Income Investing Advice

Playing the investing game is at the best of times a volatile and fluid activity, depending on your approach to it. While some get up before dawn for the excitement of day trading, and others are in it for the long haul. But no matter your method of playing the game, we all want more stable finances. We all want what is commonly referred to as “Financial Wellness”.

One way to stabilize your investments is Fixed Income Investing. Fixed income investments are those with a (relatively) more predictable return and the returns are issued at certain times, such as monthly, quarterly, or annually. companies and governments issue bonds and pay a rate of return to raise capital.

Knowing more about the available options will inform any decisions you can make in this field. One thing to realize is that there are different types of fixed-income assets. Investors can buy individual bonds, or build a fixed-income portfolio using exchange-traded funds or fixed-income mutual funds.

However, the Federal Reserve recently announced that it is accelerating its removal of monetary support for the economy, citing a rise in inflation that has seen the biggest jump in prices in nearly 40 years. In a move to cool growth, policymakers also said they expect to hike interest rates three times in 2022.

This increase will have positive effects on savings and investments (earning higher interest) but borrowers will also feel the effects of the higher interest when it comes to their debt payments.

“It may be time to reevaluate riskier investments and put more attention on safer bets, like short term US Treasury bonds for example. Either way, it is always smart to place your investments in a safer, middle-ground approach,” says Peter Testani, Vice President of David Lerner Associates.

The reason it’s so important to offset riskier investments is quite straightforward. If you’re making good ground on your safer income investments, but losing on the riskier ones, then you’re likely to be at a zero-sum outcome or worse. So shifting into those safer environments could potentially put you in the green.

Adjusting one’s portfolio to protect against possible exposure is the name of the game. Besides market-based investments, there are also a few other options to consider when it comes to income investing.

Real Estate is one area where experts uniformly agree that investment is a good idea. Rental properties may cost the buyer upfront, but once the rent checks start rolling in, it’s an ongoing avalanche of income. And for those who aren’t interested in the day-to-day burdens of property management, Real Estate Investment Trusts (REITs) are another option.

Pros and Cons for a REIT are that they pay out 90 percent of their taxable income as dividends to investors, but the dividends are taxed as ordinary income.

There are many other kinds of income investments to look at, from crowd-funded real estate to Dividend Stocks, Index Funds, and others. Passive income investments can make an investor's life easier in many ways, particularly when a hands-off approach is preferred.

 

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.

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