Investments that Pay Monthly Income in South Africa
Do you have a large sum of money in your bank account, which you do not need for the time being or you have put aside regularly? You can make this money work for you with investing and turn it into a steady monthly income.
Benefits of Monthly Income Investments
Yes, getting a monthly income from investing sounds great but there is some work involved nevertheless. Many websites on the internet promise you huge returns on your investments without doing anything and these are scums almost 100% of the time. Real investing will involve not only research but also constant monitoring of your portfolio, risk assessment, etc. However, there are many benefits that you get too.
Advantages of monthly income investments:
- Independence of time and place, since you can choose when and where to work;
- More free time, as the money stream will eventually flow on its own;
- Financial security, due to steady income;
- You are not dependent on other people.
Before we get to the exciting part (how to start investing), we need to talk a little bit about the types of investments.
4 Types of Investments to Generate Monthly Income
Not all types of investment can give you a monthly income and the ones that do vary in risk.
Bonds are considered a safe investment and can be found in almost all balanced portfolios. Although they offer a comparatively low-interest rate, they can help to compensate for fluctuations in the portfolio. Anyone looking for higher returns can also find what they are looking for in the bond segment if they are willing to take risks.
If you invest in stocks you become a shareholder in a company and are thus eligible to receive a portion of the company’s profits. This payment is called a dividend. This way the companies allow their shareholders to participate in the economic success. As a rule, a dividend is paid once a year, sometimes quarterly.
To buy bonds and stock you will need to register an account with a broker. Luckily, nowadays, everything can be done on the Internet and there are a lot of online brokers, like Brokstock. Unusually these brokers allow you to buy/sell asset and monitor your portfolio in general.
In times of low-interest rates and fluctuating stock markets, more and more people see real estate as an ideal capital investment. Houses and apartments are not only considered to be stable in value but also promise considerable returns.
The basic considerations for returns are the same for all properties offered, regardless of whether it is an ordinary condominium for rent or apartments, a nursing home, or a student residence.
Mutual funds collect money from investors and then invest in the financial markets. The great advantage of a fund is that it spreads the risk. It does not invest in just one stock or one bond, which is what investors should avoid at all costs, but in many. With a mutual fund, investors can benefit from increases in the value of the shares and from dividend payments.
Steps for Investing
Now that we know what to invest in, let’s take a look at the steps you need to take to actually start building your portfolio.
Start by looking at your options and figuring out what types of investments are available for you. For example, popular options for real estate include buying and leasing residential or commercial real estate, buying and holding or leasing undeveloped land, or investing in real estate investment trusts.
No matter the investment you chose, bonds, stocks, or real estate, you will need to research each of them. This process usually involves the assessment of risks and the return consultation. Additionally, bond and stock trading take place directly at banks or on the stock exchange, so to invest in bonds, investors must first open an account.
We advise you to first get an overview of how much loss you can afford when investing. Your risk tolerance will be mostly based on the following points:
- Duration of the investment. For how long do you want to invest the money? With an investment period of up to five years, we speak of a short period, up to ten years of a medium period, and beyond that of a long investment horizon. Since the whole point of this article is to figure out how to start getting monthly income, you will obviously want to aim for a long investment.
- Existing assets and debts. The more assets you have, the higher the risks you can take. If losses do occur, you are better protected. In addition to your assets, you should also consider your liabilities.
- Employment and salary. The more you earn and the more secure your job is, the higher your share quota can be. For example, a civil servant can take more risks than a self-employed person.
- Other investments. It is important to always look at your total assets. For example, if you have been investing primarily in safe investments, you can shift some of it into equity funds. If you have inherited a large amount, you should also take your current investments into consideration. It is crucial that the mix of all your investments is right.
Determine your value in the areas we have presented and use this to calculate your overall assessment.
Develop an Investment Plan
One of the most important steps is developing an investment plan. It shows when you plan to purchase a certain asset and at what price. Also, before you can even start investing money, you should think about how exactly you want to do it. Here you have plenty of options in terms of assets and trading methods, depending on how actively or passively you want to trade and how much risk you want to take.
We advise you not to take this step lightly. Without a detailed plan, you might start taking unnecessary risks and as a result, encounter more losses than profits.
So far, we’ve looked at the necessary steps that precede building your portfolio. So now that you have a better idea of what your investment objective is, how willing you are to take risks and what your investment horizon is, we come to the most important and exciting point: building your own portfolio.
If you have gone through every previous step then you already know what exactly you are going to buy, where, and when.
If you focus on long-term strategies, even if prices go downhill in the short term, you can usually make up for it through price fluctuations. So, if your goal is to eventually start getting monthly income and you stick to the plan, you are sure to see the results shortly.
Summary of Monthly Income Investment Benefits
Now that you know what monthly income investments are and how you can build your own portfolio, you can understand the benefits more clearly:
- Independence. Since the money earns itself, it doesn’t matter where you are when – theoretically you could actually go on vacation all year round and generate monthly income. If it is a side income, this may give you freedom in your actual work.
- More free time. Maybe eight hours a day will become only six hours of work or a five-day week will become a four-day week.
- Financial security. This is especially true if you not only finance yourself through investment income but also earn money in a conventional way.
Advice on Finding the Right Investment Strategy
The investment strategy depends on the amount you want to invest and the length of the investment – i.e. whether you invest money on a long-term or short-term basis. Most brokerage companies offer advice on investment strategies for beginners and even have educational programs to help people start.