Thoughtful Money with Adam Taggart
Thoughtful Money with Adam Taggart

Is It Becoming A Great Time For Income Investors? | Steven Bavaria

September 27, 2026

AI Summary

5 min read

When Rising Rates Become a Tailwind for Income Investors

Steven Bavaria, founder of the Income Factory framework, returned to Thoughtful Money to make a case that the current environment of rising interest rates is actually a net positive for investors who build portfolios around income-generating credit instruments—and that this moment may be unusually favorable compared to the last several decades.

How the Income Factory Handles Rising Yields

Bavaria's approach is built on holding funds—primarily closed-end funds, business development companies (BDCs), and some ETFs—that own portfolios of credit instruments like senior loans, high-yield bonds, and private credit. The key psychological shift he advocates is to stop worrying about market price and focus on the income stream, much like a real estate investor who cares about rent, not the building's appraised value.

When interest rates rise, the market price of fixed-income assets typically falls. But Bavaria argues this matters little for long-term holders. "I'm not going to sell it," he says. "I'm holding those funds for years." Inside the funds, the underlying bonds continue to pay their contractual coupons and mature at par. The fund's net asset value may dip temporarily, but its ability to pay distributions is unaffected.

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What you'll learn

  • 1 (01:08) **Why Rising Yields Are a Tailwind for the Income Factory** – Bavaria explains how higher base rates increase the "river of cash" from credit instruments over the long term, even though short-term prices drop.
  • 2 (03:11) **The Case for Funds Over Individual Bonds** – Bavaria explains why he exclusively uses closed-end funds, BDCs, and ETFs, and how they handle rate changes.
  • 3 (05:53) **Why Now Is a Historically Compelling Entry Point** – Taggart and Bavaria agree that current conditions—high equity valuations and rising bond yields—make the income factory especially attractive.
  • 4 (08:38) **The Retirement "Seed Capital" Problem** – Bavaria contrasts the income factory's safety with equity-based retirement portfolios.
  • 5 (11:45) **The "Factory" Mindset: Never Sell, Just Collect** – Bavaria explains his personal strategy of never planning to liquidate his portfolio.
  • 6 (14:50) **Where the Best Opportunities Are Right Now** – Bavaria names specific funds and sectors trading at unusually deep discounts.
  • 7 (18:30) **The "Investor Panic" Discount** – Bavaria notes that fear about credit quality has driven discounts to levels that mathematically price in depression-level defaults.

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Guests on this episode

Adam Taggart

Show Notes

LOCK IN YOUR EARLY BIRD PRICE DISCOUNT FOR THOUGHTFUL MONEY'S FALL ONLINE CONFERENCE (OCT 17TH) at https://www.thoughtfulmoney.com/conferenceBond yields are at their highest in decades.And that make things a lot more attractive for income investors.To explain why, and share where he sees the greatest income opportunities right now, we're fortunate to welcome back to the program Steven Bavaria, creator of The Income Factory.#incomeinvesting #bondyields #interestrates _____________________________________________ Thoughtful Money LLC is a Registered Investment Advisor Promoter.We produce educational content geared for the individual investor. It’s important to note that this content is NOT investment advice, individual or otherwise, nor should be construed as such.We recommend that most investors, especially if inexperienced, should consider benefiting from the direction and guidance of a qualified financial advisor registered with the U.S. Securities and Exchange Commission (SEC) or state securities regulators who can develop & implement a personalized financial plan based on a customer’s unique goals, needs & risk tolerance.All the details on Thoughtful Money's relationship with the financial advisors it endorses, many of whom regularly appear on this program, can be found in the following documents. We highly recommend you review these documents as they cover the terms that will apply should you choose to work with one of these firms at any time after watching this video.Thoughtful Money Disclosure Document: https://thoughtfulmoney.com/disclosureThoughtful Money Agreement: https://thoughtfulmoney.com/agreementIMPORTANT NOTE: There are risks associated with investing in securities.Investing in stocks, bonds, exchange traded funds, mutual funds, money market funds, and other types of securities involve risk of loss. Loss of principal is possible. Some high risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods.A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.Thoughtful Money and the Thoughtful Money logo are trademarks of Thoughtful Money LLC.Copyright © 2026 Thoughtful Money LLC. All rights reserved.

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