Sometimes people can or will follow only a simple, easy income investment strategy.
Don't Make Investing More Complicated Than It Has to Be
Many people are intimidated by the complexities of investing. They start to read about stocks. Then they see they're supposed to know all about balance sheets and financial formulas, and their eyes glaze over.
They start to read about bonds, and then see how there are Treasury bonds, corporate bonds, and municipal bonds -- not to mention Treasury Inflation Protected Securities (TIPS) bonds. And that's before they even get into duration. That will really blow your mind.
Too Many Financial Authors Advise Too Much Research
And then they read authors who tell them they have to read The Wall Street Journal every day, Barron's every week, all the financial magazines every month, and Morningstar, and visit Google Finance and Yahoo Finance, and on and on and on . . .
Small wonder they often just give up and open up an account at a mutual fund. As expensive as mutual funds are, it's arguable they're cheaper than all the research some people advise. If not monetarily cheaper, they're a lot less time consuming.
Income Investing Does Come With Choices
And even though my strategies for investing for income does away with a lot of the overcomplexity of typical advice, I have to admit it's not as easy as one two three.
For one thing, there are a fairly large number of income investments.
I divide them into two basic groups: fixed income and growth income.
And within each group there are a fair number of choices.
Bonds Can Get Complicated
There are a fair number of types of bonds, which includes their terms, because whether they mature in a year or twenty years affects them.
So Can Stocks
Growth income investments include stocks, but not just any stocks -- stocks that pay dividends.
But those can be broken down into various categories.
Some stocks have a better record of paying dividends and raising them every yield. Some types of companies have to pay dividends: Real Estate Investment Trusts, Canadian income trusts (until 2011) and Master Limited Partnerships. Some types normally do pay dividends, such as utility stocks.
Pick a Stock, Any Stock . . .
You could pick one income investment which appeals to you, and buy it, and only it.
For example, pick a major Real Estate Investment Trust, such as Kimco Realty, and buy it, and only it.
Owning Just One Company is Too Risky
However, this is risky, because you're pinning your entire retirement on the fate of just one company. Kimco Realty is a great company, and I have nothing but good things to say about it, but I don't know its future and neither does anybody else.
So it'd be safer to invest in the entire -- or at least a large segment of the highest quality companies -- REIT sector.
Owning Just One Sector is Too Risky
However, that's still somewhat risky. What if the entire real estate market goes to heck -- as it did from 2008 to 2009?
So the problem is that simplicity comes at the cost of diversity, which is how you protect yourself from the risk. The more diversity in your portfolio, the safer it is.
You can Build a Solid Retirement Portfolio With Just Two Simple Investments
And everybody should have both kinds of investments for income -- bonds and stocks.
TIPS -- Directly or Through the TIP ETF
If you want to narrow your bond portfolio down, buy Treasury Inflation Protected Securities (TIPS). These guarantee you a long term return over and above the rate of inflation.
If you're already retired or you want to buy them outside a tax-deferred retirement account, buy TIPS directly from the United States Treasury at treasurydirect.gov .
If you want to use your IRA or other tax-deferred retirement account, don't buy TIPS directly. Buy the Exchange Traded Fund (ETF) with the symbol TIP.
One ETF For Income Investors
For equity income investors there is one type of security which goes for many different kinds of high yielding income securities -- the Claymore/Zacks Multi-Asset Income Index Exchange Traded Fund -- symbol CVY.
This ETF buys up many different kinds of income producing securities.
The older you are, the more TIPS you should buy.
The younger you are, the more CVY shares you should buy, so your income will grow for the future.
Is this the "best" income investing strategy? Personally, for my own IRA I'm buying up many other kinds of investing for income types of securities, because I believe in diversification.
Any Income Investment is Better Than None
However, the very best income investment is the one you apply to your retirement account. If simplest is what works for you, do it.
Author Resource:
You can build a permanent, income generating retirement portfolio. Click here to get the information you need to effectively make money from your investments whether the markets go up or down. If you're ready to discover how an income investment can help you retire with financial security, visit this page, enter your email address into the form and click on the Submit Button. Then go to your inbox and verify that. It's free for the taking. http://www.incomeinvesthome.com/.
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