Income investing is the practice of designing a portfolio of diversified investments to achieve a passive income to live on. These investments can include real estate, stocks, mutual funds, and bonds. Read the previous article here.
Here are the tips to successful income investing for beginners.
6. What to Look for in Dividend Stocks for an Income Investing Portfolio
In your personal income investment portfolio, you’d want dividend stocks that have several characteristics. If a business pays out too much of its profit, it can hurt the firm’s competitive position. A dividend yield of between 2% and 6% is a healthy payout.
That means if a company has a $30 stock price, it pays annual cash dividends of between $0.60 and $1.80 per share.
7. What Allocation I Should Consider for My Income Investing Portfolio
The simplest income investing allocation would be 1/3 of assets in dividend-paying stocks, bonds and real estate have its roles. Dividend-paying stocks and bonds and/or bond funds meet previously stated criteria.
Meanwhile, 1/3 of assets in real estate, most likely in the form of direct property ownership through a limited liability company or other legal structure. You could use this portion of your portfolio as a 50% down payment and borrow the rest so you can own double the real estate.
8. Bonds in an Income Investing Portfolio
With a bond, you are lending money to the company or government that issues it. With a stock, you own a slice of the business. The potential profit from bonds is much more limited; however, in the event of bankruptcy, you have a better chance of recouping your investment.
9. How Real Estate Might Help You Double the Withdrawal Rate
If you know what you’re doing, real estate can be a great investment for those who want to generate regular income (picture payments rolling in each month). That’s especially true if you are looking for passive income that would fit into your income investing portfolio.
10. The Role of Saving in an Income Investing Portfolio
Remember that saving money and investing money are different. Even if you have a broadly diversified income investing portfolio that generates lots of cash each month, it is vital that you have enough savings on hand in risk-free FDIC insured bank accounts in case of an emergency.
You should wait to begin investing until you have built up enough savings to allow you be comfortable about emergencies, health insurance, and expenses. Only then should investing be conducted.
