7/30/2019 Your Guide to Investing For Income

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INVESTINGFOR INCOME

A GUIDE TO

Bright ideas to make more o your money by

building a reliable strategy and casting a wider

net to protect against infation

7/30/2019 Your Guide to Investing For Income

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A Guide to Investing or Income

A guide t

Iestig r IeHw d yu geerate a reliable ie whe iterest rates are stuk at all-tie

lws ad the Bak Eglads quatitatie easig pliy pritig ey is

squeezig yields geret bds (gilts) ad ther iestets?

Investors today can still rely on a well-balanced portolio to meet their needs or income.

However, they must be open-minded about the sources o that income, and recognise thatlow-risk income generation is a thing o the past.

Iestrs tday a still rely a

well-balaed prtli t eet

their eeds r ie. Hweer,

they ust be pe-ided abut

the sures that ie, ad

regise that lw-risk ie geerati is

a thig the past.

Tugh halleges r iestrs

The legay the redit risis is reatig aytugh halleges r iestrs, partiularly

thse seekig a reliable ie. See r

eight years ag, geeratig ie was

straightrward: just buy bds. A prtli

sae geret seurities wuld pay ut a

deet yield eery year, allwig iestrs t

eet their expeses, ud haritable datis

r suppleet their ie i retireet.

Tday, the yields the ast ajrity

bds hae shruk t rerd lw leels,

drie dw by etral bak pliies adiestrs seekig sae haes. As a result,

iestrs dt reeie the leel ie

they did i the past. Whats wrse, i this

ew wrld, there are lger ay truly sae

iestets that pride a steady ad deet

leel ie: iestrs a hae ie r

(the appearae ) saety, but t bth.

Yur ability t geerate ie

With re us liig lger i the UK,

aitaiig ur stadard liig i

retireet ad udig hlidays ad utigsrequires se areul plaig. Hae yu

sidered hw a lger liespa ad risig

iati uld aet yu ad yur ability t

geerate ie?

Geeratig a ie r yur

iestets will be a iprtat

requireet, espeially i yue retired

r are apprahig retireet, r i yu

eed t suppleet yur salary r hae a

relatiely shrt iestet tierae.

Fixed iterest

The st ppular rs ie

iestet hae bee bds (whih are

als kw as fxed iterest iestets)

ad ash, bth whih pay a regular rate

iterest either aually, twie a year r ur

ties a year. Yu a als btai a ie

r shares i the r diideds, ad

ay equity uds are set up slely with

the purpse geeratig a stable ie.

Iprtatly, equity ie uds te ai

t ahiee t ly stability, but als a

ireasig ie i the lg ter.

Lw-risk ie geerati is beig a thig

the past. Iestrs tday a still eet their

ie eeds, but they shuld lk beyd ash

ad geret bds ad be prepared t take

se re risk, whether thats r higher

yieldig bds, equities, strutured prduts r

ihe illiquid iestets.

Rather tha arrw i the headlie yield

a prtli, iestrs shuld sider takig a

brader iew, usig erall ttal returs

ad usig apital gais as well as ups ad

diideds t geerate the ie they eed.

Gd ash w

Ie stks are st usually ud

i slid idustries with established

paies that geerate gd ash w.

They hae little eed t reiest their

prfts t help grw the busiess r ud

researh ad ew prdut deelpet,

ad are therere able t pay sizeable

diideds bak t their iestrs.

Exaples traditial ie-geeratig

paies ilude utilities , suh as il

ad gas, telephe paies, baks ad

isurae paies.

Yu shuld reeber that these

iestets d t ilude the sae

seurity apital that is arded by a

depsit aut.

The ei eiret has bee

partiularly urgiig r iestrs wh

eed t geerate a ie. The Bak

Eglad redued iterest rates t a rerd

lw leel as the faial risis deepeed

ad saigs rates llwed.n

WHIcH IncomE-GEnERATInG InvESTmEnTSARE RIGHT FoR YoU?

I the urret eiret

abrally lw iterest rates, ash

saigs auts alst all pay

egatie rates retur ater takig

it aut the eets iati adtax. T disuss yur faial psiti

r reiew whih type ie-

geeratig slutis are right r yu,

please tat us r re irati.

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A Guide to Investing or Income

Te tips r iestig r ie

1. Sustainable long-term dividend growth Iestig

i busiesses whe the grwth ptetial is t reeted

i the aluati their shares t ly redues the risk

lsig ey, it ireases the upside pprtuity.

2. Ination matters Always bear i id the detrietal

eet iati. crprate ad geret bds er

higher yields tha ash but returs a be erded by

iati. Iestet i prperty r equities prides a

ehile t help ahiee a ie that rises t keep pae

with iati.

3. Consider international diversifcation A sall

uber UK paies aut r apprxiately 40

per et UK diided payuts. This pares with er

100 paies i the US, r exaple, that pride the

pprtuity t irease the lgeity diided grwth.

4. Patience is a virtue Iestig r ie is all

abut the pudig returs r the lg ter. As

a geeral rule, thse busiesses best plaed t er this

destrate sistet returs iested apital ad

isible earigs streas.

5. Reliability is the key Selet setrs the equity

arket that d t deped strg ei grwth t

delier attratie returs t iestrs.

6. High and growing ree cash ow Lk rpaies with ey let er ater all apital

expediture, as this is the strea ut whih risig

diideds are paid. The larger the ree ash w relatie t

the diided payut the better.

7. Dividend growth I the shrt ter, share pries

are bueted by all srts iuees, but er lger

tie perids udaetals hae the pprtuity t shie

thrugh. Diided grwth is the key deteriat lg-

ter share prie eets the rest is setiet.

8. Cautious approach Prfts ad diideds utility paies

are at the whi the regulatr. Be autius paies thatpay a high diided beause they hae ge ex-grwth suh a

psiti is t usually sustaiable idefitely.

9. Investment diversifcation The frst rule

iestet is te said t be spread risk. Diiishig

risk is partiularly iprtat r ie-seekers wh

at ard t lse apital.

10. Tax-efciency Irease yur et ie by usig

a ISA (Idiidual Saigs Aut). The preeds r ISA

ie is ree taxati, thereby ptetially iprig

the aut ie yu atually reeie. UK diided

ie has bee taxed at sure at the rate 10 per etad this at be relaied by aye. The preeds r

ISAs are als ree r apital gais tax, allwig yu t

swith uds r ash i withut a tax harge.n

Lw-risk ie geeratiis beig a thig thepast. Iestrs tday a stilleet their ie eeds, butthey shuld lk beyd ashad geret bds adbe prepared t take sere risk.

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Past perrae is t eessarily a guide t the uture. The alue iestets ad the ie r the a all as well as

rise as a result arket ad urrey utuatis ad yu ay t get bak the aut rigially iested. Tax assuptis are

subjet t statutry hage ad the alue tax relie (i ay) will deped up yur idiidual irustaes.

Low-risk income generation isbecoming a thing o the past

in the current environment oabnormally low interest rates.To discuss your fnancial

position or review which typeo income-generating solutions

are right or you.

ctat us tday.