Income investing: boost your earnings through investments

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If you’re aiming to build a steady stream of income beyond your regular paycheck, income investing could be the perfect fit. Income investing is a strategy where you buy assets that provide regular cash flow, as opposed to those that rely on capital gains or appreciation. It can be a fantastic way to diversify your investment portfolio and potentially increase your wealth over time. Let’s take a look at some investments that generate monthly income and how each one can align with your financial goals. 

Investment ideas to generate monthly income 

Navigating specific investment choices can be tricky. While there’s no substitute for personalised investment advice, we’ve put together a list of popular income-generating options to consider. Each one offers unique benefits and caters to different financial goals, helping you find the right fit for your needs. 

  1. Investment properties
    It’s no secret that Aussies love property investment. It’s one of the most popular wealth-creation strategies in the country. An investment property is a physical asset that’s easy to understand and can generate rental income every month.

    Property also has a strong track record of capital growth, so you might enjoy increased value over time as an added bonus. It does come with many expenses, though, including maintenance costs and property management fees. So just make sure you factor these into your budget and do your research before diving in. 

  1. Dividend shares
    Australia has one of the highest-yielding equity markets in the world. So if you’re looking for a steady monthly income, shares that pay dividends might be perfect for you.

    You can either use dividends to buy more shares (most companies offer a dividend reinvestment plan) or pocket the money as extra cash flow. Just remember, while dividends can offer reliable income, the amount you’ll receive can vary depending on how well the company performs and overall market conditions. 

  1. Managed funds
    Managed funds pool your money with other investors to invest in a diversified portfolio. Some managed funds focus on income-generating assets, providing monthly distributions.

    Managed funds are great if you prefer a hands-off approach and want a professional to take care of your investments. It can also be a smart strategy if you’re inexperienced with investing. You don’t have to spend time on research because your fund manager does it for you. 

  1. Online businesses
    According to Australia Post, Australians spent a whopping $63.6 billion online in 2023 alone. If you want to take advantage of this growing trend, you might consider investing in an online business.

    Buying an existing online business means you can skip the start-up phase and dive straight into generating income. Whether it’s an e-commerce store, subscription service or affiliate marketing, online businesses offer the potential for substantial returns. Just keep in mind, it might require a significant initial investment and take some time before you start seeing profits. 

  1. Bonds
    When you invest in bonds, you’re essentially lending money to a government or corporation, and in return, they pay you regular interest payments. This can be a great option if you prefer stability and want to preserve your capital.

    While the returns might not be as high as some other investments, bonds offer a reliable income stream and can be a safe way to boost your financial security. They’re also a good choice to include in a diverse portfolio because of their low risk. 

Real-world examples of generating extra income through investments 

Want to know what income investing looks like when you put it into practice? Here are some real-world examples of how you might generate income through your investments: 

  • Jane and Stephen, Southern Highlands residents, earn a combined income of $180,000. They want to leverage their salaries to build a passive stream of income. They purchase an investment property in Brisbane and hire a property manager to handle maintenance, tenant inquiries and rent collection. This property brings in $2,000 in rental income every month. By investing through their SMSF (Self-Managed Super Fund), they also benefit from tax advantages and can diversify their investment portfolio further. 
  • Sarah, a single professional in Sydney, recently landed a new job with a salary boost to $125,000. Wanting to make the most of her pay rise, she decides to invest the extra income rather than rely solely on her job for financial stability. Since she’s swamped with her new role, Sarah chooses to put her money into a managed fund. This way, she enjoys the perks of professional management and diversification, while the fund manager takes care of the daily investment decisions. 

 

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How to invest your extra income for long-term growth 

Once you’ve started generating extra income from your investments, it’s time to think about how to make it work even harder for you. Here are some strategies to consider for long-term growth: 

Diversify your portfolio 

Diversification spreads your money across different types of assets – like property, shares and bonds – so you’re not putting all your eggs in one basket. Once you’ve got some solid income-generating investments, consider adding a few with high growth potential too. This way, you’re not just protecting yourself against downturns but also positioning yourself to benefit from different market trends. 

Contribute to your superannuation 

Think about boosting your superannuation contributions as a savvy way to grow your future nest egg. By putting money into your super, you can take advantage of tax benefits and set yourself up for a more comfortable retirement. It’s a great way to make your extra income work harder for you, while also giving your long-term savings a nice boost. 

Pay down your mortgage 

If you’re a homeowner, you might want to consider putting some of your extra income toward your mortgage. This can reduce your balance faster, cutting down on interest costs and freeing up your finances in the long run. Plus, having a lower mortgage balance can give you more peace of mind and reduce financial stress. 

Build an emergency fund 

Think about setting aside some of your extra income into a high-interest savings account as an emergency fund. You’ll have a financial cushion ready for any unexpected surprises, and you won’t have to touch your investments to cover those costs. 

Looking for tailored investment advice? Poole Advisory can help 

While this article gives you a good starting point, there’s no substitute for personalised advice from a financial planner. The best investment options depend on your unique goals and situation. At Poole Advisory, we’re here to help you navigate these choices and create a strategy that fits your needs. Reach out via our contact page or book an appointment to get started. 

 

Compliance Disclaimer: 

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns 

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917 

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