INVESTING FOR A PASSIVE INCOME STREAM
Many people look to traditional income investments like term deposits when they think of a passive income stream. But with falling interest rates it may be more appropriate to look elsewhere for investments that offer an income that grows over time.
Australian shares offer opportunities for growth and diversity
The capital growth provided by Australian equities may look volatile when compared to more conservative investments like term deposits, but what about the income you receive in the form of dividends?
Australian equities have delivered higher income revenue than the average one-year term deposit. In fact, in 2014, Australian equities delivered the highest 12 month dividend yield across the G20 equity markets and the highest 10 year average dividend yield at over 4% p.a. (Source: RBA, Bloomberg, AMP Capital Investors as at 31 March, 2014).
Long term analysis indicates that dividends have been more stable than the income you receive from a cash investment. Your income stream has a higher chance of remaining stable – or increasing over time – compared to interest which has been steadily declining.
Franking credits increase returns
Franking credits can increase the returns you receive from Australian share dividends. Over time these credits have added more than 1% to the post tax return from Australian equities.
Diversify to see greater return
As with many investment options, there are pros and cons that you need to consider before committing yourself. A diversified portfolio can minimise risk. Talk to Milestone Financial about how this can be achieved and what income investments are right for you.