Over the last thirty years or so I’ve managed to confirm a couple of things about investing and making your money work hard through investing.
There is no doubt that there are several investment options that make money and many that don’t and investing for income is one of the things that works and will make a poor performing portfolio zing with life.
My views have caused a little conflict with industry players and the invest for income or growth debate. My conclusion is most advisers and wealth managers get this completely wrong and the evidence is starting to become overwhelming against many advisers.
Investing for income is like having a machine inside your bank account churning out fivers on demand and whenever you need and without having to work for them.
Income that’s passive is the gold that most businesses look for and do their best to achieve.
Imagine for one minute, your retirement; with a portfolio of shares and Exchange Traded funds (ETF) that have been working for YOU over the last ten or twenty years. It’s likely that you’d have seen some increases in capital value (growth) which is good news, however when comparing that with the income you’ll note how much better off you could be with this strategy.
Growth funds you see are just that. Growth. But in order to survive, to pay bills you need income. Income is that tangible thing that flows into your bank each month or quarter. Income that doesn’t stop when the markets wobble or flatten. In business terms ‘you can’t pay a gas bill with your balance sheet or share price, you can only do that with income.’
Traditionally, we invested in shares because of income. Capital value increases were the icing on the cake – something that would be nice to have. Income is something you should aim for.
Forget what your current adviser is telling you. They’re so wrong on this. Investing for income is the only way to go.
The evidence for this is supported by a number of ‘more erudite and knowledgeable’ than me people, one of which is Geraldine Weiss.
Weiss felt that a stock should meet most (or ideally all) of seven key criteria before investors should consider buying it. They are: 1. Must be yielding more than its historical average dividend yield. 2. Must have raised dividends at a rate of at least 10% a year over the past 12 years. 3. Trading for less than double the value of net assets. 4. Trading at less than 20 times earnings. 5. Earnings are at least double dividends. 6. Debt is less than 50% of total market cap. 7. Financially stable and with a long enough track record to be considered a “blue chip”.
And from the Telegraph
Quite simply put. If you are not investing for income you are missing a trick and if haven’t been then it’s not to late start. With Pension Freedoms – this could be way to enjoy a good cash income in retirement and enjoy something to pass on to your kids – a proper tax free legacy.
When you’re ready to learn some more about this strategy then get in touch using the form below, you’ll be pleased you did.