How do we potentially invest for more income?
With interest rates still hovering at lows, investors have to get creative when it comes to generating steady income out of their investments. After all, they aren’t going to find it in bonds, with yields at near record lows. Nor will they get it from bank CD’s, which have been paying low returns for some years now. But investors can find yield in other places, such as dividend paying stocks, or equity income mutual funds.
Dividend stocks may help in the long run.
Dividends have long been a favorite way for higher yield seeking investors to generate income. Some may think a company that pays a dividend is a slow growing one with nothing better to do with its cash. But investors can potentially end up getting a better return from dividend investing stocks a lot of the time. The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.
There are many options when it comes to dividend stocks that you should be aware of. Oil companies, for example, typically pay dividends with suitable yields, but given the current energy environment, that may not be the best way to generate income. You may be drawn to those double digit dividend paying stocks, but you have to be careful when making those investment choices, particularly in an environment marked by slow economic growth. Stock investing involves risk including loss of principal.
Equity income funds give you exposure and may manage some risk.
One of the big question marks in 2016 was whether or not the Federal Reserve would continue to raise interest rates. After much uncertainty, it appears the Fed will continue their current path of raising rates. The uncertainty remains about how many times and at what rate they will rise. As a result, there’s a lot of uncertainty and that can breed risk. One way income investors can potentially cushion themselves from a blow is to spread the risk. One way to do that is with an equity income fund. Investors who utilize a diversified mutual fund that includes a mix of different dividend paying stocks across a broad array of industries may be another option. You do have to be careful of the investment fees that may come along with such investments though, making sure to select a fund whose annual fees don’t overly erode the yield you’re searching for. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Investing in mutual funds involves risk, including possible loss of principal.
The bottom line.
At Nash – Hasty Investment Services, for our clients needing income, we diligently invest with the objective to generate a steady stream of income even when it can be tough in times of economic uncertainty and low interest rates. We utilize a variety of investments that are catered to your particular needs. Contact us today and let’s see if we can help with your individual situation.