funds’ ticker symbols. As is common practice, I use these as shorthand for the funds’ actual names, but they serve other practical purposes as well. Say you want to buy shares of ICAP. In your brokerage account’s user interface for buying stocks, you can just type in “icap” and that should be enough to call up all the info you need to execute the transaction.

Both ICAP & SCAP invest primarily in stocks that pay dividends. The difference is in size. By “size”, I mean market capitalization (“market cap”, for short). A stock’s market cap is the total number of shares that are out there in the world, multiplied by the price at which those shares are currently trading in the stock market. SCAP invests in “small cap” stocks (market caps of 9–10 figures), while ICAP invests in the “large cap” variety (market caps of 11 figures or more).

These two funds are more than just an economical way to source cash flow from various stocks in various industries. They supplement the income they collect from dividend-paying stocks by selling covered calls. This can be a great way to generate cash flow, and it’s available to us as individual investors. But in order to sell just one covered call, you need to own 100 shares of the corresponding stock. As I write this, Apple stock is trading for around $345. So if you don’t already own at least 100 shares of Apple, you’d need to spend $345 per share to buy however many it would take to get you to 100. Just to get in the game. For funds like ICAP & SCAP, this isn’t a problem.

Now, let’s talk about these funds’ payout histories. Since its launch in January of 2022, ICAP’s base payout has gone up nine times and never gone down. SCAP’s track record is even more impressive: it didn’t launch until almost two years later (December of 2023), and yet its base payout has gone up ten times and never gone down.

Payouts (Both): Monthly

Current Yield in My Roth IRA:

ICAP: 11.17%

SCAP: 8.79%

(2) Virtus InfraCap U.S. Preferred Stock ETF (PFFA) & Infrastructure Capital Bond Income ETF (BNDS)

Like ICAP and SCAP, these two funds are from my favorite ETF shop: Infrastructure Capital (“InfraCap”). One of the reasons it’s my favorite is their dedication to finding ways to continually increase their funds’ base payouts without sacrificing quality. We’ve seen this already with ICAP & SCAP, and PFFA & BNDS are no exceptions either. Starting in 2021, PFFA’s base payout has gone up every January like clockwork, and while BNDS is less than 2 full years old, its base payout has already gone up twice.

As its name implies, PFFA invests primarily in preferred stocks. These are a different animal from common stocks (the proper term for what we normally just call “stocks”). Not every company whose common stock is listed on a stock exchange (and therefore accessible to anyone with a brokerage account) also issues preferred stock, but quite a few do. And it’s not unusual for a company’s preferred stock to yield more than its common stock (assuming the common stock even pays a dividend in the first place). A few years ago, at the urging of a mentor of mine, I bought shares of a preferred stock from a particular bank, locking in a yield of 11.31%. Had I bought the same bank’s common stock instead, my yield would’ve been around 3%.

The chief difference between preferred and common stocks is that the common ones come with voting rights, while the preferred ones get priority for the payment of dividends. (If a company fails to pay the full dividend it owes on its preferred stocks, it can’t legally pay a dividend on its common stocks either.) Another major difference is that most preferred stocks have a maturity date (a date when the company has to buy it back from you at a predetermined price) and/or a callable date (a date after which the company can, at its discretion, kill the preferred stock in exchange for paying you the aforementioned predetermined price). Either way, if you’re holding shares of a preferred stock when its shelf life comes to an end, you’ll receive the predetermined amount, and that typically is $25 per share. (Which is great for you if you were able to buy it for less than $25!) All of this means that if you want to invest in preferred stocks on your own, it’ll take a different kind of research and management than investing in common stocks. I’m content to invest in a fund like PFFA that’ll take care of that for me. (Yes, I do still own that one preferred stock that’s yielding me 11.31% — and it turns out PFFA owns it too!).

Not only is PFFA an economical way to source cash flow from a variety of preferred stocks in a variety of different industries, it has other tools in its toolbox to boost our cash flow. For instance, the fund will buy a preferred stock when it’s trading for significantly less than $25, and then if & when it closes the gap most or all of the way (or even trades above $25, which happens on occasion), the fund might take the opportunity to sell it at a profit and then buy another preferred stock with a higher yield. (Incidentally, both ICAP and SCAP also hold a smattering of preferred stocks, as a supplement to their dividend-paying common stocks and covered calls.)

Before we move on to BNDS, a word to the wise: As far as I can tell, all preferred stocks that are listed on a stock exchange are dividend payers. But in the world of startups (a world that’s been open to investment by regular folks since Regulation CF came into effect in 2016), you can’t assume that preferred stocks pay dividends. In fact, from what I’ve seen, most don’t. Naturally, PFFA’s hunting ground for preferred stocks is the stock market.

Okay, on to BNDS. As you can guess from the name, it invests primarily in bonds. A bond is essentially a loan where the borrower, rather than the lender, sets the terms. When you buy a bond, you become the lender (the one the company owes money to), but you accept the terms as is; you don’t get to change them. In practice, a bond actually works a lot like a preferred stock: it comes with a maturity date and/or a callable date, and when it matures or gets called, the company has to pay out the amount of the loan (which is typically $1000 per bond).

In January of 2025 (before BNDS IPO’d later that same month), I attended a webinar where InfraCap’s founder and CEO described the fund as the bond version of PFFA. InfraCap’s track record with PFFA gives me confidence in their ability to identify creditworthy bonds. You see, a company will stop paying dividends on its preferred stocks before it defaults on a bond payment. (In that sense, bonds are safer than preferred stocks.) So if InfraCap knows how to pick solid preferred stocks, they should have no trouble picking solid bonds. And BNDS is an economical way to source cash flow from bonds coming from a variety of different industries.

One other thing worth mentioning: at the time of this writing, most of the bonds in BNDS are from companies that are publicly traded (meaning their common stocks are listed on a stock exchange). But the fund’s portfolio also includes three different bonds from Land O’Lakes, a member-owned agricultural cooperative (famous for its butter). This goes to show that bonds can be a way to source cash flow from companies outside the stock market.

Payouts (Both): Monthly

Current Yield in My Roth IRA:

PFFA: 12.09%

BNDS: 9%

Before we finish, there are a couple of things you need to understand. First, every ETF is a company in its own right, and when you buy shares of one, you’re buying shares of common stock in that company. Even if what the company invests in is preferred stocks or bonds (or something else).

Second, ICAP, SCAP, and PFFA occasionally borrow money in order to enhance their payouts. (So do the other hedge funds for ordinary people I’ll be introducing in the next two installments. BNDS is an exception.) The term for this is leverage.

If that sounds scary, I don’t blame you, but understand that are strict limits on how much a regulated investment company can borrow. Let me put it this way: If you’ve ever taken out a mortgage to buy a home and your down payment was 20% (meaning the other 80% was borrowed money that you had to pay interest on), then you were much more leveraged than a regulated investment company is ever allowed to be.

That’s all for today. The four names I dropped are all a great place to start. But I assure you that InfraCap isn’t the only game in town. You’ll see for yourself this coming Monday, when I’ll drop the next batch of names. Till then!

You have more power than you realize,

© Ben Rosenthal 2026

Hedge Funds for Ordinary People: Part 1 was originally published in Straight Talk from a Financial Industry Insider on Medium, where people are continuing the conversation by highlighting and responding to this story.