Investing For Income

When investing in the stock market, many investors only focus on the capital appreciation of investments only. While there is nothing wrong with seeking to make money over the long haul; many investors are sacrificing the possibilities of earning short term income. This income could come in the form of quarterly distributions.

I am a big believer in having a portfolio that is balanced. Your portfolio should have a combination of growth and income together. This way you are getting the best of both works. You are earning current income and getting long term growth. Here are a few ways that you can start investing for income.

Balanced Funds

The easiest way to simply invest build a balanced portfolio is to buy a fund that owns stocks, bonds, and cash. This way you get the benefit of cash distributions and ownership of different common stocks. Balanced funds can pay out dividends on either a quarterly or annual basis. They offer low to moderate risk since they maintain allocations of roughly 60 to 40% equities to bonds.

Dividend Stocks

Another good passive income option is to buy a stock that has a long term track record of giving cash back to shareholders. Good examples of dividend stocks are companies like Proctor & Gamble, General Electric, and Kraft Foods. These companies have enough cash that they can sustain paying a dividend for the long term and will likely increase it in the years to come.

Bonds

You can always buy Treasury and savings bonds to produce some investing income. They offer guaranteed long time payments that are backed by the Federal government. Corporate grade bond funds have higher interest payouts and are guaranteed by individual companies. These payments can add up to a nice residual income stream if structured properly.

Certificates Of Deposit

Certificates of deposits are not offering the greatest interest rates right now but they do guarantee the interest rate. CD’s can be purchased anywhere from as short as 3 months to as long as 10 years. Certificates of deposit can be a good passive income source for the person looking for worry free income. You can even create a CD ladder that brings in income on a recurring basis.

Comments

  1. avatar krantcents says:

    This is a good resource when I retire although I still want to invest for growth with some of my portfolio. The balance funds are a good resource for that.

  2. I believe this is wrong. You have to think of investing as capital gains, not income. If I had $10 million, and made 10% a year, my CAPITAL gains would be $1 million. If I had $100,000 and made 50% a year, my capital gains would be $50,000. So you can’t think of it in pure monetary matters; it’s the capital gains that count.

    • avatar Mark says:

      Your point is actually incorrect. You have to determine what the distribution is. Is it a qualified dividend or an unqualified distribution? A short term capital gain is taxed entirely differently.

  3. I couldn’t have said it better myself. Balance in your portfolio is one of the best ways to moderate risk. Great article.

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