Everyone should be an income investor. The hunt for yield is not just for those who need to boost their annuity payments or supplement their monthly income. Investing for retirement? Playing the stock market for long term goals? Yield-paying assets should be on your radar too, because reinvested dividends are the key to doubling your nest egg in a fraction of the time.
Reinvested dividends have been the single biggest driver of equity returns in the UK, the US and Europe over the long-term. Even Albert Einstein was a fan – calling compound interest one of the wonders of the world.
That said – finding income isn’t easy. In the days before the credit crisis cash savings rates were as high as 8%, as long as you were willing to tuck your money away for a couple of years. Now you’d be lucky to get 2.5% from your high street bank, little more than the current rate of inflation. Despite Bank of England Governor Mark Carney promising an interest rate rise in the next 18 months, many are sceptical this will be passed on to savers.
Those willing to take on a little more risk and invest in government bonds were equally disappointed – in the depths of the recession; gilt yields fell to way below the rate of inflation, offering investors a negative rate of return. Even now 10 year gilt yields are only 2.6%.
Corporate bond yields are paltry – such is the demand for a decent return on fixed income, many investors have been forced into more risky high yield bonds, causing rumoured liquidity issues.
Equities have provided some respite, if you are willing to take on the uncertainty. According to the Dividend Monitor Report from Capita Registrars, UK dividends as a whole were down £2bn to the end of 2010. But in the first three months of this year, dividends broke all records, up 120% on the same period in 2013, to an incredible £31 billion. Capita estimates that UK companies will pay out a total of £99 billion in dividends this year.
Of course a well-balanced portfolio will contain cash, bonds and equities – as well as a few alternatives on the side. This week we bring you the best places to find income across all asset classes, and reveal what income investors should expect in the years to come.
Monday: Why Choose Income Investing?
We explain the benefits of income paying assets to boost your income and offer long-term growth
Savers Reveal Their Income Needs
How to Double Your Money in Half the Time
Choose Income Assets for Your Pension
Why You Should Invest in Dividend Paying Shares
Tuesday: Home Grown Stock Selection
Which UK companies pay the best dividends, and which funds capture these stocks?
Market Outlook: Income Paying UK Stocks
Are Record UK Dividend Payments Sustainable?
Neil Woodford: Pharmaceuticals Will Provide Income for 10 Years
Wednesday: Overseas Income
Where in the world can you find the highest yielding shares?
Where to Find Income in Asian Stock Markets
Where in the World are the Best Income Opportunities?
Stock Market Rally Squeezes Income Investors
Thursday: Bonds that Still Deliver Yield
Fixed income yields may have been falling over the past five years, but there are still attractive opportunities
What Next for High Yield Bonds?
Emerging Market Bonds Yield 6%
BlackRock: Bond Markets are Challenged
Ultra-Low Interest Rates Put Pressure on Bonds
Friday: Alternatives and Mixed Asset Income
Cash, property and how to blend an income portfolio
How to Build an Income Portfolio
Income Seekers Beware of False Recovery
Archive: How to Invest in Infrastructure