The Financial Times Guide to Investing for Income: Grow Your Income Through Smarter Investing

The Financial Times Guide to Investing for Income is the definitive guide to using investments such as equities, bonds and derivative structures, as a source of income. It provides you with the necessary tools to work out the best strategy to follow. The book begins by describing the basics of risk, return, volatility, structure, inflation and investing. It then shows you the simplest and safest products and funds before moving on to higher risk strategies that will pay the highest income.

Introduction:

This book is the result of a straightforward moment of revelation, a tiny epiphany. As an investment journalist I’m used to writing about weighty issues that prey on the minds of supposedly smart people who work in banks and asset management houses – is inflation about to make a come-back, can we trust the central bankers to properly manage volatile asset markets? These translate into relatively straightforward actions within the investment world, such as buying gold if you believe inflation is about to shoot up or selling government bonds if you think government’s haven’t got a handle on sovereign risk.

But a great many investors, though curious about this ‘weighty’ stuff, aren’t actually that bothered by all this smart talk. What they care passionately about is squeezing out an income from their investments to pay for a huge range of things including their retirement, payments to their children at university or frankly anything that requires a monthly or quarterly cheque. This small revelation is of course no great surprise to the managers of massive investment management houses who have spent countless decades building empires around marketing funds that offer a ‘reliable’ income, with a headline percentage featuring prominently in the billboard advertisement. But for investment journalists it is a revelation as we assume that investors are really only interested in ‘growing’ their investments, at best, and preserving their capital at worst. Income is useful as a tool for building models that can calculate the fair value of an investment – analysts at big stock broking houses use the dividend paid out by companies as the basis for many valuation models – but basically it’s just a small building block on the path to capital growth.

This book is a reminder that for many people income is an end in itself. A few years ago I attended a focus group for a large investment house and found myself astonished at the wide range of ordinary ‘punters’ who were interested in income, in one shape or another. I’d expected the older investors in retirement to be desperate to build a sustainable income but I was surprised just how interested the younger investors were in generating an income. In particular I found myself astonished by the mid-twenty- something investors who carefully scrutinised the dividend payouts of large companies – I’d rather lazily assumed that they’d be desperate to talk exclusively about finding the elusive, racy tenbagger stock that shot up tenfold in price. Instead they wanted to know whether GlaxoSmithKline could afford its dividend over the next ten years.

Hopefully this book will address many of those concerns, worries and aspirations. I’m aware that Financial Times/Prentice Hall has already published books on planning for retirement which feature a heavy dose of commentary on income. I’m also aware that there are a great many good books on bonds and income investing, and personal finance books full of worldly wisdom about cutting costs and finding the right savings accounts. All of these serve a purpose but I hope you find this book equally as useful if only because it has at its core a slightly wider purpose, namely to provide a comprehensive overview of all the investment options open to investors looking for a sustainable income over the long term, ranging from ordinary high street savings accounts through to complex structured products built on derivatives and an understanding of equity markets.

Contents:

• The basics – risk, yield and structure
• Savings accounts and annuities
• Bonds – government and corporate
• Investing in shares for a dividend
• Using funds and hybrids to build an income from equities
• Using retail structured products
• Putting it all together in portfolio terms
• Building some model income portfolios
• Investing in shares through a dividend index

The Financial Times Guide to Investing for Income: Grow Your Income Through Smarter Investing By David Stevenson pdf