Where to invest for income
Bank interest rates range from around 1.5% for “at call” bank deposits, to 3.0% for three year fixed term bank deposits, to 1.8% for 10 year Australian government bonds.
Direct property investment in homes and apartments provide a net rental income yield of around 2.0%.
Real Estate Investment Trusts (REITs) yield around 5.5%. REITs invest in major shopping centres, office buildings and industrial parks.
Our current portfolio of Australian stocks provides an income yield of around 7% inclusive of management fees.
Stocks and property also provide income and capital growth through rising profits and rents, which translate into rising capital values.
“Interest only” investments give certainty of capital. However, they return only their nominal capital, with its purchasing power eroded by inflation, currently around 2% per annum in Australia. So called “safe” conservative investments are not so “safe” long term.