Investing for Current IncomeOne of the goals you might have for investing is to generate more income. What kind of investor might have this as his or her goal?
- Someone who is retired
- Someone who wants financial security and independence
- Someone who wants a comfortable standard of living
- Someone who wants to pay off debts and bills
- Someone who wants extra money to travel
Certain types of investments are very effective for generating income on a regular basis. These include the following:
- Cash and equivalents, including money market accounts, CDs, and Treasury bills and notes. These instruments provide interest income on a regular basis.
- Bonds, including Treasury, municipal, and corporate bonds. These provide a higher level of fixed income over time.
- Income stocks, including preferred stock, utility stock, and high-capitalization blue chip stocks. These stocks pay income in the form of dividends.
- Income mutual funds. Income funds provide a way of investing in diversified portfolios of income investments such as the ones mentioned above to provide reliable income over time.
However, a portfolio made of these investments may run the risk of not growing as much in value over time as would a growth-oriented portfolio. Some investors find that they need to balance their goal of income with their desire to build the value of their investment capital.