The Boring Invstr - Your Simple, Digestible Weekly Investing & Finance Newsletter

Hello Boring Invstrs,

Welcome Back to The Twelfth Edition of The Boring Invstr!

What We Are Covering This Week:

Income Investing - What it is and how you can use it to grow your portfolio.

The Basics of Income Investing:

Very few things are guaranteed when investing, but these two asset classes are almost 100% guaranteed after investing. Fortunately, these two things are components of income investing.

Income investing is an investment strategy that focuses on generating income from your investments. This strategy has a component of a strategy we have previously talked about and a component that I have yet to talk about but most likely is already a part of your current portfolio.

If you’re asking yourself what the two things are, dividends and bonds are your answer.

When a company distributes a share of profits to qualified shareholders, it is called a dividend. The dividend yield, the percentage of a company’s share price it pays out in dividends can range from tenths of a percent to almost seven percent.

A bond is a loan from an investor to a borrower. The borrower is typically a corporation or government, and they pay a set interest payment at the end of the bond term.

Bonds can range in length and interest. US Treasury bonds are one of the safest investments you can make. They currently yield around 3.5% - 4%. The US government is essentially saying the only way you won’t get paid back is if you fail. You and I both know that’s not going to happen.

The difference between dividends and bonds is the maturity or the timing of when the asset pays out its yield. Dividends typically are paid out four times a year, while bonds are paid out at the end of the bond term.

Both dividends and bonds help to generate fixed returns in an income investing strategy.

Although dividends and bonds can help you grow your portfolio and offer cash flow, you should not look to dividend and bond yields for any type of income, especially with limited investment into dividends and bonds.

Reinvesting dividend and bond yields over time will allow compound interest to work its magic over the long term. With steady and consistent reinvestment over the long term you may be able to generate respectable income from dividends, but I would not say the same for bonds.

How You Can Start:

There are several ways to start income investing. You may already use components of income investing in your portfolio currently. Personally, I would not make my entire portfolio based on income investing, but that is up for your discernment.

A Few Tips for Beginners:

• Find What Makes You Comfortable - Assess your risk tolerance. Ask yourself if you would rather obtain your returns at the end of the term or many times while holding an asset.

• Do Your Research - Know how dividends work. Know how bonds work. Know what you’re investing in and try to limit your risk.
  

A Few Tips for Advanced/Experienced Investors:

• Understand Where You Are in Your Investment Path - Are you still in the early stages where you can take on more risk or are you later in your path where you want less risk while still generating a solid return?

• Know What You Need to Know - Understand what you need to understand. Maybe income investing is not the right plan for you. Seek professional advice if you need to. Going to the depths to know what you need to know will only help you long term.

Income investing can be a great way to generate more cash flow from your investments and build wealth over time.

As I have said before, it is important to understand the risks involved before you invest.

Doing your research, diversifying, reinvesting, and assessing your portfolio for the long term will help you reduce your risk and increase your chances of success in the long term.

This is not investing advice. Results may vary and you should always consult a professional if you have questions.

Add your value to something this week!

Trey