The Sunday Mail
SOMETIMES you just think, “The money I am currently making just isn’t enough”, and it is in times like this that it may be worth considering income-generating investments. These provide more than just growth; they also provide an element of safety and guaranteed income.
These investments provide monthly income, and they come with a diverse range of features to cater for various preferences for safety, security and yield. These investments include money market funds, bond funds, real estate investment trusts (Reits), security of deposits, equity funds (shares) and alternative investments. From this compilation of top monthly income investments, you are likely to discover an option that aligns with your financial goals.
Below, we will explore these income-bearing investments and their main characteristics.
Publicly traded Reits own income-producing real estate or mortgages and must distribute 90 percent of taxable profits as shareholder dividends, some of which may be paid monthly. It is much easier to buy and own Reit shares than to purchase and manage individual properties yourself. Reits also provide risk-reducing diversification but are vulnerable to real estate cycles and interest rates.
Fixed deposits are commonly categorised as income investments due to their characteristic fixed-rate returns, usually distributed as interest across a predetermined time frame. These deposits typically offer higher interest rates than standard savings accounts, making them an appealing choice for individuals seeking a consistent income source from their savings.
Additionally, fixed deposits are regarded as relatively low-risk investments since they are government-insured up to specific limits, which can vary based on the jurisdiction. Nonetheless, it is crucial to recognise that the returns from fixed deposits might not match the rate of inflation, potentially resulting in a decline in the investment’s real value over time.
Dividend shares refer to the equities of publicly traded companies that routinely provide dividends to their shareholders. A dividend represents a portion of the company’s profits distributed to its shareholders, typically disbursed as cash or additional shares of stock.
These companies that consistently pay dividends are frequently well-established, mature businesses with a reliable track record of earnings and cash flow. They often operate in industries characterised by stability, where rapid technological changes are less common or a history of steady growth can be observed.
For investors in search of a relatively steady and predictable source of dividends, preferred shares can serve as an attractive income option. These shares represent ownership in a company, akin to common shares, but they enjoy a higher priority when it comes to dividend distribution and recouping investments in the event of bankruptcy.
One primary advantage of preferred share investments lies in their tendency to offer superior dividend yields compared to common stocks and bonds. Furthermore, preferred share dividends are typically fixed, rendering them less vulnerable to fluctuations in interest rates and market dynamics often seen in common shares. Nevertheless, it is important to recognise that investing in preferred shares carries certain risks. Unlike bonds, preferred shares lack a maturity date and may not be subject to redemption by the issuer.
The bond market serves as the primary source for corporations and governments to secure financing. When you invest in corporate or government bonds, you essentially assume the role of their creditor or lender. Bonds offer varying interest rates, influenced by factors such as the issuer’s financial stability, the bond’s maturity duration and other relevant considerations. Notably, bond yields can often exceed those of standard bank deposit accounts. While most bonds typically disburse interest on an annual or semi-annual basis or upon maturity, there are also options that provide monthly interest payments.
The best way to access income-bearing investments while avoiding administrative hassles and complex procedures is by investing in unit trusts or hedge funds that include these income assets within their portfolios.
Behind the scenes, asset managers handle the management of these underlying assets, leaving you, as an investor, with the simple task of selecting the one that aligns best with your financial goals. For individuals who may not possess extensive knowledge or expertise in unit trust investments or the selection of underlying funds, seeking guidance from a financial adviser is highly recommended. They can provide valuable insights and assistance to ensure you make informed investment choices.
In times when your current income feels insufficient, exploring income-generating investments can provide not only financial growth but also a sense of security with guaranteed returns.
Monthly income options — including money market funds, bond funds, Reits, security deposits, equity funds, and alternative investments — offer a diverse range of features to suit various preferences.
Simplifying access to these opportunities by investing in unit trusts or hedge funds managed by professionals streamlines the process, allowing you to choose the best fit for your financial objectives. For those lacking expertise, consulting a financial adviser is a wise step to make informed investment decisions. — Moneyweb