Here's a big downside to investing in stocks: Your gains come later, not sooner.
If you don't invest in income-producing securities, then your portfolio won't generate a regular stream of cash flow. Instead, when you need funds for retirement or other purposes, then you'll have to sell a portion of your stocks to generate the cash you'll need.
That’s why I’ve invested nearly all of my money into income-producing income assets, so I can generate cash flow immediately to help fund my lifestyle. Each dividend check I receive helps bring me and my family closer to financial freedom.
Here are five asset classes that could help you generate annual income of up to 9% from your investments...
1. Dividend-Paying Stocks and Funds
Dividend-paying stocks are hassle-free income-generating investments. You receive a portion of a company’s profits just for being a shareholder. At regular intervals, you receive a payout based on the number of shares that you hold. You can begin receiving dividends almost immediately.
Start with dividend-paying stocks and exchange-traded funds (ETFs), and build up your portfolio. It’s also possible to find some great foreign stocks that offer competitive yields. Your income will rise as you build your portfolio.
Here's a quick list of some of my favorite dividend-paying stocks and ETFs...
JP Morgan Equity Premium Income ETF (JEPI) - 9.0% yield
iShares International Select Dividend ETF (IDV) - 7.0% yield
AT&T (T) - 6.3% yield
Exxon Mobil (XOM) - 3.7% yield
Reaves Utility Income Fund (UTG) - 7.0% yield
2. Bonds
Another classic addition to any income portfolio is bonds. While you won’t receive your principal back until the bond matures, you receive interest payments regularly. With the right strategy, bonds can provide you with a solid income stream right now. Bond funds allow you access to a diversity of choices, and if you want to increase your potential yield, then you can look into municipal bonds (they come with tax benefits) or emerging market bonds.
Here's a quick list of a few of my favorite bond funds...
Invesco Value Municipal Income Trust (IIM) - 5.0% yield
Western Asset Inflation-Linked Opportunities & Income Fund (WIW) - 6.4%
iShares Mortgage Real Estate Capped ETF (REM) - 7.0% yield
3. REITs (Real Estate Investment Trusts)
REITs are a special type of company that invests in real estate. They give investors like you and me a chance to profit from real estate without a huge capital outlay, and receive income as well. The structure of REITs means that 90% of profits have to go to dividend payments. If you want exposure to real estate in your income portfolio, REITs can be the way to go. As with many other income investments, it’s possible to purchase REIT ETFs and you can geographically diversify your holdings with foreign REITs.
Here are a few of my favorite publicly-traded real estate funds...
Vanguard Real Estate Fund (VNQ) - 3.0% yield
Vanguard Global ex-U.S. Real Estate Fund (VNQI) - 7.6% yield
4. Master Limited Partnerships (MLPs)
Many investors aren’t aware of these income-producing investments.
MLPs are most commonly found in the energy sector. The majority of them own and lease oil and gas pipelines, as well as a variety of other energy infrastructure assets.
Here are a few of my favorite income-producing MLPs and MLP funds...
Alerian MLP ETF (AMLP) - 7.4% yield
Enterprise Products Partners (EPD) - 7.2% yield
5. Preferred Shares
If you want income that is a little more regular, preferred shares can be the way to go. A preferred share is a hybrid: It’s not a common stock, and it’s not a bond. It represents a sort of quasi-debt. Preferred shares pay out regular dividends, and yields can be 6% or more.
Many companies that offer preferred shares are in the financial sector, so you need to feel confident about those companies before you buy.
Here are a few of my favorite preferred stock funds...
Nuveen Preferred Securities Income Fund (JPS) - 7.2% yield
Global X U.S. Preferred ETF (PFFD) - 5.9% yield
Summary
Investing doesn’t have to just be about capital appreciation over a period of decades. It’s possible to start making money right now when you invest in income-producing assets. Just make sure you diversify your income portfolio by investing in a mix of income investments that suit your risk tolerance. Create a plan that mixes long-term capital appreciation with income right now, and you’ll have a great recipe for long-term financial success.
