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Information for ALL types of Investors
The difference between "Growth Investing" and "Income Investing"?
"Growth Investing" and "Income Investing"
Determining which method is right for me/ us.
There is no sure way of determining which method will provide the best results for a given set of objectives. The future growth of the equity market is uncertain, and the speculation about where it will go - up, down or stay flat - is a difficult prediction.
Lifecycle Planning is a concept by which an investor can determine where they are in a lifecycle, and make decisions related to their investing with less emotions. Some examples include:
If the timeframe for achieving goals is far into the future, the Lifecycle method would recommend a more "Growth" oriented investing style.
If the timeframe is quickly approaching (or here), such as is the case with investors who are near or in retirement, or with institutional investors, who demand principal safety over speculation, the Lifecycle method would recommend a more "Income" oriented investing style.
Note: There is a concept called the "Retirement Red Zone." This is the critical time when investors are 5 years prior, or 5 years into retirement. This stage demands that principal security be at the forefront of investing decision making.
Popular Options In "Growth Investing" and "Income Investing"
Stocks, certain bonds, mutual funds, options, commodities, real estate, precious metals and currency.
Growth investors are searching for capital appreciation in the share price of the stocks (or funds) that they purchase.
Income can be derived by stocks that pay solid dividends. However, with this option, there is the underlying principal risk associated with the share price volatility of the stock.
CDs historically have been a safe money option for those who wanted to create income they can count on. Today, the low interest rate environment has made this strategy difficult to use.
Annuities can create a guaranteed lifetime income, but they come with a price related to access to principal and legacy planning, if the investor should die prematurely.
Structured Payout Products are readily available today to create low risk sustainable income for investors.
Real Estate Investment Trusts (REITs) are real estate backed investments that create income for investors in the form of interest payments that are backed by the rents paid by the tenants of the buildings owned.