In the investing philosophy, income investing refers to the practice of creating a portfolio of diversified investments that can provide a passive income to live on. Stocks are one of the investment tools offering regular income that an investor can use in their everyday expenses.
Dividend-paying stocks bring much-needed stability to an income investing portfolio. These can be common stocks and preferred stocks and both are useful when it comes to regular income. Shareholders receive dividends from the annual profit of a company. The proportion of dividend is based on the volume of shares they own. A good dividend yield is 4% – 6%. The dividend yield is the dividend payout as a percentage of the share price.
Investors should choose companies that have records of safe dividend payout ratios. If a company distributes 40% – 50% of its annual profit and reinvest the remaining back into the company for growth.
If you are a long term investor, you can also expect some capital appreciation apart from the quarterly dividends. If your portfolio increases in value, you can use that capital to generate additional income.
Online Share Trading for Income
Online share trading involves the trading of shares using an online platform. To access the online platform, one needs to open a Demat and Trading Account with a broker. Intraday traders trade and earn on a daily basis. Intraday trading is all about trading strategies to be employed by a trader to minimize the losses. If you opt for a discount broker, you will have to pay a flat brokerage rate per trade as against the volume-based brokerage charges charged by full-service brokers.
Other Investment Avenues
Different investors invest with different financial requirements. While selecting an investment avenue, investors have to match their risk profile and the risk associated with the product. Following are the other investment avenues that generate regular income:
Mutual funds are majorly debt instruments. The interest is disseminated among investors periodically. These are suitable for investors who need a regular income and are looking for accumulating funds in the short-term.
Dividend-Paying Mutual Funds: Dividend-paying mutual funds are a steady source to receive regular payouts that keep the risk factor low. These mutual funds have a proven track record of announcing profits.
Real Estate Investment Trusts (REITs)
The REITs participate in real estate projects. They typically invest in commercial real estate projects such as office buildings, shopping centres, complexes, etc. It can be either equity REITs or mortgage REITs.
One can own rental properties or invest through (REITs). Real estate offers some protection against high inflation. Its tangible nature creates lasting value.
NBFC Fixed Deposits
Fixed deposits provide regular payouts of interest. In case of a non-cumulative fixed deposits you will get options of receiving interest payouts on a monthly, quarterly, half-yearly, or annual basis. One can earn a higher rate of interest by investing with Non-Banking Financial companies (NBFCs) as they generally offer 1-2% more than banks. Bajaj Finance FD offers up to 7.35% interest rate. Apart from fixed interest rates, fixed deposits also offer various other benefits such as flexible investment terms, loan against FD, flexibility to choose the frequency of periodic interest payouts, premature withdrawal facility, online FD calculator, and more.
7.15 percent RBI Bonds
RBI Bonds are non-cumulative securities. The interest is payable half-yearly. It is exempted from the Wealth-tax Act, 1957.
Some government Investment Avenues offer regular income:
Pradhan Mantri Vaya Vandana Yojana
Senior Citizens Savings Scheme
Kisan Vikas Patra (KVP)
National Savings Certificate (NSC)
NPS & Atal Pension Yojana
Pension and Annuity