Income investing: boost your earnings through investments

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. 
   
   

2. 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. 
   
   

3. 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. 
   
   

4. 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. 
   
   

5. 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.