Where to invest for income
A portfolio of Australian stocks with us yields a dividend income return of 7.5%. Capital growth is on top of that.
A stock exchange listed Real Estate Investment Trust (REITs) portfolio yields 6.0%, plus capital growth. REITs invest in major shopping centres, office buildings and industrial parks.
Direct property investment in homes and apartments provide a net rental income yield of around 2.0%, plus capital growth.
Interest only investments rates range from 0.50% for “at call” bank deposits, to 1.75% for 3-5 year bank term deposits, and 0.75% for 10 year Australian government bonds. However there is no capital growth.
Stocks and property provide income and capital growth through rising profits and rents, which translate into rising capital values.
“Interest only” investments provide certainty of capital. However, they return only their nominal capital, with its purchasing power eroded by inflation, currently around 1.5% per annum in Australia. So called “safe” conservative investments are not so “safe” long term.