income investing strategy An income investing strategy revolves around building a portfolio that generates a steady income. You might be interested in income investing if you’re looking for a way to build a supplemental income stream during your working years or for retirement. If you’re working with a financial advisor , an income strategy is one option you might be offered so it’s important to understand how this approach works.
What Is Income Investing?
Income investing is all about making investments that produce consistent income, either through dividends , interest or a combination of the two. So why would someone want to do that?
Simply speaking, income investing may appeal to people who need or want to increase their current income. The extra money generated by your incomes could be used to cover everyday expenses, pay off student loans or other debts or fund other financial goals, such as saving toward your child’s college expenses.
An income investing strategy is essentially the opposite of a capital appreciation strategy, which focuses on investing in companies that are poised to see significant growth over the long term. In this scenario, an investor is banking less on dividends and more on price appreciation by holding shares of companies that tend to reinvest retained earnings for expansion rather than paying them out to investors.
The overall goal of income investing is to provide an investor with passive income. Investors are less interested in stocks that may see big price jumps in years to come. Instead, they’re looking at companies that have a consistent track record of paying out dividends to their investors. So they may lean more toward the Dividend Aristocrats or Dividend Kings rather than trying to find the next Amazon or Facebook.
What Does an Income Investing Strategy Look Like? income investing strategy There […]
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