Why We Believe Investing For Income Is The Best Choice
With UK interest rates stuck at historic lows and showing no signs of increasing any time soon, many investors have come to realise that there’s little difference between a savings account and leaving their money underneath the mattress.
Leaving money in the bank might be the safest option, but it is also one which will see the value of those savings gradually whittled away.
Income investing is becoming increasingly popular – here are seven reasons why we believe it is the best way to secure your financial future.
1. A little risk goes a long way
To enjoy any sort of income from investing it is necessary to accept some risk, however the key is to find that sweet spot where the risk is acceptable given the potential and predicted returns.
Income investing can allow that balance to be found. Whether it is in property or established companies with a history of solid dividends, money can be put into areas which show historic stability.
Areas, sectors and businesses which survive recessions, fashion and the volatility of other markets.
2. There are safe options – major companies with a track record
Income investing does not have to be in risky start-ups or areas tipped for massive growth but with high risk.
In fact, while such options might work out in the short term, in the longer run the established areas tend to be the ones which not only offer stability, but also provide the better returns. You can have your cake and eat it (speaking of which, huge bakers aren’t a bad investment – people always want cake…)
Larger established companies have exited periods of rapid growth and expansion, so rather than reinvesting any capital tend to offer attractive dividends.
3. Potentially have two means of making money, yields and capital growth
When income investing it’s possible for two ways to enjoy a return.
Take property for example – admittedly our area of expertise. Invest in a rental property and there are the yields from rent, but also potential capital growth too.
Two ways to enjoy a healthy return – that beats savings and its big fat zero ways to make a decent return.
4. Helping to grow the economy
This might not be your key concern, but income investment does help perform an important job. It helps keep the economy moving, it provides funds where they are needed, importantly to well-run businesses.
If investing in the UK, it helps keep our economy healthy and competitive, if investing in property it helps improve the housing stock and provide affordable housing.
Invest wisely and you can go to sleep with a healthy self-satisfied glow to accompany that healthy bank balance.
5. You can have range of different investments, some low risk, others with the potential to offer great returns
When investing, it is paramount to build a portfolio to help spread risk and with it maximise returns.
You can invest for income and do this by investing in a range of businesses, in a range of property or even a mix of the two.
Some industries offer healthy dividends no matter the economic circumstances of the day – pharmaceuticals for example and others providing products and services which are always in demand. Others such as car manufacturers and those producing luxury products are more likely to be affected by the prevailing economic mood.
Property, being in obvious demand, is firmly in the safer camp. That said, a little risk as part of a portfolio can go a long way – would Apple or Microsoft have seemed safe investments a few decades ago?
6. Healthy growth of dividends
The days of living three score year and 10 are long past – with a fair wind there’s a fair chance any of us could now live to our late 80s and beyond.
Great news on one hand, but it does mean those investments made in advance need to keep paying out for longer than you might imagine – especially as who knows what pensions will look like by then…
The percentage increase in dividend pay-outs could be absolutely crucial – a difference of a few percent could more than double the annual dividend a few years later.
To reiterate a point made higher up, income investment in solid options enables you to tap into dividends which pay out, and pay out, and keep paying out – hopefully for many, many years to come.
7. Bricks and mortar
We’ve hinted at it above, but property can be an ideal investment for those seeking an income.
Traditionally, buy to let investing has been appealing but only available to those with sizeable savings pots – especially given the need to invest in multiple properties to spread risk.
However, the emergence of crowdfunded property investment means that smaller sums can go a long way – for example a £20,000 savings pot could be used for 10 stakes of £2,000 each in different properties.
With crowdfunded property investment also a passive investment, there is none of the red tape of going it alone as a landlord, or the worry around ever changing legislation on Stamp Duty and mortgage relief…or the coming difficulties of getting a buy-to-let mortgage.
With property investing, there is always a tangible asset behind the investment.
As you might have guessed, the House Crowd is a property crowdfunding investment platform.
If you do want any more information on property crowdfunding, please have a look round the site and register for more information.
And however you choose to invest, we wish you the best of luck.
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