Whether you are pursuing income or growth, it’s always important to make sure that you are not overexposed to an asset class and that the quality in your portfolio is maintained.

 Different asset classes each come with their own related risks, which you should be aware of before investing, and as with all forms of investing, it’s important from the outset, to consider the following in the context of your personal situation and goals:

Cash

Interest-earning savings accounts and term deposits are two examples of ‘cash investments’ that can be used to generate an income stream, through interest paid at regular intervals and also offer the benefit of compounding if left in your account.

 The benefit of using cash invested with an APRA-regulated institution, as part of your strategy, is the reduced risk of losing everything. Conversely though, during periods when interest rates are low, if you're unable to generate more than the rate of inflation from a cash investment, the value of  the cash will actually decrease in real terms over time.

Fixed Interest Investments

Investors can also access corporate or government bonds and can buy and sell some corporate bonds on the Australian Securities Exchange (ASX), while managed funds and exchange traded funds (ETFs) can also be a way to invest in this asset class.

There are a range of managed funds available that align with an income-specific investment objective, with professionals actively managing the assets of the fund.

These funds might invest in government, corporate bonds, as well as other income-focused securities.

ETFs that aim to mirror the performance of particular types of bonds, as well as those that track the performance of high dividend stocks can also be traded on the ASX.

  Property and shares

Shares and property are generally considered 'growth' assets – investments that increase in value between the time they are bought and sold. Shares and property can also contribute to an investor’s income objectives.

 In the case of shares, this takes the shape of dividends, with stocks that pay high, stable and regular dividends, referred to as ‘high yield’.

 In the case of property, it is rental payments that form the income stream.  

Listed property, such as real estate investment trusts (REITs), will distribute income to unit-holders on a regular basis, in a similar way to which shareholders receive dividends.

 Investing for income and superannuation

 Depending on age, goals and risk preferences, people tend to select investments with the aim of either generating capital growth over the long term, generating regular and predictable income, or a combination of the two. As we get closer to retirement, we may be increasingly relying on earnings from investments to fund lifestyle.

In this context, regular income that can keep up with inflation will typically become more important than it might previously have been, which is why lifecycle superannuation funds tend to move a greater portion of funds into defensive, or lower risk assets, as we near retirement.

Even for people not yet close to retirement and are more conservative in their preferences, income investments can provide a way to build wealth over time, if the income generated is reinvested.

These income assets also form an important role in a diversification strategy for all kinds of investors.

Whether you are looking for portfolio diversification or the essentials to get started, our trusted Finance Partner has a range of investment solutions to suit.

 Contact us now @ propertyloans@realrenta.com and we will put you in touch.