How to invest for income: Shares, bonds and why dividends matter

Investing for income can be about harnessing the power of dividends to boost your investment returns, or using the stock market and bonds to increase the money you have to spend.

In our new series on investing for income, James Norton, senior investment planner at Vanguard, will explain what you need to know, the investments to look for and the pitfalls to avoid.

It is aimed both at those growing their wealth through their working years – and using the money they have built up to fund retirement.

With dividends reinvested, £100 invested in the UK stock market in 1899 would have grown to a staggering £28,232

The power of income

Whilst many of us crave income from our portfolios during retirement, not all of us are aware of how important income can be in growing a portfolio.

Want evidence? The 2016 Barclays Equity Gilt Study shows that without reinvesting dividend income, £100 invested back in 1899 would be worth just £184 today (after inflation is taken into account). 

But with dividends reinvested, that £100 would have grown to a staggering £28,232. As for bonds, with interest reinvested the account would be worth more than 600 times more than if the interest had been spent.

In other words income is a vitally important part of the total return of your portfolio.

Next time: In the next article we’ll look at income – and its sources – in more detail. It will be live on This is Money this week. Sign up to our newsletter to be sent the this series of articles as they are published.

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