24 Investments That Pay Monthly Income

It’s investing 101: Reinvesting dividend and interest income is the fastest way to grow your money, period. And generating more regular investment income is the best way to manage living costs while preserving your wealth.

So whether you are actively growing your wealth for the future, or already living off your retirement funds today, investments that pay monthly income are an absolute must have!

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Monthly investment income is an important component of well-diversified investment portfolios

But where can you invest for reliable monthly income at a decent rate today? Interest rates for savers are terrible, and financial markets look risky with poor dividends. At the same time, the cost of living is rising fast. For many of us it seems like a a lose-lose situation!

Fortunately, there are better options out there. In this article you’ll find my list of the best monthly income-generating investment options for 2021 and beyond.

Contents

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Best Monthly Income Investments Through 2022

So, here is my ultimate list of the best monthly income investments that I think is good through 2022 and beyond.

I have included a range of both traditional and alternative investments in this list. I have also included some investments that pay interest bi-annually. These can be factored into your overall monthly income plan using a ladder investment strategy.

So far, I have added 24 different asset classes. I will aim to add more in the future, so be sure to subscribe to the Priority Investor weekly email for updates.

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1. Certificate of Deposit (CDs)

Certificate of Deposit accounts are offered by Banks and other financial institutions such as credit unions. Customers agree to deposit a lump sum, for a fixed amount of time in exchange for regular interest payments. Every institution offers it’s own specific terms, including the interest rate offered, and any penalties for early withdrawals.

Financial institutions pay regular interest on certificates of deposit

CDs are considered safe investments because they are generally federally insured. Because of this, interest rates are usually very low although often slightly higher than typical savings rates.

Including certificates of deposit in your monthly investment income strategy will reduce the overall risk profile of your portfolio.

Related: Certificate of Deposit – What? How? Returns and Risk

2. Short-Term Corporate Bonds

Like CDs, short term bonds are on the lower end of the risk spectrum. Because these bonds are short term, there is less risk of default by the borrower and less risk of losses due to fluctuations in interest rates.

Due to this lower risk profile, short terms bonds are used as a risk reduction tool when setting up an investment portfolio to produce monthly income. The returns are certainly nothing to write home about, but there is little chance of losing all your money.

Short term bonds are considered relatively low risk

Most investors will choose to invest in a short term bond fund rather than buying bonds directly. This method of investing offers some diversity in the underlying bond investments as a bond fund will typically hold a range of different bonds covering various issuers, industries, and regions.

Bond fund investors also have the benefit of oversight from a professional fund manager picking the underlying bond investments, making a bond fund a great option if you are a more passive investor and do not want to spend a lot of time micro-managing your investment portfolio.

Related: Short Term Bonds – What? How? Returns and Risk

3. Long Term Corporate Bonds

Long term bonds generally offer better interest rates than their short term counterparts. But along with a better return comes more risk.

Long term bonds are more sensitive to changes in interest rates as they have a longer term. When interest rates rise, the price of bonds tends to fall. When interest rates fall, bond prices rise. If you are aiming to hold a bond until maturity, this interest rate risk is less of a problem because the income from bonds is fixed, and you do not intend to sell the bond so it’s price is less of an issue.

Long term bonds can produce monthly income, but are more sensitive to interest rate volatility

Right now, interest rates are at historic lows, so the only way to go eventually is up. This means that, at some point, long term bonds with fixed coupons are likely to lose value. That said, rates seem unlikely to rise any time soon.

There are many ways to invest in long term bonds as part of your monthly income strategy, but most investors will buy exchange-traded funds (ETFs) that offer similar benefits to short term bonds funds such as diversity of holdings and a professional fund manager.

Related: Long Term Bonds – What? How? Returns and Risk

4. International Bonds

To add some diversity to your monthly income plan, you might consider international bonds. No different to US bonds, international bonds are simply debt obligations issued by corporations. In this case however, the corporation is based outside the US, and the bond is most likely issued in a foreign currency.

International bonds are issued by foreign corporations, often in foreign currency

There are lots of international bonds to choose from, including Eurobonds, Global Bonds, Foreign Bonds and Brady Bonds.

Eurobonds are usually issued by corporations based in Europe, Eurobonds are issued in a foreign currency, and traded outside the country in which the bond’s currency or value is denominated. An example of a Eurobond would be a German corporation issuing bonds in Taiwan, denominated in US Dollars.

Global bonds are much the same as Eurobonds, with the added characteristic that they can also be traded and issued in the country whose currency is used to value the bond. For example, a German corporation issuing bonds in US Dollars in the United States.

Foreign Bonds are issued by foreign corporations in the currency of the country they are being issued in. For example, a bond that is issued by a British Corporation in the United States, and valued in US dollars.

Brady Bonds are government bonds issued by foreign government, backed by US treasury bonds, and issued in US Dollars. These types of bonds were mostly issued by Latin American countries, and were first issued in the late 1980’s.

Related: International Bonds – What are They? How to Invest? Rates of Return and Risks

5. US Treasury Bonds, Bills and Notes

While not strictly an investment that pays monthly income, US Government debt is seen as one of the safest investments. It’s unlikely that the US government will default on their debt, so they might be worth including in your portfolio – if only as a risk reduction tool.

US treasuries are seen as safe investments, although returns are very low

There are three types of US Government debt; Treasury bonds, notes, and bills. Each of these has a different term and interest rate. Treasury Bonds have a term of 30 years, and pay interest twice a year. Notes pay a lower rate of interest and have terms ranging from 2 to 10 years. Bills have terms as short as 4 weeks up to 1 year.

You can invest in US Treasuries directly, or you can purchase them via a bond broker. There are also several investment funds that invest in U.S government debt assets. For example, the Vanguard Extended Duration Treasury ETF. Investing in treasuries through an ETF is a great way to gain passive exposure to a broad range of U.S. Treasury bonds

Related: US Treasuries – What are they?, how to invest, and what are the risks and returns?

6. Municipal Bonds

Another investment that pays interest every 6 months, Municipal bonds are seen as extremely low risk. The 10-year default rate is about half that of corporate bonds at just 0.1%. Some Municipal bonds are tax-exempt, making them even more attractive.

Local governing bodies issue municipal bonds to pay for ongoing costs and infrastructure projects

There are two types of municipal bond; general obligation bonds and revenue bonds. General obligation bonds are used to raise money to cover ongoing costs, while revenue bonds are issued to pay for infrastructure projects.

As with all other bond types in this list, there are two main ways to invest in Municipal bonds; buying bonds through a bond broker, or buying into an investment fund such as a mutual fund or ETF.

Related: Municipal Bonds – Everything You Need to Know

7. Floating Rate Funds

A floating rate fund is a type of mutual fund or exchange traded fund (ETF) that invests in bonds, bank loans, and other interest-bearing assets. These funds pay a variable (or floating) interest rate. Floating rate funds tend to invest in short-term assets.

Floating rate funds invest in bank loans and corporate bonds, they can be a great monthly income investment

Some examples of floating rates exchange traded funds include:

  • iShares Floating Rate Bond ETF
  • SPDR Barclays Capital Investment Grade Floating Rate ETF
  • Invesco Variable Rate Investment Grade ETF

Floating rate funds can invest in both short term and long term debt securities, and fund investors are exposed to the credit risk associated with the funds underlying investments.

Related: Floating Rate Funds – Everything You Need to Know About this Often Overlooked Income Investment

8. Money Market Funds

Money market funds are investment funds (mutual funds and ETFs) that invest in cash and near-cash equivalents. These funds a very liquid, and they try to maintain a Net Asset Value (NAV) of $1 per share. Any excess earnings are distributed to shareholders in regular distributions.

Money Market Funds invest in liquid assets like cash, and often pay out monthly income to investors

There are 4 main types of money market funds:

  • Prime – investing in non-government debt
  • Government – investing in government securities, and repurchase agreements
  • Treasury – investing in U.S. Treasury issued debt
  • Tax-Exempt – investing in tax-exempt assets such as Municipal bonds

Because money market funds have to maintain a $1 NAV, they are forced to make regular payment to their investors, creating a dependable flow of monthly income.

Related: Money Market Funds – The Low Risk Short Term Investment Generating Monthly Income

9. Dividend Paying Stocks

While the income-generating performance of the stock market is pretty poor in general, there are stocks that pay much higher than average dividends.

You can do you own research and pick the best stocks with a history of consistently raising dividends, or you can invest in a dividend focused fund and leave the hard work to the fund manager. You can buy stocks and funds with an online brokerage account.

There are plenty of stocks that pay monthly income in the form of regular dividends

Despite the fact that most stocks pay dividends annually, there are some that pay out monthly dividends. It is also possible to create a monthly income stream by selecting a range of stocks that pay out their dividends on different months of the year. This is know as a ladder strategy.

Related: The Ultimate List of All 53 Monthly Dividend Stocks

10. Real Estate Investment Trusts (REITs)

REITs own income-producing properties and distribute 90 per cent (90%) of their profits to shareholders. Investing in a REIT is an easy way to invest a small amount in income-producing real estate, and there are plenty that pay dividend income on a monthly basis.

There are many different types of REITs specializing on all manor of property types, regions and sectors. Some REITs invest in mortgages secured by real estate, and collect interest income.

Some REITs pay monthly dividend income

You can invest in REITs directly, or through exchange traded funds. Either way, they’re very accessible, liquid and generally quite stable investments.

Related: 3 Solid REITs That Pay Monthly Dividends in 2021

11. Master Limited Partnerships

Master limited partnerships (MLPs) offer a way to invest in a business enterprise in the real estate and natural resources sectors through a public exchange. MLPs do not pay federal income taxes, but investors are taxed on their dividend income.

MLPs sell units to investors, but they are listed on national stock exchanges, so they are considered relatively liquid investments. They are required to distribute all of their free cash to their investors, so they can be a great monthly income investment. Also, they do not pay Federal income taxes. instead, investors just pay their own taxes on the income distributions they receive from the MLP.

MLPs are listed on national stock exchanges and can pay monthly investment income

An MLP does not have employees. They are managed by a general partner (GP), which will typically holds at least a 2% stake in the venture initially.

A business might choose to raise capital from investors using an MLP because it is typically cheaper than borrowing money. Effectively, the business is exchanging future cash flow from an underlying project for capital from investors to get the project operational.

Related: The Quick Income Investors Guide to Master Limited Partnerships

12. Peer to Peer Lending

Another alternative investment that has become unceasingly accessible and popular in recent times, P2P lending investments can boast yields into double figures.

The premise is simple. A P2P lending website will match borrowers with investors (lenders). As an investor, you can choose to lend money to the borrowers in the form of secured and unsecured debt.

Peer to Peer lending can be a great way to add extra income to your portfolio

Interest rates charges to borrowers vary from site to site, and depend largely on the quality of the borrower and credit risk on making the loan.

Returns for investors range from about 8 per cent (8%) to well into double figures. You can also invest in part of a loan alongside other investors in the form of notes. this can be a good way to spread the risk of investing across multiple loans and borrowers.

Related: Your One Stop Guide to Peer to Peer Lending Investments

13. Private Lending

Private lending is a great way to generate monthly income from real estate, without the hassle of owning physical property. As a private lender you act as the bank, providing a loan to a real estate investor in exchange for a fixed rate of interest, and lien over the property as security for your investment.

Provided you find a good borrower to work with, private lending offers solid monthly income returns with minimal risk. You can check out our own Private Lending Program here.

Private lending is a great way to invest passively in real estate

You can expect a private lending investment to pay interest from 8 per cent (8%) to 12 per cent (12%), depending on the dynamics of the deal, the quality of the real estate and the experience and financial stability and capability of the borrower.

Related: Everything You Need to Know About Private Lending

14. Real Estate Mortgage Notes

If you can’t find a good borrower or project for a private lending investment, you could buy an existing mortgage note (or two) to add to your monthly income plan.

Real estate note investments consist of a promissory note and a lien – usually a mortgage deed or deed of trust. The note details the terms of the loan between a borrower and lender, while the lien provides security for the lender who can force the sale of the real estate through a foreclosure if the borrower defaults on the terms of the note.

Real Estate Notes Generate Passive Income

Notes can be performing or non-performing. Performing notes are in good standing with regular payments received on time from the borrower. Non-performing notes are bad debts where the borrower has stopped making payments.

The secondary market for real estate notes is huge, with billions of dollars of performing and non-performing notes traded between lenders and investors every day.

Related: Note Investing 101 – Everything You Need to Know About Investing in Real Estate Notes

15. Commercial Rental Properties

Commercial property can be a great investment for monthly income. This particular real estate asset class includes almost any non-residential building, and also residential apartment buildings with more than 4 units. Examples of commercial property include medical centers, office buildings, industrial property, multifamily apartment buildings, hotels, warehouses and malls.

Compared to residential rental properties, commercial property tends to require more capital, expertise, and time to buy and manage successfully. Fortunately, there are a number of ways you can co-invest with experienced partners.

You can invest in commercial property via syndicates and REITs

You can invest in commercial property funds, REITs, syndicates and crowdfunding websites. These access points allow smaller investors to co-invest with a relatively small amount of capital alongside experienced sponsors or fund managers who will do all the hard work.

Related: How to Invest in Commercial Real Estate for Monthly Income

16. Residential Rental Property

Rental properties are a go-to investment option for those seeking monthly income because of the regular rent payments, easy accessibility for all investors, and the fact you can use mortgage debt to amplify your cash on cash returns.

Owning rental properties can be hard work. Despite often being marketed by turnkey rental providers as a passive income investment, dealing with ‘tenants, toilets and trash’ can be time consuming and costly.

Rental properties generate monthly income, but can be difficult to manage

There are a number of ways to invest in rental properties, including a range of widely accessible residential property funds – including REITs – as well as direct ownership of physical rental properties and real estate crowdfunding websites.

Often, investors buying rental properties will use a BRRRR investment strategy; buy, rehab, rent, refinance repeat. This essentially facilitates the purchase of multiple rental properties with a relatively small amount of capital.

Related: Everything You Need to Know About Investing in Rental Properties

17. Timberland & Forestry Investments

Timber is seen by some institutional investors as the perfect asset class. Trees continue to grow and produce more timber regardless of market conditions. So your investment continues to grow whatever the economic weather.

Good quality timber takes a long time to grow, so income from owning timberland is unlikely to be received on a monthly basis. One solution that can help you incorporate forestry and timberland investments into a monthly income investment plan, is to invest via a timber fund. Because large funds and timber REITs own lots of timberland properties, they are constantly felling or thinning on rotation, so there are often more frequent income distributions to investors.

Timberland and forestry investment have outperformed most other asset classes in the long term

Timberland and forestry investments have been one of the most consistent asset classes for some of the world’s biggest investors, including pension funds and university endowments. However, a high cost of entry and a lack of forestry management skills are significant barriers to entry for many investors.

Related: Your Quick One Stop Guide to Investing in Timber REITs

18. Business Development Companies (BDCs)

BDCs can be great investments that pay monthly income at a higher than average yield. These regulated investment companies invest in small and/or distressed businesses – providing then with access to growth capital.

They are structured as closed ended investment companies, and distribute 90 per cent (90%) of their income to shareholders. Because of their regulated status they do not pay Federal income tax before distributing dividends. instead, individual shareholders pay their own taxes on income they receive.

Business Development Companies provide retail invest with exposure to an underlying portfolio of small business investments

BDCs are listed on the stock exchange and there are currently around 47 to choose from. Although they are higher risk stocks risk due to the nature of their underlying investments, they also pay significant returns. As of August, 2021, the nine best business development companies were paying yields in excess of 9% p.a. Many of these pay monthly!

Related: The Quick One Stop Guide to Investing in Business Development Companies

19. Preferred Stock

Preferred stocks can be a great investment that pays monthly income at a decent rate. But of course, there are risks to consider, especially considering the wild volatility associated with the stock market.

This interesting equity investment acts a little bit like debt, paying fixed income to investors. But preferred stock is an equity investment, and so has the potential to appreciate in value as well. Like any fixed income investment, preferred stock can be used to generate predictable monthly cashflow.

Preferred stock pays fixed income, and investors take priority over common stock holders

Preferred stockholders get priority over common stockholders when it comes to dividends. They also have a greater claim over company assets of the company falls into liquidation. But, preferred stockholders rights are limited. Usually, they cannot vote on company matters like common stockholders do.

Related: The Quick One Stop Guide to Investing in Preferred Stocks

20. Royalty Income Trusts

If you want to add monthly income from natural resource production to your portfolio, royalty income trusts are the way to do it.

RITs are set up to hold the rights to as deposits, oil wells, coal mines, and other energy-producing assets. Unitholders in the trust receive regular monthly income from the operation of the underlying energy assets, and the trust is shut down once the asset has been exhausted and is no longer producing.

Royalty Income Trusts pay out income from energy and natural resource assets

Royalty trusts pay higher than average dividends, and there are certain tax advantages. RITs are a pass-through  entity and do not pay corporation tax, and in some cases, such as clean and renewable energy production, unitholder may get tax credits.

Monthly income from royalty trusts can fluctuate as it is dependent on production volumes and commodity prices, which can both be very volatile. You can find a list of high performing royalty trusts here.

Related: Your Quick One Stop Guide to Investing in Royalty Income Trusts

21. Parking Lot Investments

If you have the right type of retirement account, you can park your money almost anywhere to generate monthly income, even parking lots!

You can of course invest in individual parking lots, or working in a similar way to crowdfunding, investors can buy into part of a larger commercial scale parking lot. Parking lot investments usually generate monthly or quarterly income from operations, which is distributed to owners by the project Sponsor.

Car park investments pay out monthly income from operations

There are a number of companies offering parking lot investments in the US. You can invest directly in parking lots through crowdfunding or a syndicate, or through a specialist parking lot REIT. As this is a relatively specialist asset class, make sure you do your due diligence on the Sponsor before investing.

Related: The One Stop Investors Guide to Investing in Parking Lots

22. Self Storage Units

Another good monthly income investment, self storage units generate regular cashflow from rents just like commercial or residential real estate.

Now becoming very popular among real estate investors, one of the most attractive characteristics of self storage, is that it still works well in a downturn economy. Whether the economy is up or down, people still need storage. It is also much lower maintenance than residential or commercial property investments.

Self Storage Investments can generate a great monthly income yield for investors

According to industry sources, there are roughly 49,000 self-storage facilities in the US, comprising 2.6 billion square feet, generating approximately $32 billion in annual revenue.

There are plenty of ways to invest in self storage depending on how active or passive you want to be. You can purchase an existing facility, build your own from scratch, or invest passively in a syndication, or self storage REIT.

However you choose to invest, investors love the regular monthly income generated by self storage facilities, and profit margins tend to be a lot higher than comparable industries.

Related: My One-Stop Introduction to Self Storage Investment 

23. Mobile Home Parks

Next on our list is mobile home parks. These can be great investments for monthly income, as well as capturing capital appreciation.

Over 5 per cent (5%) of the US population live in mobile home parks. That’s almost 18 million people. Demand is high, and supply limited, so investors are starting to take an interest.

Mobile Home Park Investments generate monthly income from lot rents and property rents

Mobile home parks offer investors regular cashflow from rents and other property income. They can have capitalization rates of up to 10 per cent (10%), making them solid cashflow opportunities.

You can invest in this asset class by buying a park yourself, through a syndicate (like crowdfunding), or through a fund known as a manufactured housing REIT.

Related: Everything You Need to Know About Investing in Mobile Home Parks

24. Coming Soon…

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