Learn about income investing, which is a strategy to bring in cash flow from investments. Find out what types of assets can help you generate income. SPDR S&P Global Dividend Fund WDIV is an ETF designed to track the performance of the S&P Global Dividend Aristocrats Index. Find out more. On May 21, the joint webinar series, ‘Education under COVID-19: Problems, Solutions, Perspectives, Research’ began with a session about the effects of school closures under the pandemic. From annuities to mutual funds, Federated Hermes offers a broad array of asset management products to customers worldwide.
There are many ways you can invest depending on your goals. Some people invest to grow their money quickly and accept a higher risk of losing money in the short term.
Others may be at a different point in their investing journey. They need reliable income from their investments. These people generally can’t afford to lose a large percentage of their assets.
Income investing is the name of this more conservative form of investing. It focuses on earning a reliable income from your investments.
Income investing is exactly what it sounds like. It’s investing with the goal of earning income from your assets.
Different types of investments work in different ways. Stocks with high growth potential may have been a good fit early in your investing journey. These stocks may not provide consistent growth or income, though.
These types of assets normally aren’t what most income investors gravitate toward. When you rely on your investment income to live in retirement, you want safer options.
Safer investments still have downside risk, but it isn’t nearly as great. They’re generally stable and, in most cases, provide income in different forms.
When you’re investing for income, you have many different ways you can earn that income.
When you invest in a company by buying stock, you’re a partial owner of the company. One way companies reward their shareholders is through dividend payments.
Dividends are direct payments to the shareholders. They are typically paid from the profits of a company.
Corporations don’t have to offer their shareholders dividends. If they already give out dividends, they can lower them or cancel them if they wish.
Of dividend-paying stocks, a group of companies may try to provide reliable dividends year after year. In some cases, these companies pride themselves on increasing their dividends each year.
One way to gauge the value of the dividend a company offers is a formula called dividend yield. Divide the total dividends paid per share by the share price. This gives you a percentage of the share price the company pays in dividends.
You can use the dividend yield to compare the income from these investments to other options.
You can earn interest income from many different sources. Essentially, interest is a payment for lending your money to someone else.
You can earn interest payments from keeping money in savings accounts, certificates of deposit, by investing in corporate bonds or other interest-paying investments.
When you choose these types of assets, you’re generally told up front what the interest rate will be.
Some investments, such as putting money in a high yield savings account, have an interest rate that can change over time. Others have set interest rates for the term of the investment.
The interest rate you’re paid normally varies based on the risk of the asset.
Since savings accounts are FDIC-insured, their interest rates are usually low.
However, risky corporate bonds may have very high interest rates due to the possibility of the company defaulting.
Real estate investments can offer rental income, another type of reliable income for income investors.
Investing in real estate is more time consuming than investing in stocks or bonds. It can be more rewarding, too.
Many people consider real estate investments — and being a landlord — to be passive income.
The reality is:
This is rarely the case, but it is possible if you outsource all of the management of the rental properties you own.
Income investing is a good fit for people that can’t afford or don’t want to see drastic decreases in their total assets.
No type of investing can guarantee no losses.
Income investing is considered one of the most conservative types of investing.
You’ll typically receive much lower returns than with other types of investing. This can be well worth it.
Those that have already accumulated a sufficient nest egg don’t need to take on extra risk. Instead, they want to ensure their money doesn’t run out prematurely.
Income investing is also popular among those that are risk-averse. These people are willing to accept lower returns and invest more to reach their goals to avoid the downside risk of riskier investments.
Depending on your preferences, you could use several types of investments to reach your income investing goals.
There are plenty of asset classes to choose from and financial services companies can help you invest in them.
Savings accounts, certificates of deposit and money market accounts are all relatively safe assets.
They normally offer low interest rates, though. (Online banks are a common exception.)
You could invest in a wide variety of bonds. Some are backed by the federal government.
There are also state and local bonds, often called muni bonds. These bonds generally have lower returns because they’re viewed as safer investments.
You could invest in corporate bonds. This is essentially the debt of companies. These are usually riskier because some companies have a higher likelihood of failing.
Another option is investing in the corporate bonds of a specific company. By carefully choosing a company, you can try to lower your risk.
Alternatively, you could diversify your bond holdings by using bond funds.
Another option to earn income is owning dividend-paying stocks. Dividend-paying stocks can be fairly safe or extremely risky depending on the company you invest in.
Dividend yield can be used to estimate the amount of income you could receive from a company. Dividends can be changed at any time, though.
In addition to earning dividend income, your investment could grow or decrease in value based on the company’s performance and other factors.
If you’d like to diversify, you could purchase mutual funds focused on long-term investing in dividend-paying stocks.
Rental real estate is another favorite type of investment for income investors. By owning and renting out a property, you receive income in the form of rent checks.
The goal is to cash flow the rental property. This means the rent you receive covers all of your costs and provides a profit.
Some people buy rental properties early in life. Then, they pay off the mortgages before they retire.
By doing this, you could have significant income-producing assets in retirement.
The same concept applies if you can pay cash for rental properties without using a mortgage.
Each type of investment comes with its own tax considerations. As long as your assets aren’t in a tax-advantaged account, they’re usually taxable in some way.
In general, there are two different types of taxes you might have to pay.
One tax is your ordinary income tax rate. This is your marginal tax rate on your next dollar of income.
The other tax is called the capital gains tax. This a lower tax rate for certain investments and investment income.
Interest income is normally considered ordinary income for tax purposes. A special rule exists for municipal bonds. The interest from these qualifying bonds is not taxable on your federal income tax return.
The tax treatment for dividend income varies. Some dividends are ordinary dividends taxed at ordinary income tax rates. Others may be considered qualified dividends, which are taxed at capital gains tax rates.
Taxation for rental real estate is much more complex.
Since rental real estate is technically a business, you get to deduct your expenses from your income before you pay taxes. In fact, landlords may show a tax loss despite having positive cash flow.
In these cases, you may not have to pay federal income tax during these years. You may have a large tax bill when you eventually sell the rental property.
Any type of investor is likely looking at how they can optimize their investing.
Investors can benefit from prudent tax planning. Take a look at your assets and figure out how you can reduce the taxes you owe on them and the income they put off.
This may require changing where you house different types of investments.
In general, it makes sense to put the highest income-producing assets in Roth-based tax-advantaged retirement accounts. These accounts don’t usually have to pay taxes in the future. An example is a Roth IRA.
You can then move your lower income-producing assets. Ideally, you’d put these into traditional retirement accounts. If you’ve exhausted your tax-advantaged accounts, a taxable account is another option.
These investments put off less income.
You won’t owe as much tax on them as you would your higher income-producing assets.
If you’re an income investor, chances are you’re relying on the income to fund your lifestyle. If this is the case, it doesn’t make much sense to reinvest your dividends.
Reinvesting your dividends can help you get more shares of stock. This may result in more dividends later.
If you don’t need the income, reinvesting your dividends could help your future financial situation.
Income investing is for those with relatively low risk tolerance that need to earn a reliable income. There are many ways you can be an income investor.
It’s easy to be unsure which method is best for you or how to enact a particular type of income investing.
In these cases, consider hiring a fiduciary financial planner. They can help you draw up an investment plan for your specific situation.
Author: By Lance Cothern
Updated: May 24, 2020
Brompton Tech Leaders Income ETF
This ETF provides high monthly distributions and the opportunity for capital gains through an investment in an actively managed portfolio of large cap global Technology companies selected by Brompton, complemented by a proprietary covered call program.
Our PM team first uses top-down analysis to identify attractive sub-sectors. Rigorous fundamental analysis focuses the portfolio on 15 to 20 global Technology companies which offer a combination of growth and value characteristics. The PMs then actively set the level of covered call writing (up to a maximum of 33%), with the goal of optimizing distributable cash and total returns.
May 20, 2011
April 3, 2018
Brompton Funds Limited
CIBC Mellon Trust Company
TSX Trust Company
Brompton Funds, a division of Brompton Group which was founded in 2000, is an experienced investment fund manager with over $2 billion in assets under management. Brompton’s Portfolio Management team specializes in Canadian and global equity investments and is a leading manager of covered call writing strategies in Canada.
Summary of Investment Portfolio as at April 30, 2020
Total Net Asset Value$38,105,450.00
Returns for Brompton Tech Leaders Income ETF are unaudited.
Commissions, trailing commissions, management fees and expenses all may be associated with exchange-traded fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated.
The actual breakdown of distributions for tax purposes will be provided to unitholders annually in March. This information will also be posted on the website as soon as it is available.
This information is of a general nature only and does not constitute legal or tax advice to any particular investor. Accordingly, prospective investors are advised to consult their own tax advisors with respect to their individual circumstances.
Investors may elect to automatically reinvest their distributions in additional units of the Fund and realize the benefits of compound growth. Any units acquired pursuant to the distribution reinvestment program qualify for the service fee.
The following information is applicable to holders who, for the purposes of the Income Tax Act (Canada), are resident in Canada and hold trust units as capital property. If this is not the case, a tax advisor should be consulted.
Holders of trust units outside of a RRSP, DPSP, RRIF, RESP or TFSA should expect to receive a T3 slip from their investment dealer. T3 supplementary slips will indicate Investment Income in Box 26, Foreign Non-Business Income in Box 25, Capital Gains in Box 21 and Dividend Income in Box 23 and Box 49. Dividend income is subject to the standard gross up and federal dividend tax credit rules.
The return of capital component is a non-taxable amount that serves to reduce the adjusted cost base of the Fund units and is reported in Box 42.
Class A Share
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WDIV: SPDR S&P Global Dividend Fund | State Street ETFs
The tables above show historical distributions from the funds. Historical distributions are no indication of future distributable income.
All SPDR ETFs, aside from the SPDR® S&P 500® ETF Trust and the SPDR® S&P®/ASX 200 Listed Property Fund are managed on an accumulation basis, with income reinvested into investable securities. This means that subsequent application and redemption activity could distort the nature and size of distributions. The proportion of total return attributable to income versus capital growth may differ from the relevant index.
The distribution components are as calculated and reported to the Australian Securities Exchange (“ASX”) at the time of each distribution. The year end components reported to investors in their annual tax statements, once all year end information is finalised, may be different.
The ability of the Funds to pay distributions depends on, among other things, the dividends and distributions declared and paid by the companies whose securities are held by the Funds. There can be no assurance that such securities will pay dividends or other earnings. For further information on distributions, including tax implications, please refer to the relevant fund PDS. However, the information contained therein is not tax advice and investors should obtain their own professional tax and or financial advice.
Dividend tax rate
World Bank—HSE University Webinar Examines the Costs of School Closures During the Covid-19 Pandemic
On May 21, the joint webinar series, ‘Education under COVID-19: Problems, Solutions, Perspectives, Research’ began with a session about the effects of school closures under the pandemic. Harry Anthony Patrinos of the World Bank presented the results of a model that he and a team of researchers developed in order to predict the extent to which the closures may reduce learning and lead to future losses in labor productivity and earnings for today’s students. The webinar was moderated by Isak Froumin (Head of the HSE Institute of Education), while Professors Tommaso Agasisti (School of Management, Politecnico di Milano) and Sergey Kosaretsky (Director of the HSE Centre of General and Extracurricular Education) served as discussants.
Social distancing requirements associated with COVID-19 have led to school closures worldwide. In mid-April, the World Bank was reporting that 192 countries had closed all schools and universities, affecting more than 90 percent of the world’s learners: almost 1.6 billion children and young people. The model created by Harry Patrinos (Practice Manager, Education Global Practice, the World Bank) and his colleagues (George Psacharopoulos, Victoria Collis, and Emiliana Vegas) aims to estimate the long-term effects of school closures from the perspective of wage loss due to loss of schooling. The work draws on the human capital theory which stipulates that education is an investment: if societies are deprived of the opportunity to invest, then the returns of that investment—namely, increased earnings—will likely go down.
Starting with the fact that every year of schooling equates to 8–9 percent in additional future earnings, Patrinos and his colleagues then used the number of months of education closures to estimate the loss in marginal future earnings. Their results show that the school closures will reduce future earnings, and that this loss is equivalent to 18 percent of future GDP. Their model also demonstrates that low-income students might be affected most.
In developing their model, Patrinos and his colleagues examined the economic effects of previous pandemics and school closures. According to Patrinos, studies have shown that previous pandemics (such as the Spanish influenza pandemic of 1918) reduced earners’ incomes by 5-9%. In addition, studies that look at the effects of recessions on graduates have shown that graduating in a recession year leads to losses in earnings that could last at least a decade. ‘The impact is about a 10% reduction in wages due to just graduating in a recession year,’ he said.
In order to examine the impact of school closures specifically, Patrinos and his team looked at the impact of past non-pandemic-related school closures, such as those in China after the Chinese Cultural Revolution, which led to a 35% decline in high school completion rates among the affected cohort, in addition to labor market outcomes a decade later. They also looked at rates of return to education during volatile economic periods in the last quarter of the twentieth century in countries such as Argentina, Mexico, and Venezuela.
‘From the literature, we know that every year of schooling increases future earnings by about 9% a year. Using the 9% figure on additional earnings, we estimate how the number of months of closure will reduce your earnings. Applying this to the US, for example, we find that if a school is closed for 4 months, the loss in marginal future earnings is 2.5% a year, or a total of over $50,000.’
Currently, there is the mitigating factor of distance learning, Patrinos says, but factors such as coverage, quality, and access, which cannot be ascertained at this point, make it difficult to estimate the extent to which it will reduce the negative impact of school closures. ‘The model also does not account yet for learning loss, which also affects earnings,’ he said.
In the United States, more than half of schools are closed until the fall, and some universities are not planning on opening in the fall. It remains to be seen how much education can be made up in online education measures.
With the currently available data, Patrinos and his colleagues predict that, in the US, the school closures will result in an earnings loss of $1,337 per year per student, or $33,464 (present value) of lost earnings over a lifetime. ‘This may seem like a small price to pay,’ he said, ‘but for society—for a school system of 76 million of students—we estimate that this could be up to 2.5 trillion dollars’ worth of earnings losses. This is a significant amount of resources lost just because of schooling being closed for just 4 months in the United States. This is the first estimate we have come up with.’
In terms of the global context, there are some global impacts that are clear, Patrinos says. The majority of the world’s students are in middle-income countries, and the higher losses will occur in high-income countries by nature of the fact that when you have more, you have more to lose. However, the losses for low-income countries could be the most devastating.
While the model does not account for differences in educational quality in different regions or distributional effects (such as gender, income level, labor sector, or education level), it clearly shows that governments should maintain and improve educational funding. Governments should maintain their expenditure levels on education and better target funds for those who have been hurt most by the school closures; they should provide income support for unemployment; and, lastly, they should invest in digital skills and technology, says Patrinos. ‘This last point is important even in higher-income countries’ he said. ‘It goes for both students and teachers.’
In his remarks, discussant Professor Tommaso Agasisti highlighted the importance of looking at the long-term effects of the crisis. ‘A lot of debate is focused on learning loss, but the angle that was presented about how this translates into income and wage loss is very important. And this helps us proceed to next problems – policy,’ he said.
Professor Agasisti also underscored the particular difficulties that today’s crisis presents for researchers. ‘I like the idea of looking at past pandemic as a benchmark,’ he said.
There is a big difference between today and the pandemics of the past. Then, the only source of inequality was different parents. But today, the digital tools which are meant to mitigate the effects of school closures are paradoxically also a source of inequality.
Professor Kosaretsky echoed the issue of access to technology in his remarks, presenting statistics about students in Russia. ‘Russia exhibits higher spatial disparities than comparable countries in terms of their digital preparedness and lack of resources to compensate for problems in families—this goes not only for poor but middle-class families. 44% have few or no laptops. Only a few number of regions can provide school laptops to students in need.’
Concluding the session, Isak Froumin said, ‘I think that today we mainly started the discussion. We see what factors we have to take into account in analyzing differences in school outcomes and future labor market outcomes. Our webinar series will explore this area further with the aim of involving more researchers in this topic.’ He invited the participants to the next webinar on Tuesday, May 26, which will focus on income contingent loans for higher education.
The webinar series Education under COVID-19: Problems, Solutions, Perspectives, Research provides a venue for practitioners, policy makers and researchers to discuss and search for evidence-based responses to the major challenges education faces on the global, regional and national levels in the context of pandemic. The challenges relate (but not limited to) the following topics: economics of education (for instance, estimation of losses in terms of human capital and financing), sociology of education (how does the institutional landscape changes with the new players entering the field? What could the consequences of COVID-19 be for social mobility and inequality, especially for the underprivileged?). Other disciplines involved may be political science, pedagogy and psychology.
All webinars are held in English. Webinars can be accessed online via WebEx.
Kaufmann Small Cap Fund (FKALX)
dagger disclosure The funds expense ratio is from the most recent prospectus. The expense ratio may reflect voluntary fee waivers and/or expense reimbursements determined by the funds Advisor and its affiliates. The voluntary waivers and/or reimbursements, if applicable, are in effect up to but not including the later of 01/01/2021 or the date of the funds next effective prospectus.
The fund’s R6 Shares commenced operations on September 1, 2017. For the period prior to the commencement of operations of the R6 Shares, the performance information shown is for the fund’s A Shares adjusted to reflect the expenses of R6 Shares for each year for which the fund’s R6 expenses would have exceeded the actual expenses paid by the fund’s A Shares. The performance information has also been adjusted to reflect any applicable differences between the sales loads and charges imposed on the purchase and redemption of R6 Shares and the A Shares, as well as the removal of any voluntary waivers/reimbursements of fund expenses that may have occurred during the periods prior to the commencement of operations of the R6 Shares.
Total returns for periods of less than one year are cumulative.
Total return may have been lower in the absence of temporary expense waivers or reimbursements.
International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards.
Investing in IPOs involves special risks such as limited liquidity and increased volatility.
Small company stocks may be less liquid and subject to greater price volatility than large capitalization stocks.
After-tax returns are calculated using a standard set of assumptions. Actual after-tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The stated returns assume the highest historical federal income and capital gains tax rates, but do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions assumes a continued investment in the fund and shows the effect of taxes on fund distributions. Return After Taxes on Distribution and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on fund distributions. After-tax returns are not relevant to investors holding shares through tax-deferred programs, such as IRA, 401(k) plans. The after-tax average annual total returns are based on the 37% tax bracket and include the 3.8% tax on net investment income.
Mutual funds are subject to risks and fluctuate in value.
Product classifications noted at the top are Federated Hermes’ internal classifications.
The holdings percentages are based on net assets at the close of business on the date above, and may not necessarily reflect adjustments that are routinely made when presenting net assets for formal financial statement purposes. Because this is a managed portfolio, the investment mix will change.
Investors should carefully consider the fund’s investment objectives, risks, charges and expenses before investing. To obtain a summary prospectus or prospectus containing this and other information, contact us or view the prospectus provided on this website. Please carefully read the summary prospectus or prospectus before investing.
Current and future portfolio holdings are subject to risk.
Federated Securities Corp., Distributor
Not FDIC Insured
May Lose Value
No Bank Guarantee
Author: Federated Hermes, Inc.