Investing is for Income – Now and Future

1. The First consideration is your monthly income need:
   • The portfolio should provide this income, ideally without eroding capital.
   • This is achieved by selecting investments that produce the desired income yield.
   
2. The Second consideration is to plan for future Income:
   • If income is not an immediate need, then the portfolio choice is driven by a need to accumulate and grow capital.
   • This is achieved by a combination of income reinvestment and income growth.
   • The mix of investments should be influenced by income tax considerations and tolerance for risk.
   • Where income is tax free (retirement savings), the portfolio may be biased toward higher income yielding investments.
   • Where income is taxable (personal savings), the portfolio may be biased toward higher income growth investments.

Recognise the trade-off between Income Yield and Income Growth

• Cash and bonds produce a high income yield and no income growth over time.
• Real estate produces a relatively high income yield with near to inflation hedged income growth.
• Equities produce a low income yield, with greater than inflation income growth over the longer-term.
• Combining these investments will create the desired income yield, and a commensurate level of income growth.