![]() You don't have to become a landlord: REITS and RELPs are common ways to invest in real estate indirectly. The income derives from rents paid by tenants of residential, industrial, or commercial properties, and sometimes from mortgage interest on the properties as well. What they are: Although it can and does appreciate, real estate often provides a solid cash flow as well. What to know: Bond prices tend to go up when the stock market goes down, making bonds a good tool to balance risk from equities, as well as an income source. depending on the creditworthiness of the issuer. For that reason, they pay a higher interest rate than government bonds. Corporate bonds are issued by companies (both public and private) and therefore riskier than government bonds.Interest is exempt from federal taxes and often from state and local taxes as well. Municipal bonds are a form of government bonds issued by states, cities, counties, and other government entities.Government bonds, also known as Treasuries, are considered extremely reliable because they are backed by the US government, but the tradeoff is a relatively low interest rate.How they work: The rate of interest you receive on a bond depends on the length of its term - the longer, the higher - the creditworthiness of the borrower, and the conditions of the market. When the loan term ends, you receive your original investment back. As the bondholder (lender) you receive a fixed amount of interest income on a regular schedule. Your income from bonds comes in the form of fixed-interest payments. What they are: Bonds are loans to the government or a company. That ratio indicates a decent payout relative to a company's earnings and market valuation and helps you avoid companies that may be borrowing excessively to inflate their dividends. (It's often indicated on a stock's online listing.)Īim for stocks that pay a 2% to 6% dividend yield. How to tell if a dividend is a good one? Look not just at the dollar amount, but at the dividend yield: that is, the company's annual dividend divided by its stock price and multiplied by 100. What to know: The most consistent, good dividend-payers tend to be from blue-chip stocks - that is, those of large, well-established corporations. Preferred stock dividends are less risky, but generally lower. Also, preferred stockholders receive their dividends before common stock shareholders get theirs.Īlthough common stock dividends are riskier, you stand to gain more. Preferred stock dividends are more regular: pre-determined, fixed payments over a specified period of time. You won't know the amount or even if there will be a dividend until the board decides. How they work: Common stock dividends are set by the company's board of directors each quarter. The two main types of dividend stocks are called common and preferred. What they are: Dividend-paying stocks are issued by companies that make cash payments per share, generally quarterly, based on how well the company is doing. ![]() There are multiple types of investment income assets, and ways to invest for income. This is buy-and-hold passive investing at its best. ![]() With income investing, once you buy the asset, there isn't a whole lot more to do. Income investing involves building a portfolio using dividend-paying stocks, bonds, real estate, and other assets designed to generate cash on a recurring basis. We call the latter type income investors. And there are those who ask of their assets "show me the money - now." There are those who want appreciation - that is, they invest for growth. You can classify investors into two basic types.
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