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How can Investing Increase your Cash Flow Year on Year?

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The pandemic has been a reminder to everyone that their job and career could be on the line at any time. Cut off from the regular wage is a frightening prospect and now saving and investing for that rainy-day fund is a top priority.

Even when times are good extra cash flow doesn’t go amiss, so when you’re looking at investment options you’ll find a huge choice and they are available to investors around the globe with a simple click on your phone or a quick phone call to a financial adviser.

The investment market has become more accessible and user-friendly, and there is more choice. However the sheer number of investment options and individual niches each investment option provides, can be an intimidating factor for new investors to navigate.

In this article, we provide some insights into the world of making your money make money for that all-important rainy day fund.

How can investments increase your cash flow?

The world of investing provides investors with the chance to increase their returns and cash flow throughout the year. As investing has become increasingly more accessible to the everyday individual, more and more people can take advantage of the fantastic benefits the different forms of investments provide.

When trying to understand how investments can help you increase your cash flow year on year, it crucial a new investor understands the differing form of returns they can expect from an investment.

Investment Income

Interest Payments

One of the most secure and reliable forms of returns an investor can pursue are interest payments from simple investments as continued contributions to saving accounts. On the other and investors can take advantage of more complex investment options such as fixed-rate bond investments.

One of the most attractive benefits of interest returns is investors know exactly how much money you can receive from your investment.

Dividends

Some form of investments provides investors with the chance to take advantage of dividend payments from their investment.

Acting in a similar vein to a salary, dividends are a chance for a company to thank investors for their continued support through regular payments of what a company makes throughout the year.

The amount an investor can receive from a dividend depends on how well the company performed that year and the investment your provide.

Capital Gain

Capital gain is arguably the most recognised form of return when you mention the word investing. Simply, arising from when an investor sells their stake in a company, bond or position in a fund for more than they paid, capital gains provide investors with the chance to seek considerable returns on a relatively small investment.

How can you secure a regular return on investment to boost your cash flow?

While it would be great to provide each investor with a golden formula to ensure they receive a regular return on investment, this is not the case. As each investor is looking for something different from their investment, the answer to this question will naturally change.

However, there are a number of overarching factors that each investor can take into account.

Spread The Risk

Diversification

One of the most common mistakes investors can make is putting all their eggs in one metaphorical basket. Through only investing in a singular asset type investor may receive considerable returns when that asset is performing. However, when this asset witnesses a dip in performance, the returns from that investment will be hampered significantly.

To overcome this shortfall and ensure a regular and robust return to investment, investors should look to diversify their investment portfolio to include a range of asset types that are disassociated with each other.

At the same time, an investor may be limited to what they can invest in due to available finances or access to specific markets. An investor’s portfolio should encompass a range of varying assets to ensure you see consistent returns throughout the year.

Diversifying your investment portfolio does not need to be a complicated process. On the surface, it may sound relatively easy to carry out such a task. For those looking to take a step back from their investment investors can take advantage of specialist diversified investment trusts.

Fixed-Rate Investments

While diversification in an investment portfolio is critical, one of the most secure and relatively simple investment investors can pursue are fixed-rate investments.

Although bonds may not be the trendiest place to your money, the associated risks to a bond are relatively safer, reliable and more manageable than those continually relying on the performance of the stock market.

For those who are looking for a steady return on investment, fixed-rate investment bond payments act similarly to a salary and provide investors with a steady income throughout the year.

Dividends

For those looking to see a consistent and growing return on their investment, investments that pay dividends provide investors with a two-fold return. Depending on the company they invest in, investors looking to see consistent returns throughout the year can take advantage of cash payments throughout their investment and capital gain from when they choose to support.

While dividend payments provide investors with growing returns year on year, it is essential to remember that how much an investor receives is dependent on two key factors. The first of these is how well the company is performing and the profit they have made.

Secondly, the payment will be in proportion to your investment. It is safe to say dividends are an attractive feature of an investment. However, investors should keep in mind that dividends are used as a way to retain investors year on year.

Summary

Every worker needs to think ahead and prepare for that unprecedented event that could take away their regular wage. A fund that grows through making your money make money is your best step forward.

The murky world of investments needs through research, knowledge and support. Always get independent investment advice before making any investment decision.

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