The need for income from the portfolio is not restricted to retirement years. You may need income from your investments to meet goals such as children’s education, repaying a loan, or reinvesting to balance your portfolio’s asset allocation. Interest-bearing investment products such as deposits with banks, companies, bonds and debentures, income schemes sponsored by the government, and debt schemes of the mutual fund are the go-to products when income is required from an investment portfolio. You need a strategy to benefit from these investments. Here are some pointers to keep in mind.
Go long-term
One way to earn higher income from debt investments is to lock into longer-term bonds that offer a higher interest, so that your returns continues even if the interest rates fall. Make sure you have adequately provided for near-term liquidity needs and emergencies before you tie-up funds in these. The principal of a fixed-tenure bond is not paid back before maturity by the issuer and if you sell it in the secondary market before maturity, there is a possibility of capital loss. As far as possible, match the tenure of the investment to the period for which you need the income. For example, 10-year bonds could be of interest to those looking to fund their children’s education over that period, provided they don’t want to take the risk of equity.
