You’ve worked hard to build your wealth and now it’s time to make your money work hard for you. Here’s a step by step guide to build a plan to help you maximise the income you receive from your investments.
Step 1 – Choose your structure(s)
For most people, the structures they hold their investments in will have the greatest impact on the amount of income they receive. The structure you use (such as superannuation, account-based pension, annuity or family trust) will determine the amount of tax you pay or, if you are retired, the Centrelink benefits you receive. A professional financial adviser can work with you to structure your investments to maximise your after-tax income.
Step 2 – Create an asset allocation strategy
The next step is to determine your attitude to risk – how much you are willing to ride the ups and downs of investments. Your financial adviser can help you understand your risk profile and work with you to build an asset allocation strategy in line with your attitude to risk.
A well diversified portfolio is as important when you are drawing an income from your investments as when you are building your wealth. In the past five years, many investors have turned to the safety of term deposits to generate the majority of their income. In 2009, when the average three year term deposit paid around 7% interest per year, that was very attractive. With the average term deposit now paying around 4.45% interest, people are beginning to diversify their allocation to assets such once again such as shares that pay large dividends, residential and commercial property and fixed interest.
Step 3 – Choose your individual investments
The final step to your passive income plan is to choose the individual investments in line with your structure and asset allocation strategy. This may involve investments such as shares, managed funds individual properties. At this point, it is worth seeking the advice of a professional stock broker, property adviser or financial adviser to bring your investment portfolio to life.