Income Portfolio Strategies & Assets To Build Your Wealth
Let’s look at different examples of portfolio income assets today. Then discuss how to increase your portfolio income from those assets.
To do this, I’m going to break this article up into 3 main parts.
- Types of income
- Examples of portfolio income-producing assets
- How to increase portfolio income
But for we get into the details, let’s hit the key takeaways…
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
Examples Of Portfolio Income-Producing Assets
First of all, make it a goal to target income-producing assets for your portfolio. Here are the examples we will cover to round out your income portfolio.
- Certificates of deposit
- Savings accounts
- US savings bonds
- Money market accounts
- Corporate bonds
- Peer-to-peer loans (P2P)
- Preferred stocks
- Dividend-paying common stocks
- Open-end mutual funds
- Closed-end mutual funds
- Exchange-traded funds
- Real estate investment trusts (REITs)
- Master limited partnerships (MLPs)
Next, consider these income portfolio strategies…
Tips To Increase Portfolio Income
Implement some or all of these ways to increase portfolio income. We will discuss each in more detail shortly. Because making more income is a good financial goal.
- Invest new capital
- Opt for investments with higher interest rates or yields
- Invest in dividend growth stocks
- Reinvest dividends and interest
- Optimize your mix of portfolio income holdings
- Strategically sell holdings for cash
- Reduce income taxes
- Invest in qualified accounts
- Keep portfolio turnover low
- Reduce investment fees
- Never over-pay for an investment
- Diversify with multiple portfolio income assets
- Write options
Now, let’s dig into the 3 parts of the article I highlighted at the beginning. Starting with the types of income.
And before you go, be sure to check out our full library of investing content.
Portfolio Income Versus Passive Income And Earned Income
To better understand portfolio income, let’s touch on the other 2 types of income. There is earned income and passive income.
Earned income comes from 2 possible sources. You work for someone who pays you. Or, you own and run a business.
The strict definition of passive income says it can be generated from these 3 sources.
- Renting equipment
- Renting real estate
- Owning a business in which you are not involved
But now, for today’s focus area, portfolio income…
Portfolio income is interest, dividends, or capital gains. It is derived from investment assets or money lent.
Next, let’s go through some examples of portfolio income assets. Specifically, those assets that generate interest, dividends, or capital gains.
Why? Because knowing where to target your investment dollars is important. It is the base for starting an income portfolio.
But, asset choice is only the starting point. There is more to portfolio income management than just picking the right investments.
Related: What is portfolio income and why it is important
Examples Of Portfolio Income-Producing Assets Explained
First of all, below describes several portfolio income assets. Furthermore, put several of these assets together in a portfolio. To build your own income fund.
Savings Products That Produce Income
A certificate of deposit (CD) is a savings certificate. They have a fixed maturity date and specified interest rate. Most CDs have minimum investment requirements.
Savings accounts have some similar characteristics to CDs. However, unlike CDs, they have no minimum holding period.
US savings bonds are low-risk savings products. They pay interest for up to 30 years. U.S. savings bonds are issued by and backed by the credit standing of the US government.
Money market accounts are another type of savings product. They are comprised of very short term, high-quality investment securities.
Bonds And Loans For An Income Portfolio
Next, let’s talk about investing in bonds and loans.
State and local governments borrow money by issuing municipal bonds to fund their operations.
For-profit companies issue corporate bonds. To borrow money from investors.
Peer-to-peer lending (P2P) allows people to obtain loans directly from other individuals. The P2P lending process cuts out traditional financial institutions.
Investing In Stocks For Income
Preferred stocks are hybrid securities that have a mix of bond and common stock characteristics.
Dividend-paying common stocks provide the investor with partial ownership in a company that pays dividends.
Real estate investment trusts (REITs) refer to a company that owns, finances, or manages income-producing real estate. REITs issue common stock to the public that pays a dividend.
Master limited partnerships (MLPs) are businesses in the form of a publicly traded limited partnership. Like REITs, MLPs issue common stock to the public. And pay a dividend.
Resource: Webull is my go to broker to trade stocks for free
Fund Alternatives For Income
Open-end mutual funds, closed-end mutual funds, and various exchange-traded funds have different characteristics. But, they are all similar in that they are a group of securities. That offers investors diversification across an asset class. Or, across multiple asset classes.
How To Increase Portfolio Income
One’s personal financial goals may include increasing income from savings and investments. And, we now have numerous examples of portfolio income-generating assets. Those asset types are where we want to put our investment dollars to produce portfolio income.
Creating more income is a great way to solve money problems before they get started. And, there are many things you can do to increase your portfolio income.
Let’s go through several portfolio income ideas for generating additional cash flow. They are the best tools in my toolkit of income investing strategies.
Example 1 – Invest new capital into your portfolio
Create extra earned income over and above your expenses. Then add that extra money to your asset portfolio income assets.
Example 2 – Opt for investments with higher interest rates or yields
The example list of portfolio income assets we just covered is presented from the lowest interest rates and yields to the highest.
By investing money in the assets further down the list, you will create more income from higher rates and yields. In addition, you take on more risk.
Example 3 – Invest in dividend growth stocks
Dividend growth stocks are blue-chip stocks of companies that increase their dividend payments regularly. This is one of the most passive ways to increase portfolio income.
Just hold a dividend growth stock for the long term. And the company will increase its dividend payments every year.
Example 4 – Reinvest dividends and interest back into your income portfolio
Maybe you do not need the income from interest and dividends right now? Then reinvest it back into your portfolio of income assets.
Example 5 – Change mix of portfolio income holdings
Sell lower-yielding assets from your portfolio. Then, invest the proceeds in some of the higher-yielding examples of portfolio income assets.
Example 6 – Strategically sell holdings in the portfolio
Our definition of portfolio income includes capital gains. Create income from selling growth assets in the portfolio periodically.
Example 7 – Reduce income taxes on portfolio income
First of all, reducing taxes depends on your tax situation. So, it is hard to give specific guidance. But, every dollar of tax you save increases the after-tax portfolio income you keep for yourself.
Furthermore, it is important to know that some forms of portfolio income receive preferential tax treatment. Specifically, dividends and long-term capital gains. They are taxed at lower rates than interest from savings products.
Finally, put your income investments in an IRA. They offer big advantages for income investors. More on that topic next…
Example 8 – Invest in qualified accounts
Investing in qualified accounts is another way to reduce taxes. In the US, qualified accounts include the 401(k), 403(b), Roth IRA, and regular IRA.
Depending on the type of account, taxes are either deferred or eliminated.
Resource: M1 Finance-a great source for IRA accounts & financial services
Example 9 – Keep portfolio turnover low
Portfolio turnover means how often you buy and sell your portfolio income assets. A certain amount of selling is necessary. For rebalancing or realizing capital gains for income (example 6).
But, do not buy and sell too much. Income investors should know this: keep portfolio turnover low.
Because you are more likely to increase taxes and increase transaction costs. The more taxes and transaction costs you incur, the less portfolio income that remains for you.
Example 10 – Reduce investment fees
Investment fees are another area that can take a bite out of your portfolio income. Mutual fund fees are taken off the top of any income that the mutual fund produces. Thus, fees reduce the cash that ends up in your pocket.
Invest in low-cost exchange-traded funds (ETFs). Use a discount brokerage firm for your transactions. Many online stock trading platforms are commission-free.
Example 11 – Never over-pay for portfolio income investments
The income from many portfolio income assets is inversely related to the price you may. Higher prices, mean less portfolio income.
Look for value. Dollar-cost average into stock and bond investments. Avoid buying overvalued stocks.
Example 12 – Diversify portfolio income sources
One of the reasons I provided so many examples of portfolio income-generating assets is for diversification. You want to be careful about having all your income coming from just one or two sources.
Diversification may not lead to the highest level of portfolio income possible. But it will protect your income from a big portfolio income asset running into financial difficulty. Dividend reductions, corporate bankruptcies are just a couple of examples that can damage your income stream.
So remember to grow and protect the income you earn through diversification.
Resource: Manage your total financial picture for free with Personal Capital
Example 13 – Write options to increase portfolio income
Finally, an investor can increase portfolio income by writing call options against their stock holdings. This is a little more exotic investment strategy but can be effective if you know what you are doing.
Of the 13 examples of how to increase portfolio income, writing options is the only one of these good investing tips I have not used for my accounts.
Start thinking about how you can use these strategies for increasing investment income. You may be surprised at the amount of your investment income stream over time.
We have covered a lot of ground, so let’s recap and summarize the main points of this article covering examples of portfolio income and how to increase it.
Portfolio Income Assets & How To Manage Them For More Cash Now
There are 3 types of income streams:
- Earned income
- Passive income
- Portfolio income
This article’s emphasis was placed on portfolio income and how to increase portfolio income.
First of all, invest in portfolio income assets. Furthermore, use the techniques discussed to increase your portfolio income. Finally, have fun and invest for the long-term to allow the power of compounding to work its magic.
Related Articles To Improve Your Income Earning Potential & Money Management
Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. However, I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional. Instead, I’m a 50-something-year-old, early retired CPA, finance professional, and business school teacher with 40+ years of DIY dividend investing experience. I’m here only to share my thoughts about essential topics for success. As a result, nothing published on this site should be considered individual investment, financial, tax, or real estate advice. This site’s only purpose is general information & entertainment. Thus, neither I nor Dividends Diversify can be held liable for losses suffered by any party because of the information published on this website. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.
8 thoughts on “Examples Of Portfolio Income & 10+ Ways to Increase It”
I had forgotten all about call options – I got really into options a few years ago, but have not touched them since. It may now make sense for us, since we’re buying more individual dividend stocks 🙂
Hi Miguel. That topic has been on my project list to investigate more too. Tom
Tom, Still loving your articles. Great information for anyone looking to get into investing and securing their financial future! Keep it up!! – Ben AKA Money Hungry =)
Thanks, Ben. Good to hear from you again and I appreciate you stopping by and commenting. Tom
Gotta love that passive portfolio income!
It is truly one of the best things in life. Right after friends, family and good health! Tom
Thanks Tom, I was able to share this…and read it to my daughter 8 yrs old. It was a good experience for her and I.
Thanks for sharing it with your daughter. Very glad the content created a nice experience for the two of you! Tom
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