This style of investing aims to pick companies who provide a steady stream of income from a variety of investment types. When investors think of steady income they commonly think of fixed-income securities such as bonds. However, stocks can also provide a steady income by paying a solid dividend.   There are various levels of security provided with debt instruments from senior secured collateral to hybrid securities like preferred stock.  As a rule of thumb the yield on an investment is directly related the risk; the higher the yield, the greater the risk. Oddly enough, fixed income securities can be one of the highest risk categories.  The guarantee on the returns is often so low that it is impossible to be compensated for the risk no matter how slight it might be. Return of your money should be more important than the return on your money. 

Income investing in a low interest environment is particularly challenging.  In fact it might be downright dangerous to your financial health. Ultra-low interest rates require an enormous amount of capital to live on without dipping into your principal.


Pros:  An income investment takes a lot less management.  The kind of fixed income investments that make sense, short to medium term bonds from strong credits, need little if any investment advice.  Fees should be absolute minimum or non-existent. These investments can provide a reliable income stream not subject to the fluctuations of the stock market.

Cons:  Fixed income investing is rarely the best way to maximize your money.  In a low interest environment you will need to have a lot of money to live on without dipping into your principal.  Event risk and interest risk are the two major obstacles.

An excerpt of “The Investment Survival Guide

By: Harvey Sax, Partner at Alpha Wealth Funds