Investment Advice – Producing Income

Often trying to make heads or tails of the different types of income producing investments that are out there today can be a confusing ordeal for anyone. Getting help to determine what kinds of investments would be beneficial for your portfolio is often a step in the right direction.

If you are the type of investor that is looking to generate regular income from your investments you will have to examine many aspects of your portfolio. Could you manage to accrue capital growth within your asset-supplied investment portfolio? Some may feel hesitant about relying on this capital growth to supplement income if you are subjecting yourself to a potential tax liability from collective investments such as unit or investment trusts, OEICs or even insurance company bonds.

If this sounds like your personal situation, you will want to make sure that you are able to utilize all tax exemptions and tax reliefs available to their maximum potential. When you hold an investment producing capital growth, in a unit trust or OEIC, you would be able to encash some of the units or shares from this, where the proceeds would include an element of growth and an element of original capital. Using taper relief for this example would use your annual capital gains tax (CGT) exemption, so that you will not loose that opportunity to effectively receive a tax-free cash sum that can exceed the annual CGT exemption limit. You will want to utilize this tax relief since it does not have the ability to carry it forward to the next taxation year and will be lost if not used.

When you are investing in a UK single premium insurance company bond, you qualify for an annual allowance, which allows you to withdraw 5% of the original investment each year up to a maximum of 20 years in total. The positive side of this example is that there is not tax payable for those times of withdrawal, and even applies to those investors that are in a higher tax bracket. Overall, this equals a tax deferral, unless the final encashment of the policy held is occurring in a tax year where you are paying basic rate tax, such as while in retirement, where there would typically be no tax charges.

National savings bonds or Pensioners bonds come with a fixed term of 1, 2 or 5 years and pay out a monthly income that is fixed and cannot change for the duration of the term. Income bonds are quite similar but they are open to anyone.

Some feel that the most effective way to produce income from your investments is by investing in real estate. Depending on your financial situation and what type of risks you wish to take, some prefer partaking in over-seas real estate as a means to obtaining property for their present use part-time for vacation property or for future personal use as a retirement settlement.

There are many options that will produce income regularly from your investments, but one needs to examine each aspect to find out if it is the right choice for your portfolio before jumping into an investment to make sure it is the right option for you.