In today’s economic climate, there are a lot of people who want to know what is income investing. In a previous article I touched on some basics regarding what is income investing and how it differs from actively managed investments. This is basically where your money is in the hands of a professional or experienced investors. The goal for an individual investor is to build up a portfolio that will provide them with a modest income and that will also keep growing over time.
Income investing is simply the process of carefully designing an investment portfolio to attain a modest passive income to survive on. These investments may consist of stocks, real estate, bonds, and mutual funds. It’s important to think about what types of assets would be most beneficial to an individual investor and learn the most common risks that may affect an income investing portfolio… Here’s what to keep in mind:
If you are just getting started with an income investing portfolio, it’s important to start out with safe, low-risk assets. This is going to help you generate the fastest returns and minimize your risk. Safe investments allow you to generate a high return but also have little or no risk of losing money as well.
Some of the safest investments to make are those that pay dividends… sometimes monthly or at other times throughout the year. Dividends are payments received by the company from its stockholders. These can come in the form of checks, certificates of deposit, money market funds, or even petroleum funds. There are many companies that offer income investing options that allow investors to choose from a wide array of potential dividends…
Dividends are attractive to investors due to the fact they don’t require a large amount of upkeep. As long as the company is making money, you will receive your dividend payment. One of the primary reasons that income investing makes sense for busy people is that you can generate a very high return on your investment quickly. Once you have learned how to best manage your portfolio, you can even sell some of your holdings and create a profit with your investment. Dividends can be used as a source of additional income as you grow your portfolio.
Real estate income investing allows investors to choose between owning residential properties and buying condos or apartments. Typically, the condos pay more in rent because of their proximity to amenities. However, many investors prefer the more stable realty income property such as a single family home because the equity will always be available. While owning real estate can give you extra cash flow, it is a much more complicated option that must be handled and managed by a professional. Most investors find that they do not make enough money to justify the time and expense it takes to manage a realty portfolio.
There are many different areas where investors can put together income investing portfolios. Putting together portfolios that focus on stocks and bonds is simple and an integral part of learning how to invest. For instance, if you have a bunch of blue-chip stocks that are doing well, then you will want to add those stocks to your portfolio.
Most investors will find that putting together an income investing portfolio that covers multiple asset classes pays off the best. Investing in mutual funds is a great way to build a diversified portfolio that will generate a reliable cash flow. The key is selecting investments that will generate an income and generate a return. If you do not do your homework, then you might find that the majority of your portfolio will be lost and you will lose money in any investment. It is imperative to do your homework in order to generate a dependable income generating portfolio.