8 Great Investments to Generate Monthly Income
Bills for utilities, mortgages, auto loans and similar expenses usually arrive monthly, while many investments generate income only quarterly, annually or even less often. However, there are a number of assets that pay income on a monthly basis. Options include savings accounts, certificates of deposit, annuities, bonds, dividend stocks, rental real estate and more. Here are eight of the best investment options for monthly income.
A financial advisor can help you build a portfolio of income-generating investments.
Monthly Income Investing
Investments that pay income monthly are not as easy to find as you might expect, given that living expenses often must be paid on a monthly basis. Quarterly, annual and even longer payback schemes are more the norm in the investment world.
And that’s with many investments offering no income at all beyond the promise of eventual profit thanks to price appreciation. Purchasing a typical share on the stock market, for instance, generally won’t yield a penny until and unless you are someday able to sell it for more than you paid.
The Eight Best Options
Monthly income-paying investments do exist, however. And they offer a variety of characteristics to give nearly any profile for safety, security and yield. You can likely find something to fit your needs from this list of the best monthly income investments:
If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
A savings account at a bank or credit union pays interest on deposits every month. Savings accounts are safe, reliable, highly liquid and easy to open, with small or no minimum initial investment requirement. Savings accounts usually don’t pay enough interest to keep you ahead of inflation, however, although the highest-paying savings accounts come close.
Certificates of Deposit (CD)
A certificate of deposit (CD) is as safe and simple to open as a savings account but not nearly as liquid, since you have to commit funds for a period between 28 days and 10 years. In return, you earn more interest, but, again, even the best-paying CDs aren’t likely to beat inflation.
Owning stock of public companies that share profits with shareholders as dividends offers regular income plus the potential for price appreciation. Dividends are generally paid annually or quarterly but some companies pay them monthly. Dividend exchange-traded funds (EFTs) can be purchased like individual stocks, offer good diversification and provide more options about how often you’ll receive income.
The bond market is where corporations and governments go to borrow money and when you buy corporate and government bonds you are acting as their lender. Bonds pay interest rates that vary widely depending on the financial strength of the issuer, the length of the bond and other factors but can be significantly higher than bank deposit accounts. Most bonds pay interest annually, semiannually or at the end of their term, but some pay interest monthly.
An annuity is a contract with an insurance company that promises to pay you monthly benefits in exchange for an up-front purchase amount. Annuity benefits may extend for periods from a few years to the life of the purchaser and may be guaranteed by the insurance company. Annuities are generally reliable sources of monthly income, but they are complex investments and also come with sizable fees.
Rental Real Estate
Buying rental real estate can give investors tax benefits and potential appreciation. And because rent is usually paid monthly, income on a monthly basis. Rental property is also highly illiquid and requires significant initial investment while managing it calls for more time, expense and expertise than many people can bring to it.
Real Estate Investment Trusts (REITs)
Publicly traded real estate investment trusts (REITs) own income-producing real estate or mortgages and must distribute 90% of taxable profits as shareholder dividends, some of which may be paid monthly.
It’s much easier to buy and own REIT shares than to purchase and manage individual properties yourself. REITs also provide risk-reducing diversification but are vulnerable to real estate cycles and interest rates.
Starting, buying or investing in a small business can provide reliable monthly income in the form of dividends paid to the owner or, if you are actively involved, a salary. Business ownership offers potential for income and price appreciation that rivals almost any other investment. However, investments in the business are generally highly illiquid, carry considerable risk, and may call for substantial expertise, effort and patience.
You can generate monthly income from a wide variety of investments, ranging from ultra-safe but low-yielding savings accounts to the exceptional risk and potential high payouts available to small business owners. A sensible strategy would likely involve dividing your money and putting it in several of these types of investments, selecting asset classes and individual assets on the basis of your needs for income, convenience safety and liquidity.
Tips on Retirement
- Consider working with a financial advisor to develop, implement and fine-tune a financial plan for your retirement goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area. And you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Are you saving enough for retirement? SmartAsset’s free retirement calculator can help you determine exactly how much you need to save to retire.
Photo credit: ©iStock.com/ArtistGNDphotography, ©iStock.com/Khanchit Khirisutchalual, ©iStock.com/fizkes
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GM, POSCO Future M to boost investment at battery materials plant in Canada – The Globe and Mail
General Motors Co GM-N and South Korea’s POSCO Future M said on Friday they will invest more to boost production at their chemical battery materials facility in Canada, taking their estimated total investment in the plant to over $1-billion.
The companies said the new investment includes an additional CAM and a precursor facility for local on-site processing of critical minerals.
The development comes a few days after the Canada’s federal government and the Quebec province each provided about C$150-million ($112-million) for the facility.
The companies last year established Ultium CAM joint venture, which is majority owned by POSCO Future M, and had initially invested about $327-million, according to media reports.
Their battery facility in Becancour, Quebec, will produce cathode active material (CAM) for electric vehicle (EV) batteries.
Canadian pension fund CDPQ puts brakes on China investment, Financial Times reports – Reuters
June 1 (Reuters) – Canada’s second-largest pension fund Caisse de dépôt et placement du Québec (CDPQ) has stopped making private deals in China and will close its Shanghai office this year, the Financial Times reported on Thursday, citing people familiar with the matter.
The news follows a May 8 parliamentary hearing in which several Canadian pensions, including CDPQ, were asked about their relationship with China as bilateral political tensions have intensified.
CDPQ is leading its regional investment efforts from Singapore, the report said, noting that it still has business interests in China.
“We paused private investments for some time already — and have focused on liquid markets, which is the majority of our two per cent total portfolio exposure to China. We expect this trend to continue,” the newspaper quoted CDPQ as saying in a statement.
CDPQ confirmed the Shanghai office closure later this year, but declined to comment further.
The Financial Times in February reported that Singapore’s sovereign wealth fund GIC has reduced private investments in China.
During the May hearing, Michel Leduc, a senior manager at the Canada Pension Plan Investment Board (CPPIB), said China was an “important source” for its portfolio.
“We recognize that any investment in China needs to be handled with care, sophistication, and an acute understanding of the current political and geopolitical environment,” Leduc said.
A CPPIB spokesperson declined to comment further on Thursday.
In May, Canada’s C$211.1 billion ($157.87 billion) British Columbia Investment Management Corporation (BCI) said it had reduced exposure in China and Hong Kong by about 15% over two years and paused direct investments in China.
“Our current exposure in China is less than 5% of the overall BCI portfolio, the majority of which is through public markets and via indexed funds,” the asset manager said.
In April Canada’s third largest pension fund, Ontario Teachers’ Pension Plan (OTPP), also closed its China public equity investment team based in Hong Kong.
At the start of the year, OTPP said it was pausing future direct investments in private assets in China, citing geopolitical risk as a factor.
OTPP expects to name a new head of Asia-Pacific Private Capital Direct in the coming months to replace Raju Ruparelia who has left to pursue other opportunities, a spokesperson said by email.
($1 = 1.3372 Canadian dollars)
Our Standards: The Thomson Reuters Trust Principles.
Why Canada would benefit from 'direct index' investing – The Globe and Mail
Traditionally reserved for institutions and ultra-high net worth individuals, direct indexing is a hot topic for investors as technology advances and downward pressure on retail trading commissions have done much to democratize its access. In the United States, direct indexing strategies are expected to outpace the growth of both ETFs and mutual funds. In response, U.S.-based providers are scrambling to build, buy or partner to acquire the required capabilities to get in on the action, driving down the costs and required account minimums for investors. For Canadians, it’s worth getting a better understanding on what Direct Indexing is, and what we can expect for the future of these strategies north of the border.
As a brief overview, direct indexing amounts to personalization at scale. Similar to a traditional investment fund, direct indexing gives individual investors a way to get exposure to a broad segment of the investment market, such as an equity index. Unlike traditional funds, however, direct indexing involves individuals investing directly in the underlying securities (stocks or bonds that make up a larger index), instead of simply buying units of a fund. Investing in this way offers multiple benefits. First, there are a variety of tax strategies (most notably tax loss harvesting) made available by directly holding the individual securities, which can add a potential 1-3% after-tax return on an annual basis. Second, the investor would have near-full autonomy to incorporate their personal preferences for the purpose of excluding securities that do not align with their values or investment objectives. Consider an index that is made up of the 500 largest companies listed in the United States, when investing in this product the investor does not have the choice of what companies make up this portfolio, meaning they may be required to invest in companies that do not align with their values or investment objectives. However, by holding the underlying securities, these non-aligned stocks can be excluded from the investor’s portfolio. While traditional thematic ETFs and mutual funds provide generic options for investor choice, the opportunities for hyper-personalization inherent in direct indexing strategies are almost endless.
As a concept, direct indexing is not new. Sophisticated investors, such as institutions and wealthy investors, have long held the requisite buying power and influence to overlay all manners of unique constraints on their investment portfolios. However, technology advances that could handle significant scale coupled with reduced trading costs brought this concept into the hands of individual investors – the former made it possible for investment managers to offer direct indexing while the latter made it affordable for the retail market.
The seismic nature of this shift cannot be undersold. Consider an investment advisor seeking to satisfy the individual needs of their clients across 10,000 individual investment portfolios. They’d need to manually ingest a mountain of client-level information, go about buying into hundreds of thousands of individual securities and monitor all accounts to identify portfolios that require rebalancing when they drift out of alignment. Prior to the advances described above, this would be cost- and time-prohibitive. Direct indexing offers this high degree of personalization in an automated fashion that is feasible for the investment manager, while better serving individual client needs.
When compared to the U.S., Canada has been slower to internalize the required pre-conditions to support direct indexing, but the outlook is increasingly positive. Leading direct indexing technology-solution providers in the U.S. are expressing interest in Canada as an expansion target. Additionally, Canadian broker-dealers are exploring ways to enable zero commission trading at scale. Fractional shares, at one time considered more of a marketing gimmick, is also slowly finding its footing as firms are tapping into lower account balance investors that are seeking alternatives to traditional funds.
Beyond these structural considerations, it’s worth examining whether demand among Canadian investors will be sufficient to justify bringing direct indexing to the Canadian market. For instance, the main driver for adoption of direct indexing in the U.S. is the opportunity to capture additional after-tax returns through direct indexing’s optimization capabilities. However, given tax code differences in Canada related to the treatment of capital gains, the benefit provided from tax optimization strategies deployed on Canadian portfolios will likely be less than those experienced by our counterparts south of the border. That said, believers in the concept remain steadfast that the increase in personalization for Canadian investors will be enough to drive demand for direct indexing.
Direct indexing likely still has a place in the Canadian investment landscape, despite the differences between Canada and the U.S.. The first ‘Canadianized’ direct indexing solution made available to the mass-market will have to navigate Canada’s structural nuances; if done successfully, investors aim to significantly benefit by accessing institutional investment capabilities at a cost likely competitive with most Canadian mutual funds.
Michael Thomson is director, and Jeffrey Joynt a consultant, with Alpha Financial Markets Consulting
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