Obtaining and sustaining a monthly income from investments is a goal that many investors strive for. Reliable income requires a low risk factor, but this means a lower percentage of return. On the other hand, higher risk investments have greater returns but run the risk of being wiped out by market fluctuations. Of course, home investors benefit from risk management as well. Investors looking to generate passive income from their investments have to consider the long term risk and reward of each financial instrument. The following are the best investments for monthly income generation.
One of the safest ways to generate a steady monthly income is to purchase and hold government bonds. Bonds can be bought and sold individually or in bundles. The return on investment for bonds is variable and correlates positively with the length of the investment. This investment is particularly safe due to how rare it is for governments to default on bonds. For example, the United States has only defaulted on bonds once, and investors were compensated fully shortly after. For cautious investors, putting their money into government bonds is the safest way to make money.
Corporate Investment Bonds
Corporate investment bonds are an option for investors looking for safety and higher rates of returns. Like government bonds, an investor buys a share of a publicly traded corporation’s debt in return for a larger payment upon maturity. Corporate bonds have a higher average rate of return compared to government instruments. The risks involved with these investments are higher than government bonds, but lower compared to most other investments. These bonds are best suited for investors looking to make higher monthly returns without excessive risk.
Stock Market Dividends
Investing in stock markets profitably is one of the most common ways of generating passive income. Each company has different dividend rates and time tables for paying out earnings so investors should do research before buying stock. Investors also have the option of buying investment bundles through managed funds, which lower risk by diversifying stock portfolios. However these funds take a portion of the principle as a fee for managing investor profiles. Investors willing to take more risks can see more monthly income with stock market dividends.
Real Estate Investment Trusts
Investors can earn high returns on their money by buying shares in a real estate investment trust. Similar to buying an investment property, these trusts buy buildings or land and pay out dividends to shareholders. These investments can involve buying a property and repairing it for sale or renting properties. Buying into these trusts often requires higher initial capital and carries more risk than stock options, but has the advantage of very high returns. Real estate investment trusts are a good option for investors with large amounts of capital.
Long Term Annuity
Annuities can be the best type of investment for receiving monthly income because they pay out at periods determined by the investor. These instruments are similar to insurance plans, and typically involve steady payments over a long period. Only once you meet the target amount of investment the annuity starts to pay out dividends. While it does not have the immediate benefits of other investment opportunities, annuities have the advantage of “averaging the market.” In other words, annuity investments can survive market crashes because the length of the investment means they often ride the recovery back to full value. Risk-averse investors that are not looking for immediate returns should consider investing in a long term annuity plan.
Investors looking for ways to generate a stable, monthly income from their financial instruments have a lot of options. These options vary in risk, return, and payout period. Some options, like government bonds are very low risk but have a low return to match. You might also consider looking into what ETF trades are. Investments like a corporate bond with an established company can have higher returns than government bonds in exchange for a middling risk. Other options like publicly traded stocks have much higher rates of return, but can also run the risk of losing the entire investment. A real estate investment can be attractive to investors who have access to higher amounts of starting capital. For more patient investors, a long term annuity plan carries low risk with good returns. The specific needs and situation will dictate what options allow you to generate a monthly income with financial investments.