How to Boost Your Income Without Taking Big Risks

With record low interest rates, everyone’s looking for the best income boost.

Term deposits are at a record low. We know.

Recently, we received the latest term deposit rates from AMP. A six-month term deposit pays 2.9%.

Not so long ago, the same term deposit paid more than 5%.

Lower prices make it hard to earn an income. So folks have to take more risks.

But if you take more risks, you need to manage the risk.

We’ll explain a simple way to manage risk and improve your income today…

We’ve often written about what we call ‘punting money’ as well as ‘safe money’.

We advise folks to split their investments into 2 groups — ‘safe money’ such as gold, cash and dividend shares. And ‘punting money’ such as growth stocks, small-caps, microcaps, futures contracts, and speculative options contracts.

As an apart, note that we put a focus ‘speculative’ options contracts. Not all choice trading involves speculation.

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But getting back to managing risk, even within the ‘safe money’ and ‘punting money’ segments, you can still manage your danger according to each investment kind.

If you use stop orders, you’lmost all probably use them in a different way depending on whether you’re investing in a big blue-chip stock or a tiny microcap.

And in the event that you’re managing risk with a dividend portfolio, you may use position sizes to help you achieve an overall level of yield for your profile.

For instance, let’s say you had a $4,000 portfolio, and also you want to earn a decent income from stocks. You could take that $4,000 and put it all in to one stock or a quantity of stocks that each paid a 5% dividend yield:

In this scenario, you’d earn $200.

Alternatively, you could take your $4,Thousand and spread it across four stocks, each paying a different yield. Your profile could look like this:

In this case, you have a higher yield and income. You’re earning $370, or even 9.25% on the same amount of cash.

However, this could also mean that you’ve elevated your risk. Typically, (but not always), a higher yielding stock can mean a greater amount of risk.

So, what can you do? Simple, you can alter the numbers. You can do that till you’re happy with the amount of funds invested in each stock and the average income yield. Your own portfolio could look something like this:

In this case, we’re following an average income yield of around 7%. But rather than putting all the money in the stock that pays a 7% dividend yield, we’ve put most of the portfolio into a inventory yielding 5%, and then smaller amounts in stocks with higher yields.

You see? There’s no single way to do things when it comes to danger management, or even trying to make money stream. You have to play around with suggestions and your capital, until you’re comfortable.

Although, even then, you shouldn’capital t remain static. You should always pay close attention to what’s going on in the markets, and most of all, not be scared to adjust your thinking if your view of the market has changed.

Cheers,

Kris

PS: Income specialist Matt Hibbard knows all about managing danger for income investors. Visit here to find out Matt’s latest ideas on assisting investors boost their income