Back to Basics: Investing for Income

Gard: How do you get income when you're investing?

Babin: So, you might invest in shares of a company, and then you could receive an income called the dividends. That can change throughout the years. And it's linked to how much of that company that you own. But also, if you invest in bonds, you could get an income payment called a coupon, and actually usually fixed. So, it's the same amount each year and you know how much it's going to be when you start investing.

Gard: Which other investments pay an income?

Babin: So, probably the next most popular will be property. So, it's typically commercial property, so office buildings like this, or shops or maybe even warehouses. And the money that pays the income from those comes from the people who are in the building, so they pay a rent and the rent can change depending on how popular the area is or whether or not people want to build more shops or less shops.

There are also some other alternative income investments, but they can be a bit more complicated, and maybe a lot more risky as well.

Gard: Should I spend the income or save it?

Babin: It depends. If you need that income to pay your bills, you should probably pay your bills with it. But if you don't need that income, what you can do is you can reinvest it in another investment where it then starts to generate its own income as well. And we call that compounding and it can be a very powerful way to boost your long-term returns.

Gard: Thank you, Louise. Goodbye.