Investing for Current Income

One of the goals you might have for investing is to generate more income. What kind of investor might have this as his or her goal?

• Someone who is retired
• Someone who wants financial security and independence
• Someone who wants a comfortable standard of living
• Someone who wants to pay off debts and bills
• Someone who wants extra money to travel

Certain types of investments are very effective for generating income on a regular basis. These include the following:

• Cash and equivalents, including money market accounts, CDs, and Treasury bills and notes. These instruments provide interest income on a regular basis.
• Bonds, including Treasury, municipal, and corporate bonds. These provide a higher level of fixed income over time.
• Income stocks, including preferred stock, utility stock, and high-capitalization blue chip stocks. These stocks pay income in the form of dividends.
• Income mutual funds. Income funds provide a way of investing in diversified portfolios of income investments such as the ones mentioned above to provide reliable income over time.

However, a portfolio made of these investments may run the risk of not growing as much in value over time as would a growth-oriented portfolio. Some investors find that they need to balance their goal of income with their desire to build the value of their investment capital.

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