Once investors know the approximate due dates and yields of their holdings, they can do a few simple calculations in a spreadsheet or other program to calculate thier income. Here is a breakdown of the due dates for some common fixed-income sources:
- Bonds & CDs - Government, corporate, and municipal bonds tend to pay their interest semiannually, but exactly which months will depend on the individual issue. Information about specific bond coupons can be obtained from account statements or from a broker or advisor directly. The same semiannual schedule also applies to certificates of deposit (CDs) from a bank or other institution.
- Money Market & Mutual Funds - Many fixed-income mutual funds and exchange-traded funds will pay their income monthly. The exact amount distributed each month will vary based on market conditions, but a current yield figure can be found online or through a broker and used to calculate a pro-rated amount that will be sent to your account each month.
- Stocks - Common stocks that pay dividends typically distribute this income once per quarter, or four times per year. Yield figures for stocks can also be found through many media outlets or through a financial advisor. Companies generally try to increase their dividends over time, but most do so slowly, and so investors should assume a relatively constant yield over short time frames. Preferred stocks may pay their dividends quarterly or monthly, but the dividend rate is typically locked in at issuance.
A hypothetical portfolio could look like this on an income estimation spreadsheet:
|-||Market Value||Annual Yield||Annual Income (est.)||Payment Schedule|
|Bond Mutual Fund||$60,000||3.50%||$2,100||Monthly dividend|
|CD at local Bank||$50,000||4.50%||$2,250||June, December|
|Money Market Fund||$20,000||2.75%||$550||Monthly dividend|
|Stock ABC||$15,000||2%||$300||Mar, June, Sept, Dec|
|Stock XYZ||$45,000||3%||$1,350||Feb, May, Aug, Nov|
From here, you can go one step further and set up a view that shows your investment cash flows by month:
|Income by Month|
|-||Bond Fund||CD||Money Market||Stock ABC||Stock XYZ||Total Income|
This information can then be input into your overall budgeting plans. If there is a shortfall in the desired level of income, the investor could take steps such as seeking higher-yielding investments (which may come with higher risks) or reducing expenses.
To learn more on creating a dynamic fixed-income portfolio, see The Basics Of The Bond Ladder and Creating The Modern Fixed-Income Portfolio.
Take advantage of your bond investment and learn how long you can hold on to your Series H/HH Bonds and still earn interest ...
Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ...
Learn when different savings bonds reach face value, and determine the best time to cash them in to get the highest return ...
Keep your purchase records on all investments, including tax-exempt bonds. Though the interest is tax-free, you may owe taxes ...
Several classes of noninvestment grade bonds held by an insurance ...
The amount of net income returned as a percentage of shareholders ...
A limited-time offer of a higher rate of return on a certificate ...
An entity that purchases Treasury securities at auction for a ...
An entity that purchases Treasury securities at auction through ...