How to Create Investment Income after Selling Your Business
January 24, 2020 - 3 minutes readHow to Create Investment Income after Selling Your Business
If you are selling (or already sold your business), you may be wondering how to create investment income. After all, once you sell your business, your primary source of income may be gone. But if you wisely invest the proceeds from the sale, you may create new income streams to enjoy.
if you want to grow your money faster than inflation (estimated to be 2% or higher in 2020) you cannot leave your business sale proceeds in the bank. Savings accounts – even the self-proclaimed “high yield” savings accounts – are paying less than the typical rate of inflation. Instead, you need a growth strategy for your money.
Investment Income Growth Strategies
There are several strategies we can use to create investment income for you. However, the strategy you choose should be based on your mental, emotional and psychological tolerances for risk. Here are four strategies:
1. Growth-minded Stocks — These typically pay no dividends but increase in value as the price of the shares go up. While they may not create direct income for you, an experienced Registered Investment Advisor can buy and sell shares for you.
2. Dividend-paying Stocks — Dividend-paying stocks share a company’s profits with its owners: you the shareholder. You can reinvest those dividends or use the cash for living expenses.
3. Growth-minded + Dividend-paying Stocks — There are stocks available that increase in value over time and which regularly pay dividends.
4. Bonds — If your risk tolerance is low, bonds can be a good choice. With bonds, you know the expected yield before you buy them. In some cases, municipal bonds might make sense. However, municipal bonds generally have a lower yield due to the tax-exempt status of their interest payments. Our preference is to construct portfolios of bonds that mature in a “laddered” format – some in three years, some in four years, etc.., thereby providing a stream of maturity proceeds for either reinvestment or withdrawal.
5. Asset Allocation — We often create fully customized solutions for our clients, comprised of one or more of the strategies listed above. As we prepare these custom investment portfolios, we carefully consider each client’s specific income needs and risk tolerance.
Let’s Talk About It
A Registered Investment Advisor can provide valuable strategic advice and help you create investment income.
To learn more, download our free eBook “The 3 Questions You Should Ask an Investment Advisor Before You Sell Your Business”.
Anatoliy Cherevach is a Chartered Financial Analyst and a Portfolio Manager with Kunath Karren Rinne & Atkin, LLC, with over 19 years of portfolio management and security analysis experience. Prior to joining KKRA, he was a Portfolio Manager and Research Analyst with Cohen & Steers. Anatoliy holds an MBA in finance from Pacific Lutheran University. He is an active member of the CFA Institute and CFA Society Seattle.
