There are a few different investing styles that investors can adopt, and each has its own merits.
However, the most important thing for us to do as an investor is to pick one that we feel most comfortable with. That’s how we can sleep soundly at night.
The few investing styles I am referring to are: income investing, growth investing, and value investing. In this article, I will be focusing on income investing.
Income investing – as the name suggests – entails investors prioritizing the income generated from their investments over capital appreciation (i.e. a rise in the share price).
This can be done in a few ways, such as buying stocks with a high dividend yield.
Stocks with high dividend yields carry a risk, though.
This is because stocks are not contractually obligated to make any dividend payment to its investors.
A company may pay a dividend every three months, six months, or 12 months. But, the amount is entirely up to the discretion of a company’s management.
Sensible managers of companies though, tend to pay a dividend that is commensurate with the health of the companies’ underlying businesses. This also means that a company’s dividend can be subject to fluctuations, depending on the financial performance of the company’s business.
Some examples of high-yielding stocks in Singapore’s market would be REITs (real estate investment trusts), banks, or telecommunication companies.
Income investing is usually popular with investors who need to generate a certain amount of income from their investment portfolio to fund expenses.
For example, retired individuals usually prefer income investing as the income generated can be used to support their lifestyle. But income investing can also be suitable for the younger generation, as it helps to add on an additional layer of passive income on top of one’s earned income.
At the end of the day, it’s an investing style that can suit any individual’s personal preference.
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