Income investing is an overall investment strategy, which is centered around building a specialized investment portfolio specifically designed to make regular monthly income. The only goal of this general income investing strategy is to produce a steady flow of ongoing income. The consistent income can often be in the form of salary, dividends, and interest income.
So, how to build an income investing portfolio? The first step is to choose an overall investment strategy or set of strategies to use. Some of these strategies can be long term and call for large amounts of capital, whereas others are short term and more flexible. Many investors have success with generating a large amount of passive or residual income through short term investments such as real estate and certificates of deposits (CD’s). It is also possible to generate income through using asset allocating policies.
Some of the real estate and stocks that produce income investing are fixed assets such as property, land, buildings, and equities. These types of investments will generally have a term life such as thirty years. Long term securities such as bonds and CDs may also have a term life of up to thirty years. If the investment is secured by a borrower’s home equity or if it is a single family dwelling the mortgage will often have a term commitment. A home equity line of credit (HELOC) may also be used to secure many of these long-term securities.
Other types of investments that produce income investing may not have a term life such as bonds and CDs. These may also be of interest to investors who are looking for a secure income source that will not wear off. These include stocks such as bond funds, money market accounts, and penny stocks. There are also specialty areas such as real estate, which can be used to build a portfolio. These can include commercial properties, vacant land, manufactured homes, and development sites.
Income generating investments can also be comprised of partnerships. One example of this is by using a limited liability company. Partnership interests can yield high dividends when they mature. There are also some options that yield lower but consistent income investing. These options include tax haven investment strategies, and options such as commodity investing. These strategies and options may not always yield returns that will be high enough to cover expenses but will most likely generate enough income to cover your taxes at least for a short period.
There are some areas in real estate that will yield high dividends. This includes properties that are below the market value. Properties in areas with little vacancy will also yield higher incomes for investors. The rent received from properties such as these will typically be exempt from income tax. As with any other type of income investment, income investing also requires careful consideration and a thorough analysis before proceeding.
Another advantage of income investing is that it can help protect your capital when traditional methods of savings and investment have a limit on how much you can accumulate in a single year. With income investing, you can build up your cash flow and increase the amount of money that you have available to use for retirement, use for home equity, or for other purposes such as paying off credit card debt and business debt. For many people, the flexibility of fixed income investments outweighs the risk associated with fixed return investments.
If you are interested in making income investing part of your long-term strategy, consider buying stocks or bonds that do not have dividends. You can use this money to supplement the money that you currently receive from your regular savings. You may also want to invest in some government-issued bonds. A key consideration when deciding on what type of fixed income investment you will make is how you will obtain access to the funds that you need to meet your goals.