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How to invest for income, rather than for growth

12/04/2021

Before investing your money, it’s important to know the answer to one big question: are you looking to invest for income, or for growth? 

While some are happy to squirrel money away for years without touching it, others will either prefer or need to be able to withdraw some of their investment growth at regular intervals to use as a form of income. Some will opt for investing for growth in the early years of investing, and then switch to investing for income as they head closer to retirement. If you’re looking to invest for income, what does it mean for your investment strategy? 

How does income investing work?

Income investing, say Schroders, “means selecting investments designed to deliver a steady stream of income over a certain period”. Some may withdraw this income to use to supplement a pension or salary, while others may choose to reinvest it elsewhere, potentially generating additional income. 

In a typical portfolio designed to generate income, you may find four different types of investment:

Dividend stocks: Stocks in companies who make payments to their investors on a regular basis – essentially passing on part of their earnings to investors. 

Bonds: These generate a fixed “income” from money you lend to either companies or the government who need an injection of cash. 

ETFs and mutual funds: Find out more about ETFs (exchange-traded funds) here.

Real estate: Generating income by investing in either residential or commercial property, and renting it out. 

What does income investing mean for my strategy?

If you’re looking to invest for income, experts suggest that you choose “stable, slow-but-steady assets that are unlikely to take sudden dips”. By doing this, you can aim for an investment that will grow regularly and allow you to skim an income off the top. However, some may be willing to take more risk than others – and your appetite for risk may well influence how you choose to invest your money for income. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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