Income Investing

Income investing is owning investments that produce cash payouts, often dividend stocks and bonds. Part of your return comes in the form of hard cash, which you can use for anything you want, or you can reinvest the payouts into more stocks and bonds. If you own income stocks, you could also still enjoy the benefits of capital gains in addition to the cash income.

Advantages: You can easily implement an income investing strategy using index funds or other income-focused funds, so you don’t have to pick individual stocks and bonds here. Income investments tend to fluctuate less than other kinds of investments, and you have the safety of a regular cash payout from your investments. Plus, high-quality dividend stocks tend to increase their payouts over time, raising how much you get paid with no extra work on your part.

Risks: While lower risk than stocks generally, income stocks are still stocks, so they can fall, too. And if you’re investing in individual stocks, they can cut their dividends, even to zero, leaving you with no payout and a capital loss, as well. The low payouts on many bonds make them unattractive, especially since you’re not likely to enjoy much or any capital appreciation on them. So, returns from bonds may not even beat inflation, leaving you with reduced purchasing power. Also, if you own bonds and dividend stocks in a regular brokerage account, you’ll have to pay taxes on the income, so you may want to hold these assets in a retirement account such as an IRA.

Here are a few high dividend ETFs: VIG - VYM - SCHD - SDY - DVY - NOBL