Investing for Income

Income investing involves building a portfolio that produces enough profit to pay out a regular income. The success of this strategy depends on selecting investments that are likely to provide a steady stream of cash. Now that interest rates have increased, the yields on fixed income investments are climbing, too.

What Types of Investments?

An income portfolio generally consists of investments having low volatility and a long track record of paying dividends or interest. It typically includes:

• Dividend-paying stocks (or mutual funds*), which are stocks of major companies with a history of maintaining or increasing dividends


• ETFs (exchange-traded funds)


• Bonds and other fixed income securities


• Cash equivalent investments, such as money market accounts and Treasury bills

Not Without Risk

All investing is subject to risk, including the possible loss of the money you invest. While a conservative portfolio designed to produce income is generally less volatile, it isn’t risk free. Keep the following risks in mind.

• Inflation can reduce the purchasing power of returns generated by income-producing investments.


• Companies may cut, or even eliminate, dividend payments if their profits decline significantly. While it’s important to invest in companies with a long history of solid performance, it may not be enough to keep dividends from being affected.


• Not reinvesting returns into the stock market means you’re missing out on compounding, which allows your original investment to grow over time. The longer your investing time frame, the more your savings may benefit from compounding.

Work with a Professional

Beginning investors should keep in mind that it will take many years to build enough wealth to generate a consistent and sufficient income. For income investing to be successful, it should be part of a long-term strategy that takes your goals and risk tolerance into account. Your financial professional can help you design a portfolio that meets your goals.

*Investors should carefully consider the investment objectives, risks, charges, and expenses of the fund before investing. Read the prospectus carefully before investing or sending money. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal.