Circle this date in your diary…
28 February 2019
This marks the day this airline could DOUBLE YOUR MONEY in 18 months
Income reigns supreme in 2018
When you look at returns for 2018, only two asset classes managed positive returns.
• SA All Bond index delivered 7.7%
• SA Cash returned 7.3%
• SA equity fell -8.5%
• SA Listed Property index crashed -25.3%
So bonds and cash are a safe haven in uncertain markets.
When growth is limited, the only way to generate income is through income funds, bonds or dividends.
In addition, some income investments pay you inflation-beating returns, which is essential in a country that’s plagued by high inflation.
So how can you generate income?
The best ways to generate income
1. Perpetual Income Payers
Typically, these are solid companies with high dividend yields, that consistently pay investors dividends every year. They pay double or triple
the income than the average company on the JSE All Share.
Perpetual income payers can also be preference shares. With a preference share you get the chance to loan money to some of the largest companies on the JSE. And they’ll ‘pay’ you for it.
Preference shares have the potential to grow in value and give you income. You see, because preference shares are listed on the JSE, you’re able to receive capital growth (just like a normal share) if the preference share rises in price. In addition, you’ll receive dividends (income) at least twice a year.
The advantage you have as a preference shareholder, is you’re eligible to be paid out BEFORE ordinary shareholders. There are over 20 preference shares listed on the JSE and each one has its own terms and its own risks.
There are a few options for investor when it comes to bonds. You can invest in Government retail bonds, or RSA Retail Savings Bonds.
In return for lending the South African government money, you’ll receive interest payments twice a year for the term of the bond you buy. Depending on whether you opt for fixed rates or inflation linked rates, you can invest your cash from between one to ten years.
Or you can also invest in offshore bonds through an exchange-traded fund (ETF).
Bonds are great as they give your portfolio safety, because you’re guaranteed the return. So, you should always have at least 10%-20% of your portfolio invested in bonds.
Use this shockingly
overlooked technique to 'pickpocket' weekly profits
of R543, R630 or even R1,487
from financial markets
This is a 100% legal way of 'robbing the market blind' WITHOUT using spread betting, buying and selling stocks or trading futures…
3. Income Funds
Income funds are unit trusts that focus on generating an income. They achieve this through investing in Government bonds and corporates bond.
Also some income funds will invest in preference shares and the South African money-market.
If you want to generate an income (and beat inflation) and don’t want to take on high levels of risk, income funds are a good option. They’re also a good option for retirement savings.
Just remember investing in income funds come with fees. But usually they’re not as expensive as equity funds.
So if you haven’t allocated between 10-20% of your portfolio to income investments, I implore you to do so now. Generating consistent income can be the difference between ending the year with a overall positive or negative return.
See you next week,
Managing Editor, Real Wealth
What steps can you take to start generating a REAL income today? It’s as simple as reading The Little Book of BIG Income
. This book will show you multiple ways
to generate consistent income to boost your overall retirement portfolio.