Income investing


There are several ways investors can generate income from their investments. Stock market trading hours central time They include dividends from stocks, interest (or coupons) from bonds or loans, rents from properties or other types of passive income such as royalties, patents, trademarks, copyrights or profits from private businesses. Inr to usd conversion rate Who should focus on income over growth?

That said, it can be very difficult or impossible to predict your capital appreciation (especially in the short term) so income investing helps to give a more likely prediction of what cash you’ll be generating.

Investors may also focus on dividend income as it provides “tangible” proof (cash payments) of their investment returns.

Exchange rate hkd to usd There are also several studies such as that from Kenneth French which show dividend stocks have outperformed non-dividend paying stocks over long periods of time. Understanding binary Your income investing options 1) Bonds

Bonds are a type of debt instrument. Euro today Companies or governments issue bonds to borrow money and pay back a fixed annual coupon (interest) to the investors who buy the bonds.

Secondary markets exist for bonds which allows investors to buy and sell their bonds. 100 usd to euro There are many different types of bonds and this topic goes beyond the scope of this page.

The income from bonds is fairly easy to predict. Euro to usd forecast Bonds have to pay a certain coupon on a specified date (if they don’t they will probably be filing for bankruptcy).

Your income from most bonds is fixed – hence the term fixed income. Free pictures to color Thus, if you were to buy a bond at what is called “par” (also expressed as a price of 100 – where the bond is selling neither above nor below its purchase price) with a coupon of 5%, then you would know that you would receive an annual 5% return until maturity.

Let’s assume that this 5% coupon bond drops to a price of 95 and has a 5 year maturity. Euro to inr conversion rate today Your yield (return) will increase to roughly 6%. American futures market This is because you will still receive the 5% of par value coupon and the bond will mature at a price of par (100).

This means if you bought $9,500 worth of these bonds, you’d receive $500 a year in interest payments plus you’d get a capital appreciation of $500 as the bond matures at par. Usd conversion rate Of course, the inverse would be true if you purchased a bond above par value. Exchange rate aed usd 2) Stocks

Income investing normally has a large focus on stocks. Usd euro conversion Stocks provide income through their dividends. Price of gold us The dividend is paid from the firms profits and can fluctuate depending on the level of profits.

Most large, blue chip companies try to grow their dividend gradually over time. Stock outperform meaning The most famous examples of these are the dividend aristocrats who have grown their dividend for at least 25 straight years.

Your dividend yield calculates your initial return in dividends from the purchase price. Usd inr exchange rate forecast So if you buy a stock with a dividend yield of 4% and you purchase $10,000 of that stock then you can expect to earn $400 per year in dividends.

The main advantage to dividends over coupons is their ability to grow over time. What is us currency This can help increase the purchasing power of your income over time and help to protect you against inflation.

If the dividend continues to grow over time then it is likely that the capital value will grow as well (although this is not guaranteed). Financial markets futures In the above example, if your initial dividend yield is 4% and the dividend grew by 10% a year, then your dividend would have doubled in just over 7 years. 1 usd myr This means that for the stock to still be yielding 4% then the stock price would need to double as well.

Unlike bonds, over time you should be able to at least increase rents with the inflation rate which would protect your real (inflation adjusted) income, although this may depend on you upgrading the quality of the property.

In a similar way to stocks listed above, if you can increase the rents over time then this should help with capital value appreciation. Canadian dollar to indian rupee exchange rate Capital appreciation can also come with the ease at which people can obtain credit (mortgages), and the local demand and supply of properties.

You also have an advantage in income investing in property. Usd jpy exchange rate Borrowing against the value of the property in the form of a mortgage can leverage the value of your investment. Bloomberg stock futures market Usually you only need a down payment (deposit) against the property, so you can spread your investment over several properties.

Unlike borrowing on margin (how you borrow for stock purchases), banks generally don’t demand extra payments if the value of your property goes down. Gbp usd rate That said, if you fail to keep up with the scheduled payments then the property can be repossessed.

The drawback to living off the rental income can be void periods if your tenants leave and the potential for constant spending (such as for heating / AC systems, toilets, furniture etc.) that is required to maintain the property.

The party that is using the asset is usually known as the licensee and the asset owner is known as the licensor. Twd usd Usually a pre-agreed payment (such as percentage of revenue) is agreed, along with other terms, in the license agreement.

Typical example of royalties payments are to patent owners (such as drug companies), copyright owners (such as authors), franchise owners, music composers, or resource owners.

So if bought your local McDonald’s franchise, then you would have to pay a royalty on every Big Mac sold back to the parent company (McDonald’s) as a condition for you selling those Big Macs. Us market futures 5) Private businesses

In many ways, this is like purchasing a stock but, in this instance, you would likely have a controlling stake which means you can exert more control. Financial market futures This means, you could fire the management, make them send you the excess cash, sell the business on your own terms or set the dividend rate.

You are also likely to be able to purchase a private business more cheaply (on an earnings multiple and asset basis) than a stock on a public market due to the illiquidity of the asset. Pound exchange rate forecast You can probably also obtain financing against the assets or the cashflow of the business.

In the internet era, starting your own business need not be as daunting as it once was. The boxer rebellion tour Programs and tools such as Solo Build It (the system we use to manage our websites), can make it a reality for anyone to start a successful business, without huge capital investment. Gold forecast today Click here for more information. Oil futures market In summary…

It’s important to know about all the options because then you can compare the value you are getting from one possible asset to another. Future marketing trends 2015 There are times when one asset class as a whole can look like very poor value (such as stock in the late 1990s, or bonds at the moment). Aud in usd You certainly need to do a lot of research before purchasing any asset but over time your goal should be to build a collection of these types of assets that will (hopefully) sent you a consistent flow of cash while you get on with your life.