While some people set up their investment portfolio in order to grow their bottom line, others want their investments to provide a steady income.  If you want your dollar deposits to provide income, take the following three steps:

#1. Create an “income oriented” financial plan

Look at the overall economy when creating your financial plan. This is because if your investment income doesn’t exceed the inflation rate, you’ll actually lose money in real terms. In other words, even if your account balance remains $100,000 from year to year, if inflation is 3%, your money will only buy $97,000 worth of goods 12 months later. If you want to stop losing money, make sure that the part of your portfolio designated to safer investments like bonds, actually pays you a yield that matches (or beats) the current inflation rate. 

#2. Choose the right bonds

The right income-oriented investments for you may not be the highest-yielding bonds. Don’t assume the bonds with the highest interest rates are best. Often high-yield bonds are called “junk bonds” because the rating agencies believe that there is a greater chance that these bonds will default, compared to other bonds. If your financial plan calls for investing in high-yield bonds, speak to your investment professional about using bond funds or money managers who have experience balancing risk and reward in this sector of the market.

#3. You can make money on bank deposits

If your monthly bank statements show a yield of nearly 0%, it may be time to consider Certificates of Deposits (CDs). Investment professionals can buy FDIC-insured Certificates of Deposit which actually pays a competitive interest rate. Looking for safety as well as a return? Consider using CDs as part of your overall asset mix.  

Retirees especially need to concern themselves with the income from their portfolios. Go to profile-financial.com to download a free copy of my book, The Retirement Planning Book, or call my office at (02) 624-2788 if you have specific questions about investing in bonds. 

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

Published November 30, 2018. Updated March 2020

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