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How to invest for a monthly income

Do you need your capital to generate a monthly income? Joel Lewis outlines a simple potential solution.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Investing in the stock market is a popular way to generate supplementary income for those in retirement, especially with interest rates likely to remain low for the foreseeable future.

Shares offer the potential for significant long-term income growth. This is vital for those who may rely on the income from their investments for 20 years or longer. Even a relatively low rate of inflation will significantly erode spending power over the long term, so having a fixed income can be disastrous.

'Inflation-proof' your income

By investing in companies which pay rising dividends, investors can 'inflation-proof' their income – though of course it also means the value will inevitably fluctuate along with the share price. These are exactly the types of companies sought by equity income funds, which principally invest in companies with an attractive dividend.

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Furthermore, these funds also offer the potential for capital growth, as they have an in-built 'buy low, sell high' discipline. Investing when a company is out-of-favour, and the share price depressed, should result in a boosted yield. If the value of the stock is then recognised by the wider market, the share price rises and the yield falls. The manager could then sell the stock at a profit, having enjoyed an elevated income stream. If markets go through a tough patch the income usually falls proportionately, meaning that the longer term value is eroded.

Annual income on £10,000 invested at launch

Fund financial year

Equity income investors are spoilt for choice, with a host of great managers in the sector. Investors who prefer to leave the fund selection to our experts could consider the HL Multi-Manager Income & Growth Trust. It provides access to a ready-made portfolio of our favourite equity income funds, and currently yields a generous 4.1% (variable and not guaranteed). The trust now pays income monthly, aiming to deliver a smooth, consistent dividend throughout the year.

A one-stop-shop for monthly income

Our research team use powerful analytical models combined with hundreds of hours of manager meetings each year to identify the best equity income managers. Our approach has met with great success. Anyone who had invested £10,000 at launch in 2002 and elected to take the income would have received over two-thirds (£6,862) of their initial investment back in income alone, and their total annual income has risen almost every year. In addition, their capital would have also grown to over £19,000. Please remember past performance is not an indication of the returns you might receive in future.

View the HL Multi-Manager Income & Growth Trust factsheet

The trust is proving increasingly popular with clients seeking income, with 40% more now holding the fund in comparison to last year. For long-term investors seeking a monthly income, who prefer a service which leaves the day-to-day decision making to our team of professionals, we believe the HL Multi-Manager Income & Growth Trust could be a great solution.

Annual percentage growth Oct 09-10 Oct 10-11 Oct 11-12 Oct 12-13 Oct 13-14
HL Multi-Manager Income & Growth Trust 9.9 -0.3 17.3 22.7 9.9

Source: Lipper IM to 1 October 2014

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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