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Income investing is an investment strategy that is centeredonbuilding an investment portfolio specifically structuredtogenerate regular income. The sole objective of theincomeinvesting strategy is to generate a constant stream ofincome.The constantincome canbeinthe formof dividends,bondyields, and interestpayments.
A BASIC INCOME INVESTING PORTFOLIO
GOVERNMENTBONDS
Governmentbonds areconsidereda verysafemeansofinvestingone’smoneyand generatingincome. They arelow-riskinstruments,makingthem attractive investment options. They can be loosely described asaninvestor lending their money to the government for a specified period foralow-risk exposure and a bond yield inreturn.
STOCK
Sharesasaninvestmentinstrumentforanincome-investingportfolioinclude company stocks that pay regular, increasing dividends. Theycanbe both common stocks and preferred stocks. Dividend paymentshelpgenerate constant returns overtime.
CORPORATEBONDS
Corporate bonds are similar to government bonds, except, intheformer, investors lend their money to companies instead ofthegovernment for a specific period of time. The only otherdifferencebetween the two bond types is that compared to governmentbonds,corporate bonds carry a relatively higher level of risk.However,given the associated higher level of risk, corporate bondsgenerallyprovide higher bond yields than governmentbonds.
REALESTATE
Real estate is a very popular and a highly attractiveinvestmentoption, especially for an income-investing portfolio. Realestateinvestments can generate a constant stream of income in the formofrental income. It also offers prosperous long-term capitalstockgrowth options, in addition to certain taxbenefits.
MUTUALFUND
Money market mutual funds are also an integralcomponentof income-investing portfolios. They generate aperiodicinflow of income in the form of dividends, interestpayments,etc. In addition, interest-bearing accounts withbanks,including savings accounts and money market accounts,provide the lowest-risk and safest means of ensuringaconstant inflow ofcash.
ADVANTAGES OF INCOMEINVESTING
Supplements fixedincome
Income investing is a very beneficial means of supplementing one’sfixedmonthly/annualincome. It isa greatwayofearningadditionalsupportincomeoutofassetsoneowns, whichcanbeused fordailyspendingneeds.
Potential capital stockgrowth
income investing offers the potential for capital stock growth in thelongterm, which can positively contribute to one’s wealth over thecomingyears.
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