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What investments are right for an income strategy?

POSTED ON MAY 26, 2023    

An income strategy is worth considering if you want to get regular cash from your investments to augment your salary, to create more investment opportunities, or even to prepare for retirement.


That’s because this method could give you a consistent and, in some cases, predictable source of money, as opposed to the growth strategy (which focuses on assets that may increase in value).


Choosing the right investments is essential for any investing strategy, and the income strategy is no exception. If you’d like to know what makes an asset right and to find tips for success, read on.


Highlighting income

As their name suggests, fixed-income securities such as bonds are one of the top options when you employ an income strategy. These give you a set amount of money on a schedule, so you know exactly how much and when to expect the profit.


Bonds can be issued by different organizations. Treasury bonds come from the government, which promises to pay you the interest on time and give you back the principal in full upon maturity. You can also consider corporate bonds, which are issued by corporate entities.


If you have an Aggressive risk profile, stocks are another option. Not just any stocks, though; you should pick the ones which have a good history of paying out dividends, like Index or Blue Chip stocks. However, unlike bonds, the returns that you get from stocks can vary depending on how the company itself is doing.


Real Estate Investment Trusts or REITs, which are required by law to pay out at least 90% of their income as dividends annually, are another potential choice among shares. This allows investors to get the best features of bond and stock market investing in one outlet.


If you have the money for it, you can also consider investing in real estate. If you do this, you can make money off the rental fees that you’ll charge your tenants.


Things to remember

Once you’ve made your choice, there are some things you should still keep in mind. First, while you may still see the value of your investments grow over time, this is a secondary benefit and you should be paying much more attention to the income that you’re earning.


This leads to the second point: you should keep an eye on how well or badly your investments have been bringing income in. If you see one that hasn’t been performing for quite some time, you can consider moving your money elsewhere.


Also, remember to follow the best practices for maintaining your portfolio. These include following your risk profile when selecting investments, and diversifying your holdings from your regular income.


One last thing to consider: If you’ve already started getting income but you have no immediate plans for the money, you may want to reinvest it. This would help you get even more revenue-generating assets for the future.


This will make you realize that when you are making informed investment decisions, your money can make more money.

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