The past week and a half of market volatility have put a dent in the value of many investment portfolios.  This decrease in value of equities, mutual or exchange traded funds or even bonds has a silver lining for the income investor.

Fixed income instruments or dividend paying equities whose underlying businesses continue to thrive,  still pay the cash out at the defined frequency and rate.  The dividends may drop in a bad economy, but that is not the case here at all.

Markets value of equities, funds and bonds (existing bonds not new issues) are dropping but in this case it is not because the economy is tanking, so income streams are relatively untouched.

 Buying Opportunity

Income has built up or continues from your existing investments, their prices are lower, perhaps even lower than you paid for them, so now is the time to buy and increase your yield.

For the income investor, the amount of capital is almost irrelavent.  The number of shares, units or bond interest rate is all that really matters.  If your portfolio returned $100,000 a year in income, whether it’s value is $1,000,000 or $500,000 you still have your income.

The issue is not paper losses of capital.  If you need the money and have to sell and take a real capital loss, that would be an issue.  Not only do you realize the loss but also reduce future income.

If you can retain enough liquid cash to cover sudden cash needs and meet your regular  income needs from your less liquid  capital investments,  market volatility should not be a concern.  Don’t panic.