Investing Assets & Markets Stocks Strategies for Creating Monthly Income Practical Ways to Live Off Your Investments By Marc Pearlman Marc Pearlman Marc Pearlman is an independent investment adviser with Securities America Advisors, Inc. where he has maintained a successful investment management practice for over 20 years. He has written about investing for The Balance, specializing in content helping new investors with options to invest their money. Previously, he also hosted a personal finance radio show called Your Money Matters. learn about our editorial policies Updated on February 1, 2022 Reviewed by JeFreda R. Brown Reviewed by JeFreda R. Brown JeFreda R. Brown is a financial consultant, Certified Financial Education Instructor, and researcher who has assisted thousands of clients over a more than two-decade career. She is the CEO of Xaris Financial Enterprises and a course facilitator for Cornell University. learn about our financial review board Fact checked by Julian Binder In This Article View All In This Article Mutual Funds for Monthly Income Investing in Dividend-Paying Stocks Money Markets & Certificates of Deposit Investing in Real Estate Frequently Asked Questions (FAQs) Photo: Getty Images Years ago, people would work for one company for most of their adult lives. When it was time to call it quits, they would receive a nice watch and a pension. Today, more people work for many different companies during their lives, and only a few get that gold watch. Even fewer get the pension that once went along with it. Fortunately, with proper planning, investors can use a mix of different fixed-income products and create their own stream of monthly income to support themselves in retirement, or even in very early retirement. Mutual Funds Designed for Monthly Income The idea of living off your investments with a steady monthly income stream isn't new, and multiple financial firms offer mutual funds designed to produce that income stream. When evaluating possible mutual funds as investments, take a close look at the ratio of stocks to bonds. Many funds that are set up to produce monthly income will include both, but funds that include a high percentage of stocks tend to be riskier than those that include mainly or solely bonds. Of course, funds that include a high percentage of stocks also may have higher rates of return than funds with a high percentage of bonds. Your choice will depend on your tolerance for risk and on your overall financial goals. Investing Directly in Dividend-Paying Stocks Investors who are comfortable putting their money directly into stocks, rather than investing in mutual funds, can develop a regular income stream by investing in dividend-paying stocks. Larger, well-established companies traded on the New York Stock Exchange often pay quarterly dividends. Companies in the energy or financial sector often pay strong dividends, as do public utilities. If you choose your stocks well, you can enjoy the best of both worlds: regular dividend checks and a significant increase in stock price. Parking Cash in Money Markets and Certificates of Deposit Money market accounts and certificates of deposit (CDs) are very safe investments that can be used for monthly income. Both are insured by the Federal Deposit Insurance Corporation (FDIC), which means you'd get your money back (subject to FDIC rules and limits) if your bank were to fail. Note Money market mutual funds are a different type of entity and are not FDIC-insured. There are some disadvantages to these two methods of creating a monthly income stream. Both CDs and money market accounts typically have minimum deposit requirements. When you buy a CD, you can't withdraw your money until it matures, without incurring a penalty, which makes it the wrong investment for someone who may need immediate access to the cash. Most importantly, the rates paid by both money markets and CDs are significantly less than what you would expect to earn from stocks or income-producing mutual funds. Therefore, someone who is looking to generate enough income on which to live shouldn't make these a primary choice. Investing in Real Estate Another option for creating a monthly income stream is investing in rental real estate properties. This requires significant cash up front, and you need to be able to maintain the properties on a professional level. You also have the option of hiring an agency to manage the properties, but that will cut into your income. It's also possible to have a partner who handles the property management. While rental income can supplement your income, you also have the option of selling the properties for a significant profit if the market is good for sellers. Frequently Asked Questions (FAQs) What is a good monthly return on an investment? The average monthly return on an investment will depend on the type of investment. A good return for real estate investments won't be the same return you'd expect from certificates of deposit (CDs). To get a sense of the average returns for your investment, look at an index that tracks a relevant sector. What is a real estate investment trust? A real estate investment trust (REIT) is an entity that pools funds to invest in real estate. REITs trade publicly like stocks, but they are subject to special rules. For example, REITs must issue dividends for at least 90% of their taxable income. REITs may invest in any type of real estate, including residential, industrial, commercial, and more. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Deposit Insurance Corporation. "Are My Deposit Accounts Insured by the FDIC?" Securities and Exchange Commission. "Investor Bulletin: Real Estate Investment Trusts (REITs)," Page 1.