Investing for Income V. Growth

Why is it so important to get your income from your investments?
There’s a formula out there that reads as follows:

TR = I + G
Total Return = Income + Growth

The total return on any investment is a combination of the income you receive from the investment plus its total growth. Some investments only give you growth, whereas others only give you income, and some give you both.

When you invest for growth, it’s all about capital appreciation and your goal is to buy low and sell high. You could make a lot of money – but you could also lose a lot of money.

When you invest for income, you’re investing for the interest and dividends that the portfolio will give you. You know that, year in and year out, you will get a 5% rate of return, for instance, regardless of what the market does or what the value of the portfolio is at any point in time.

So what’s better – investing for growth or investing for income? Listen in.