Back to School: What is Investing for Income?

What is income, and how do I get some!? With Ian Tam and guest host Matthew Tam

Ruth Saldanha 3 September, 2020 | 2:26AM
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Matthew Tam: Hi, I'm Matthew Tam. And today, I'm going to talk to Ian Tam about investing for income. Hi, Ian.

Ian Tam: Hi, Matthew.

Matthew Tam: Why is income important?

Ian Tam: Yeah, a great question, Matthew. Income is super important not just for you but for everybody because we need income as people to pay for stuff. So, for example, if you need to go out to buy something to eat or you need money to buy a new video game, all those things require income. So, income is very important, not just for you and me but for everybody.

Matthew Tam: How you get income from investing?

Ian Tam: Yeah, a great question, Matthew. So, when you're investing, you can think about some of the more popular ways of investing, so buying things like stocks and bonds. All these types of investments give you ways to get income. So, when you buy a stock, some of those stocks pay you a dividend. And when you buy a bond, bonds will pay you something called the coupons. So, depending on what you're investing in, there's different ways to get income but it's a very common approach.

Matthew Tam: Which investments pay an income?

Ian Tam: Yeah. So, the two main ones that people will talk about a lot are stocks and bonds. So, when you buy a stock, it's like you are buying a very small piece of a big company. And when you do that, every so often those companies will pay you what they call a dividend or income for owning that piece of stock. When you buy a bond, it's like you're letting somebody borrow your money for a certain amount of time and in exchange for letting them borrow that money, that bond will pay you what they call a coupon which is also another kind of income.

Matthew Tam: Should I spend the income or save it?

Ian Tam: Well, Matthew, that's really up to you. If you need that income today, then you should by all means spend it. But the best thing to do is to try to save that and then reinvest back into either a stock or a bond or another kind of investment if you can. Because what happens is that over time the more you invest, the more money you're going to have at the end when you actually need that income in the future. So, again, the best thing to do is to try to save it. But if you need that money today, you should certainly spend that.

Matthew Tam: Thank you, Ian. For Morningstar, I'm Matthew Tam.

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About Author

Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Follow her on Twitter @KarishmaRuth.


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