It is no longer easy to earn a generous income from your investments. You just can’t buy treasury bonds or the certificates of deposits, lean back and watch your investment grow. As a result, many people are taking calculated investment risks over the acceptance of the microscopic yields. With the high and low economic cycles, how do you increase your income from investments?
- Investment-grade corporate bonds
These have a higher yield than the Treasury bonds even though they carry higher risks. Since they have higher interest rates for payments, they hold their value better than the treasury bonds do. The only problem is that the firm may go bankrupt leading to loss of the investment.
- Preferred stocks
Preferred stocks are in between bonds and stocks. Their trading is similar to that of stocks and usually close to their issue price. However, with preferred stocks, you get paid fixed dividends and can also be called for redemption by the issuer at set intervals. The payment receives from preferred stock goes under the name qualified dividends, and they receive a favorable tax treatment. Also, they do not have set repayment dates.
- Dividend Stocks
As you think about CRA garnishment, you should also take into account dividend stocks since they give above-average rates of returns through dividends.
They also offer continued participation in capital appreciation and a level of protection against price declines. It has a high dividend yield though.
- Energy MLPs
These offer solid yields. Even though the Master Limited Partnerships trade in the same manner as stocks, they come with unique tax benefits which allow them to pass all their income to the investors. There are no corporate taxes paid on these investments.
- Closed-End Funds
Investment in closed-end funds means investing in a package of securities that trade like securities. They lack the mechanisms designed to ensure that their respective share prices track the value of the fund’s assets closely. That is the net asset value (NAV). For a high yield, you can take advantage of the pricing anomalies. You can buy the closed-end funds while they trade at big discounts and then sell them when the discount turns into a premium or when it narrows.
- Mortgage REITs
In most cases, REITs invest in shopping malls and office building among other commercial properties. But, there also is a small percentage of the high-yielding segment within the REITs world specializing in lending money to property owners or even buying mortgages and mortgage-backed securities. The mortgage REITs normally borrow money at a short-term interest then lend at long-term rates. Unfortunately, the mortgage REITs will get slammed fast if the interest rates rise steeply.
- Cut down investment expenses
Another way of increasing your income involves cutting down investment expenses. Work with a low-cost broker. Beware of fund operational expenses too. Along the same lines, you also need to minimize your trading transactions.
- Consider non-traditional investment opportunities
Other than REITs, you should diversify your investments by looking at Treasury Inflation Protected Securities and income properties.
You can also increase disposable and investment income by starting a business or getting a second job or a raise. Finally, you need to watch what to buy and when to buy.