High dividend/interest investments

November 3, 2017 12:01 PM

I am looking for investments to be made through an irrevocable trust. I want investments that produce high "income", which for the purposes of a trust means dividends or interest, not capital gains (rental income would be defined as income too). Diversified, unmanaged investments (index funds, ETFs, etc.) preferred, so long as they produce income.

I'd also be interested any tools/comparisons that show the historical risk/return characteristics of funds, broken out by dividends+interest versus capital gains. Ideally, I'd like to be able to choose a fund with risk to the principal X, expected appreciation of the principal Y, expected income Z, and variance of income W.

posted by molla to Work & Money (4 answers total)

There are specific income or dividend ETF and/or mutual funds. Specific sub-categories of those include bond funds (with various risk/reward spectrums), REIT funds and preferred stock funds.

You should be able to find a few of those fund types on Morningstar, and you do the comparisons you're interested in, from e-trade or whatever broker you're working with.

(Generally, ETF/mutual funds have a income vs growth vs risk/volatility matrix or rating etc to help you guide your purchase).

Alternatively, you can setup an indefinite bond-ladder with your broker as another set it and forget it investment too.

Then, there is always annuities, but I tend to think of those as betting against the house.
posted by k5.user at 12:34 PM on November 3, 2017

Ideally, I'd like to be able to choose a fund with risk to the principal X, expected appreciation of the principal Y, expected income Z, and variance of income W.

A person who pretends to be able to tell you this with precision, in these terms, will be lying to you. This is not the eighteenth century, where you can buy gilts and feel comfortable receiving your five percent forever. At best, a company can provide you with historical data, which, especially given the weird artificial rate environment we're currently in, can tell you only a limited amount about the likely future.

Vanguard offers several income-oriented funds. You may also be looking for just a plain-vanilla bond fund.
posted by praemunire at 3:32 PM on November 3, 2017 [4 favorites]

The IRS requires REITs to pay out at least 90% of their incomes to unitholders (the equivalent of shareholders). This is similar to corporations, and means REITs provide higher yields than those typically found in the traditional fixed-income markets. They also tend to be less volatile than traditional stocks because they swing with the real estate market.

A REIT index fund is good for small investors.
posted by Homer42 at 3:12 AM on November 4, 2017

You can't go wrong looking at the income fund options at a big shop like Vanguard. Government bonds, corporate bonds, and REITs all might make sense for you. Generally, the safer the product, the lower the income. I think you can get the type of data you are looking for by looking at the yield history for the investment product - here is the Vanguard total bond index, for example, which looks like it has a yield of about 2.4%.
posted by Mid at 11:55 AM on November 4, 2017