Investing Insights How to Generate Steady Income in 2026
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Jan 9, 2026 Dominic Pappalardo, Chief Multi-Asset Strategist at Morningstar Wealth, shares his insights on income investing in a rising rate environment. He discusses the importance of defining income goals and the advantages of intermediate bonds. Dominic highlights global bonds with currency hedging as attractive options and cautions about the high valuation of corporate credit. He recommends sectors like health care and energy, and emphasizes REITs over utilities for potential income. Finally, he stresses the importance of building a diversified, resilient income stream.
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Higher Rates Revived Income Opportunities
- Higher interest rates since 2022 reopened meaningful income opportunities for investors in fixed income.
- Persistent inflation remains a key risk that could challenge those income gains.
Start With Clear Income Goals
- Define your income goals before choosing investments so your allocations match needs like a 4% income target or higher growth ambitions.
- Your goals determine the risk you should accept when chasing yield.
Favor Intermediate Maturities
- Overweight intermediate‑term bonds (5–10 years) to capture yield without long‑end price sensitivity.
- Avoid long maturities' higher volatility unless you accept larger principal risk.