While many people start investing to have a certain amount of money by a specific date, investing for income has been increasing in popularity. With this, instead of having a fixed amount at one time, your investments will give you a source of income.
While you’re still working, this income can help you pay for your expenses. When it’s time for you to retire, it could even take the place of your salary as your regular source of money.
Income from investments may not arrive on a monthly basis, but could still be regular enough for you to count on. That can be a big help for your finances.
If this interests you, read on to see your 4 options when investing for income.
Some stocks allow you to earn without selling the shares that you own. That happens through dividends, which are the stockholder’s share of the company’s profits.
You can choose from either preferred or common stocks. Preferred stocks pay fixed dividends which usually have higher yields than common stocks. On the other hand, dividends from common stocks are variable as declared by the company’s board of directors.
Stocks of Real Estate Investment Trusts (REITs) are another good option for you. These allow you to become a part-owner of income-generating real estate properties such as malls and office buildings. They are required to distribute 90 percent of their net income as dividends to shareholders.
When choosing stocks to invest in for income, remember to look at the company’s dividend history and its dividend policy so you know what to expect.
With fixed-income securities such as notes, bills and bonds, both the amount that you receive as interest and the schedule for receiving it do not vary. That makes them very useful for income investing.
The government offers all 3 types of these debt securities, and the interest rate and the payment scheme can differ according to which of these you choose to put your money in.
Bonds and notes are also available from corporations, with interest rates usually higher than those from the government because of their comparatively higher risk.
Another good option for you is a pooled fund, like a Unit Investment Trust Fund (UITF) or mutual fund that focuses on dividends.
Such funds own assets that pay dividends (such as stocks), but typically have their own payout schedule. Investing your money in this type of fund means that a professional manager will be taking care of the research and decisions, so you don’t have to.
Possibly the option with the highest capital needed, investing for income through real estate means buying land or a property and having it rented out.
This is a decision that you shouldn’t make lightly, because of the money you’ll need. However, the potential for steady income is good if you manage to choose the right real estate asset and find tenants who pay consistently.