How to Generate Cash Flow by Investing
Investing for income or cash flow requires specific choices and strategies. Investments that increase principal aren't necessarily the best for steady cash flow. Those seeking income need dividends and interest. That means selecting specific securities and finance products that pay out regularly. Such investments range from high-risk, high-yield to safe and steady.
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Instructions
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Consider your taste for risk. Some dividend-yielding stocks and mutual funds promise regular, high payouts but have a greater chance of going bust. Other more stable options such as blue chips and utilities -- sometimes called "income stocks" -- give steady returns at lower rates.
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Research preferred stocks. These are special shares that promise regular dividends and sometimes allow investors to continue to accrue dividends even when a company can't immediately pay them.
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Look for common stocks with a history of paying sizable and consistent dividends. Naturally, stocks with reliable and good returns tend to run higher in price. However, common stock typically costs less than preferred stock, as common stockholders have no guarantee of payouts.
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Investigate annuities. Investors contribute regular payments over an extended period of time in exchange for a later payouts at a sometimes substantial interest rate. Most annuities are issued by insurance companies for retirement planning. Matured annuities can then be distributed in monthly payments as a means of income.
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Purchase bonds with regular fixed dividends. Governments and private companies issue bonds to investors who essentially lend them money. Because businesses can fail or go bankrupt, bonds from stable, respected governments are considered less risky than private or junk bonds. However, governments run into financial stresses and occasionally default, which is why bonds from townships and small municipalities often yield more than those from the U.S. Treasury. In all cases, bonds are a contract requiring the issuer to make regular interest payments for an extended period.
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Acquire mutual funds with guaranteed dividends. Funds are a collection of stocks with professional portfolio managers who oversee their holdings. Confident and successful fund managers sometimes pride themselves on being able to maintain portfolios of well-performing, dividend-paying companies and therefore promise regular dividend payments to make their mutual fund shares more attractive. Buyers should always investigate carefully as, unlike bonds, mutual fund principals can decrease.
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References
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