How investing for income could help you
You’ve worked hard, hard enough to invest and build a portfolio for the future. But as time passes by, you may now be beginning to think about taking things easier. As such it’s important to plan ahead.
- Help with monthly bills
- Help with school/university fees
- Pay towards your dream holiday
A range of asset classes offer income potential and it makes sense to spread (or diversify) your risk across these as their income generating abilities vary during different economic climates.
- Equities – dividends from shares can generate an attractive level of income and provide scope for capital appreciation as well.
- Commercial property – rental income means that investments in office, retail and industrial properties can provide investors with a reliable and attractive income.
Generating a regular income
Although savings accounts can provide an income, interest rates may remain unattractive. If you’re comfortable that stock market investments present a higher risk than savings accounts, it makes sense to see what opportunities are available.
Investing for income simply means that you’re interested in putting some of the potential returns that your investment generates throughout its life to good use. This could be to assist with day-to-day outgoings or it could be to support regular payments, such as school or university fees.
At BMO, we provide a number of options for those investors who are looking to generate income.
Investment trust income
It’s worth noting that in contrast to open-ended funds – which are obliged to pass on all the dividends they receive in any given year – some investment trusts are able to maintain payouts to investors as they operate a revenue reserve.
By keeping back some of the income they generate in the good years they can bolster dividend payments in the bad. Over the longer term, the income from shares has proven to be a significant component of overall total returns.
Before you invest, please be aware that the yield these options produce isn’t guaranteed and can fluctuate – sometimes significantly.
The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market movements. Yields are calculated on a historic basis using the actual dividends paid during a company’s last financial year and the closing share price as at the end of the relevant month. Past performance is not a guide to future performance. When you sell your shares, you might get back less than you originally invested. Change in rates of exchange may have an adverse effect on the value, price or income of investments.