Question: I need some professional advice. Where and how can I make an investment and look for a return of up to $50,000 per month? Where do I invest, and how much would I need to invest? Would you suggest that I use my own money to invest, or get a loan from the bank?
Please advise me accordingly as I am really in need of a stable investment platform.
– Andrae
Answer: It seems that you are interested in a fixed-income instrument from which you can expect to get a known return on a set schedule. Considering the low rate of return on such instruments, you have a high mountain to climb to get the return you have stated.
Fixed-income instruments, whether money-market instruments or bonds, do offer a reliable stream of income and relative safety of principal but do not give phenomenal returns. It is the more risky investment instruments, like ordinary stocks, that give really good returns. But this does not happen overnight, not to mention that there is the real possibility that you could lose some of your capital.
If you need to get $50,000 on a monthly basis, it seems that you are interested in a 30-day instrument, perhaps a repurchase agreement (repo). Let us say the rate is 2.50 per cent. The tax rate is 25 per cent, so you would net 1.875 per cent. How much would you need to invest to earn $50,000 per month or $600,000 per year, assuming that you do not reinvest the interest that you earn each month? You would need the tidy sum of $32 million. That is not what you have in mind!
To be able to get better returns, you would need to invest for capital gains. Apart from ordinary stocks, you could consider unit trusts, which invest in stocks and real estate for growth. Unit trusts, which invest primarily in the money market and in long-term bonds, are not able to give comparable returns over the long term.
Although equities generate cash through dividends, you should not expect monthly payments. Expect one or two payments per year. Do not expect a distribution from unit trusts because most do not distribute income.
Leave A Comment