Where to Invest Money to Get Monthly Income

Investing for monthly income appeals to many individuals seeking to establish a consistent financial stream from their assets. This approach focuses on generating regular cash flow, which can help cover living expenses, supplement other income sources, or support financial goals. Understanding the diverse investment avenues that offer periodic payouts is a step for those looking to build a reliable income portfolio. This article explores various investment types designed to provide regular income, outlining their characteristics and function.

Fixed-Income Investments

Fixed-income investments represent debt instruments where an investor lends money to a borrower in exchange for periodic interest payments. These investments typically offer a predictable income stream, making them a common choice for income-focused portfolios. The regularity of these payments provides stability not always found in other investment types.

Bonds are an example of fixed-income instruments, encompassing government bonds, corporate bonds, and municipal bonds. While many bonds traditionally pay interest semi-annually, investors can structure a diversified bond portfolio to receive income more frequently, creating a monthly cash flow. For instance, a bond portfolio could include various bonds with staggered interest payment dates to achieve a monthly income pattern.

Certificates of Deposit (CDs) fall within the fixed-income category, offering a fixed interest rate for a predetermined period. CDs are offered with various maturities, and interest payments can be structured to be received monthly, quarterly, or at maturity. The interest rate on a CD is guaranteed for its term, providing a secure and predictable income source, though early withdrawals often incur penalties.

Equity Investments

Equity investments represent ownership stakes in companies, and while their prices can fluctuate with market conditions, certain types are known for generating income through dividends. Companies distribute dividends as a portion of their earnings to shareholders, providing cash payment for holding their stock. This income stream can be a significant component of an investor’s overall return.

Dividend stocks are shares of companies that have a history of making regular dividend payments. While most companies pay dividends quarterly, some actively pay monthly dividends, which can directly contribute to a consistent monthly income stream. Constructing a portfolio of various dividend-paying stocks with staggered payment schedules can also help achieve a more regular monthly income.

Real Estate Investment Trusts (REITs) are another type of equity investment that can generate regular income. REITs own, operate, or finance income-producing real estate across various sectors, such as apartments, shopping centers, or data centers. The Internal Revenue Code generally requires REITs to distribute at least 90% of their taxable income to shareholders annually, which often results in regular, and sometimes monthly, dividend payments. This distribution requirement makes REITs a compelling option for income-seeking investors.

Alternative Income-Generating Products

Beyond traditional stocks and bonds, several other financial products are specifically designed to provide regular income streams. These alternatives can diversify an income portfolio and offer different risk-reward profiles. They often cater to individuals seeking consistent payouts over various time horizons.

Annuities, particularly immediate annuities, convert a lump sum of money into a guaranteed series of income payments. An investor makes an initial payment to an insurance company, which then provides regular payouts, often monthly, for a specified period or for the rest of the annuitant’s life. This contractual guarantee of income provides a high degree of payment predictability.

Income-focused mutual funds and Exchange-Traded Funds (ETFs) pool money from many investors to invest in a diversified portfolio of income-generating assets. These assets can include bonds, dividend stocks, preferred stocks, or other income-producing securities. The fund then distributes the income generated from these holdings to its shareholders, often on a monthly or quarterly basis. These funds offer diversification and professional management, simplifying the process of building an income-generating portfolio.

Key Considerations for Income Investing

Several objective factors warrant careful evaluation when constructing an investment portfolio aimed at generating monthly income. Understanding these characteristics helps investors align their choices with their financial objectives and cash flow needs.

Yield is a consideration, representing the income generated per dollar invested, typically expressed as a percentage. A higher yield generally translates to more income, though it is important to consider how sustainable that yield is. The stability and predictability of the income stream are also important, as some investments offer fixed payments while others, like dividends, can vary.

Liquidity, or the ease with which an investment can be converted to cash without significant loss of value, is another important factor. Investments with higher liquidity allow quicker access to funds if unexpected needs arise. Diversification principles suggest spreading investments across different asset types and sectors to mitigate risk and promote overall portfolio stability, meaning investors should not rely on a single income source. The investment horizon, or the length of time an investor plans to hold an investment, also influences suitable income options, as some investments are better suited for short-term needs while others align with long-term income goals.

Tax Implications of Investment Income

Understanding the tax implications of investment income is essential, as different types of income are taxed differently, which can significantly affect net returns. Investment income is generally subject to federal income tax, and sometimes state and local taxes, depending on the investor’s location.

Interest income, such as that received from bonds or Certificates of Deposit (CDs), is typically taxed as ordinary income at the investor’s marginal tax rate. This means it is treated similarly to wages or salary for tax purposes. Dividends, however, have varied tax treatments; qualified dividends from eligible domestic corporations or foreign corporations meeting specific criteria are taxed at lower long-term capital gains rates, while non-qualified dividends are taxed as ordinary income.

Selling an income-generating investment for a profit results in a capital gain. Short-term capital gains, from assets held for one year or less, are taxed at ordinary income rates, while long-term capital gains, from assets held for more than one year, are taxed at preferential rates. Investing within tax-advantaged accounts like Individual Retirement Arrangements (IRAs) or 401(k)s can offer significant tax benefits. Contributions to traditional IRAs and 401(k)s may be tax-deductible, and investment income within these accounts grows tax-deferred until withdrawal in retirement. Roth IRAs and Roth 401(k)s, funded with after-tax dollars, allow qualified withdrawals, including investment income, to be tax-free in retirement.

Citations

1. The Internal Revenue Code generally requires REITs to distribute at least 90% of their taxable income to shareholders annually. [Source: “Real Estate Investment Trusts (REITs) – Overview, Structure, Types”, Corporate Finance Institute, corporatefinanceinstitute.com]
2. Qualified dividends from eligible domestic corporations or foreign corporations meeting specific criteria are taxed at lower long-term capital gains rates, while non-qualified dividends are taxed as ordinary income. [Source: “Topic No. 404 Dividends | Internal Revenue Service”, IRS, www.irs.gov]
3. Short-term capital gains, from assets held for one year or less, are taxed at ordinary income rates, while long-term capital gains, from assets held for more than one year, are taxed at preferential rates. [Source: “Topic No. 409 Capital Gains and Losses | Internal Revenue Service”, IRS, www.irs.gov]
4. Contributions to traditional IRAs and 401(k)s may be tax-deductible, and investment income within these accounts grows tax-deferred until withdrawal in retirement. [Source: “Retirement Plans FAQs regarding IRAs | Internal Revenue Service”, IRS, www.irs.gov]
5. Contributions to traditional IRAs and 401(k)s may be tax-deductible, and investment income within these accounts grows tax-deferred until withdrawal in retirement. [Source: “401(k) Plans | Internal Revenue Service”, IRS, www.irs.gov]
6. Roth IRAs and Roth 401(k)s, funded with after-tax dollars, allow qualified withdrawals, including investment income, to be tax-free in retirement. [Source: “Retirement Plans FAQs regarding Roth IRAs | Internal Revenue Service”, IRS, www.irs.gov]
7. Roth IRAs and Roth 401(k)s, funded with after-tax dollars, allow qualified withdrawals, including investment income, to be tax-free in retirement. [Source: “Roth 401(k) vs. Traditional 401(k): Which Is Better? – Investopedia”, Investopedia, www.investopedia.com]
9. The most common form of corporate bond is one that has a stated coupon that remains fixed throughout the bond’s life. It represents the annual interest rate, usually paid in two installments every six months, although some bonds pay annually, quarterly, or monthly. [Source: “Corporate Bonds – Fidelity Investments”, Fidelity Investments, www.fidelity.com]
10. Both bonds and notes pay interest every six months. The interest rate for a particular security is set at the auction. [Source: “Understanding Pricing and Interest Rates – TreasuryDirect”, TreasuryDirect, www.treasurydirect.gov]
11. Treasury bonds are government securities that pay a fixed interest rate every six months. [Source: “Understanding Treasury Bond Interest Rates | Bankrate”, Bankrate, www.bankrate.com]
12. Most corporate bonds pay on a fixed semiannual schedule. [Source: “Understanding Corporate Bonds | PIMCO”, PIMCO, www.pimco.com]
14. What are monthly income bonds? Monthly income bonds are offered by banks and building societies to provide a regular stream of income, paid monthly. You can receive monthly income from bond funds managed by professional investors. [Source: “Monthly income bonds – ii – Interactive Investor”, ii – Interactive Investor, www.ii.co.uk]
15. You dont have to pay state income tax on federal treasury bond yields. Otherwise no benefit. If you buy a long term bond you are essentially betting that the interest rate you lock in is higher than average over the term of the bond. [Source: “If I buy a US treasury how often does it pay out? : r/FinancialPlanning – Reddit”, Reddit, www.reddit.com]
16. The issuing bank determines when it will pay interest on the brokered CD. Generally, interest is paid at maturities of one year or less. Sometimes banks pay interest monthly. For maturities beyond one year, banks may pay interest semiannually, quarterly, or monthly. [Source: “Certificates of deposit: Rates & CD investment options – Vanguard”, Vanguard, investor.vanguard.com]
17. The timing of the payments can vary, but most CDs tend to pay interest monthly, semiannually, or at maturity. [Source: “Certificate of Deposit- Fixed Income Products – Charles Schwab”, Charles Schwab, www.schwab.com]
18. An annuity is a contract with an insurance company that promises to pay you monthly benefits in exchange for an up-front purchase amount. [Source: “8 Investments to Generate Monthly Income – SmartAsset.com”, SmartAsset, smartasset.com]
20. You can withdraw interest paid during your CD’s current term anytime without penalty. You can transfer the interest to a Synchrony Bank High Yield Savings or Money Market Account or a non-Synchrony Bank account. [Source: “Certificate of Deposit (CD) – August 2025 – Synchrony Bank”, Synchrony Bank, www.synchronybank.com]
23. A CD (certificate of deposit) is a type of deposit account that’s payable at the end of a specified amount of time (referred to as the term). CDs generally pay a fixed rate of interest and can offer a higher interest rate than other types of deposit accounts, depending on the market. [Source: “Certificate of Deposit – View CD Rates and Account Options – Bank of America”, Bank of America, www.bankofamerica.com]
24. Looking for investments that pay monthly? Discover the best options for regular income, including bonds, real estate, ETFs, and more. Learn how Mintos can help you achieve steady cash flow in 2025. [Source: “Investments That Pay Monthly: Top Options to Look at for 2025 – Mintos”, Mintos, www.mintos.com]