How Do I Build an Income-Based Stock Portfolio?

You can invest through a full-service broker or trade online.

You can invest through a full-service broker or trade online.

Investing for income isn't just a strategy for folks nearing retirement. There's nothing wrong with letting your investments kick a little income into your coffers each month. While you might think of bonds or certificates of deposit as classic income investments, you can also build a portfolio of income-producing stocks. With an income-based stock portfolio, you not only get a stream of current income from dividends, but you have the potential for capital growth.

Determine what you want your investment portfolio to do for you. Income might be your primary objective, but you might also consider capital preservation and potential stock growth. Take into consideration how comfortable you are with risk, how much income you need your stock investments to produce and how soon you might need your money back. Consider what you would do if the company reduced or suspended its stock dividends. Take your time and do your homework. Look for stocks that meet each of your investment objectives. This might include stocks with a long history of paying regular and increasing dividends over long periods of time, in both good and bad economic climates. It might also include stocks that have a history of stock price growth.

Diversify the stocks in your portfolio to help reduce risk. Look for stocks in different economic sectors and for different companies in the same sector. Consider the dividend payout schedule for each stock. Stocks typically pay dividends on a quarterly basis, so a stock that pays in January will also pay in April, July and October. By including stocks that pay dividends in different cycles you can create a constant stream of monthly dividend income.

Make your purchases. You don't have to buy all of the stocks on your list at the same time. You can build your portfolio over time and add to it as you can. While some companies offer direct stock purchase plans, you'll gain the most investment flexibility by purchasing your stocks through a broker. If you don't have a broker you'll need to open an account. You'll have to provide some personal information, such as your name, address and contact information, along with your Social Security number. You might also have to prove your identity by showing a driver's license or passport. If you don't feel comfortable making your own investment decisions, consider using a full-service broker. Full-service brokers are more expensive, but they provide a higher level of personal service. You can save money on commissions by going through a discount broker or an online broker.


  • Consider adding preferred stocks to your income stock portfolio. They typically don't offer the same capital appreciation potential as common stocks, but they often pay a higher dividend rate.


  • Investing in stocks involves risk. You could lose some or all of your investment money.

About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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