How to Manage Investments to Get a Regular Income?

Jul 03, 2018 | 8 months ago | Read Time: 3 minutes | By iKnowledge Team

It is a common misconception that only retired professionals prefer fixed income. As an  investor, you may also make investments to generate fixed income and meet certain financial goals. For instance, you may invest in fixed income instruments to fulfill financial goals such as loan repayment, children’s fees, and reinvestment.

When you need income from a portfolio, you tend to invest in government schemes, bank deposits, bonds, equity funds, etc. Creating a good fixed income portfolio can take you a long way financially.

Here’s a lowdown on how to manage your investments to get a fixed income:

1. Invest in long-term bonds

If you invest in long-term bonds that offer higher interest rates, you can continue to earn returns even if interest rates plummet. Ensure you have adequate money for your short-term goals and an emergency fund before you invest in these. You can’t pull out of long-term investments before maturity, so match it to a long-term goal such as children’s higher education or marriage.

2. Consider high interest bonds with low credit ratings

Some PSUs that issue bonds may not have the highest credit ratings, but have government backing. You can invest in these, as they are less likely to default and have the potential to help your money grow with high interest rates. For instance, you can invest in A-rated or equivalent bonds and deposits that offer higher interests as compared to AAA-rated products to compensate for its higher risk. If you are investing in the private sector, consider factors like the sustainability of profits, debt-coverage ratio (this measures the firm’s ability to meet debt obligations), and the quality of management. Change your investments along the way if you feel they are too risky for you.

3. Choose stocks that pay regular dividends

You can also choose stocks that give you good returns and pay regular dividends. This can serve as fixed income for your financial goals. You can pick companies that (may) have low growth potential but also give you steady earnings. Dividends can also give inflation-protected income in sync with a company’s earnings. Since you are looking for regular income, you can choose companies that are stable and produce regular cash flow but have few opportunities to invest in growth.

4. Ladder your bond portfolio

You can stagger bond maturity dates to ladder your bond portfolio. Laddering helps you avoid the risk of reinvesting a large portion of assets in a fluctuating market. So, each rung of the ladder will have a bond with a specific maturity date. The more rungs in your ladder, the better its diversification and will have higher and stable yields. A good way to plan is to first, decide how much you want to invest, then buy bonds by arranging some distance between their maturity dates, decide the length of the bond ladder, and set up a regular interest payment schedule. Make sure you choose your bonds carefully.

5. Opt for insurance

With insurance plans such as iInvest – a unit-linked insurance plan from Aegon Life, you can opt for fixed income plans and annuities where you get a set amount monthly, quarterly or yearly. For instance, some plans offer fixed annual income every year for a period of 15 years. This is subject to conditions like the policy should be in force and you survive the policy term. This is how it works; the insured pays a regular premium to insurance companies over the policy tenure. The corpus that is built is then used to make regular payouts to the policyholder in the form of annuities.

In short

Fixed income plans are a good option if you’re looking to fulfill your short or long-term financial goals. Rebalance your portfolio occasionally as and when your goals change, and invest regularly to fulfill your financial goals.

To know about AegonLife’s life insurance products, visit our home page.

Advt. no.: IA/Jun 2018/4124


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