Investing for Income: A Personalized Approach
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While the typical goal of investing is to grow wealth and assets, for others, a desired outcome is a steady and predictable stream of investment income. Income is a by-product of investing, as most companies pay dividends to shareholders and most bonds make periodic coupon payments and return par value at maturity. Returns from investment income are generally more predictable and stable than those from market price appreciation; although, companies do sometimes reduce dividends, and issuers can default on their loan obligations. And, with notable uncertainty around price return, one could understand why, all else equal, investors might prefer to have a larger component of their total return coming from investment income as opposed to price return. This is true particularly during the retirement phase when investors may rely on their assets to sustain their lifestyle and standard of living in addition to growing for future spending or goals.