If you are lucky enough to have a lump sum to invest into the stock market then there are a number of options to choose from.
But perhaps the first question you need to ask yourself is “why am I investing in the stock market”?
You could be investing for long-term capital growth, you could be investing to generate income or you could be doing a little of both.
In this article we will concentrate on investing for income.
With interest rates at all-time lows, putting your £10,000 in the bank is likely to yield less than 0.5% in interest, unless you are willing to lock up your capital for a year or more – but even then you will have to search hard to find any institution paying much over 1%.
So, putting your money in the bank could generate less that £50 in interest over the year. Inflation dropped to 0.5% in August, down from 1.1% in July, so your interest income would be wiped out by inflation meaning the spending power of your £10,000 after one year is…. £10,000!
So where else can we look for a higher level of return?
I came up with an ambitious plan earlier this week while compiling a list of income events like dividend payments and bank interest.
You know how the Amateur Investor loves income from savings and dividends – well what if I could receive at least one dividend or interest payment every day. Wouldn’t it be great to receive money every day!
I came across this quote from John D. Rockefeller while listening to an audio Podcast from Questor (Garry White of The Telegraph) called Questor Income Tips, and it sums up the Amateur Investor attitude to investing perfectly.
Regular readers of the Amateur Investor blog will know that passive income and dividend income is extremely important to me. And I regularly reinvest dividend income to purchase “free shares”.
So when more dividend income appeared in my account with The Share Centre this morning – this time from St James’s Place (STJ) , a dividend of 3.2p per share – I quickly looked to reinvest the dividend…