Investors have long understood the importance of proper diversification of assets when it comes to growing income. This is one of the fundamental principles of investing. However, people would have a lot more wealth to spread around if it were truly as simple as that. Portfolio diversification must take in account various components of the investors life, including age and risk tolerance. It is not always so easy to know how to properly diversify, willing to accept losses in the short term to realize gains in the long, and end up coming out on top. With that in mind, continue reading to learn how to effectively increase your investment income.
Investments That Provide a Fixed Income Are Necessary
It seems that many investors who are seeking after big returns shun the safety of fixed income investments. They simply shy away from bonds and other instruments because they do not hold the glamour of stocks and commodities. With the latter comes risk, however, and this is not always the way to balance an investment portfolio to the extent that is necessary to generate income. Many investors have come to realize that bonds have a special appeal to them, especially when the markets begin to enter a downward cycle. Stocks can lose money for multiple quarters in a row, but bonds will keep churning out a positive return. It might not be the big returns that you are hoping for, but it must be looked with the larger perspective in mind. When you have a well balanced portfolio, fixed income investments will always be there to help you generate income when you need it most.
Funds Providing a Retirement Income Are An Option
Retirement can be stressful due to the loss of income that comes with it, but it does not have to be. There are ways to increase that income without creating more financial difficulties for yourself. One option is a reverse-mortgage. It is different from a traditional home loan because it is a long-term agreement with no immediate mortgage bills you have to pay. When you request a loan from a reverse mortgage lender, you can set up payments you will receive each month until you borrow the full percentage of home equity available. Alternatively, you can set up a home equity line of credit or request a large single payment, such as to pay a medical expense. Paying back the loan is only required when you no longer reside in the home, allowing you complete financial freedom during your retirement, as long as you do not leave the property.
You do not have to be approaching retirement age to have one eye looking forward towards your golden years. In fact, your investment portfolio should be developed with retirement as your core objective. With that in mind, there are certain funds in existence for the sole purpose of giving the investor some income during their retirement years. This is a specialized fund that pools your money together with other investors to focus on the purchase of low risk investments. This includes a mix of low risk stocks that are considered safe bets, along with bonds and other investment vehicles that generate stable income. This will be a way to use your investing dollars to provide you with income when the day comes that you do decide to retire. If you want to learn more about how you can direct your own funds, check out Fundrise for options.
Stay Away From Risky Bond Funds
Many people believe that all bond funds are risky. This is simply not the case, as Fundrise Reviews will reveal. Just as with any investment vehicle, there are some that you will want to stay away from if your tolerance for risk is low, but there are some great ones out there that can generate you the type of income you have been looking for. The general rule is that risk increases as bond yields increase. What you want to do is diversity your bond holdings so that your risk is tempered by safe investments.
Following this advice will help you to achieve your income goals as they relate to investment dollars. The key is to do your research and know what type of investments you are comfortable with. If you do that, the income should follow.
Photo Credits: Pixabay