Investment Income
Candlefocus EditorDividends from stocks, bonds, and other investments are an example of investment income. A dividend is a payment made by a company to its shareholdersc often in the form of cash or stocks. The payment is usually made according to a predetermined schedule in the stock's prospectus. Investors who own dividend-paying stocks or bonds can receive regular income.
Capital gains are another form of investment income. Capital gains are realized when an asset is sold at a higher price than it was purchased for The higher sale price represents the capital gain, which is taxed based on the investor's tax bracket, as long as the asset has been held by the investor for one year or more.
Interest earned on bank accounts and investments such as certificates of deposit (CDs) is also considered investment income. The interest rate on these investments is usually quite low, but can provide a reliable and steady source of income.
Taxes on the above forms of investment income are usually lower than taxes on wages and salaries. That is why it is important for investors to understand the differences between the two, and which investments will provide them with the best returns.
Investment income is an important source of income for investors and can help to ensure financial security in the future. With the right investments, investment income can provide a steady flow of income that can help pay for regular financial obligations and even save for future investments.