Series 66: 4.2.1.2. Current Income

4.2.1.2. Current Income

Investors whose top priority could best be described as “current income” or simply “income” are looking for regular cash returns from their investments. Whether monthly, quarterly, semiannually, or annually, these investors seek investments that offer a predictable cash payout and are relatively stable. Current income investors are often retirees or individuals who need the income to meet their living expenses. Portfolios that need to generate regular and stable cash returns may include a combination of fixed-income securities, such as U.S. Treasuries, agency bonds, municipal bonds, and corporate bonds, as well as equities that emphasize income over growth, such as preferred stocks, REITs, and dividend-paying stocks. Stocks that pay no or low dividends are unacceptable, as is any other investment that does not offer a regular cash return to the investor. Current income investors may also be concerned about minimizing taxes on investment income so that the maximum amount of money stays in their pocket. If a client is in a high tax bracket and values current income, municipal bonds are an excellent choice, because the interest earned on them is often not subject to any taxation.

REITs must pay at least 90% of their profits in dividends, and REITs also offer the possibility for capital appreciation