I created the Income Method because I believe that it is the best investing method for me, and it is easily adapted to the needs of others. Among the many benefits:
It helps you deal with the emotional roller-coaster of the market. Share prices change daily, and it is only human for us to get nervous when 20%+ of our retirement fund disappears. When we are emotional, most of us make poor decisions. Focusing on the income gives us a less volatile and more objective view of the actual income production potential of our portfolio.
We can see the actual income we can draw from when we retire. There is no guessing. Every month, I know exactly how much income my portfolio produced, and I have a very good estimate of what it will produce in the future.
We can set objective goals. A set amount of income that you need is much more tangible than a set amount of value. The stock market is down 20%+ in value year-to-date. If you hit your retirement value goal in January, you are now 20% or more below that! Do you go back to work? Or do you live tight and hope it recovers next year?
Income is ultimately what we need. You don't need a lump sum the day you retire, you need income for the rest of your life. Since income is what you need, why wouldn't income be your goal? If my goal was to lose 20 pounds, I would not measure my progress by counting the miles I walk. Walking is the tool I might use to lose weight, but I will measure my progress by standing on a scale. Walking two miles a day might be sufficient to achieve that goal, or it might not. Until I stand on a scale, I would only be guessing at the progress I made. Too many investors confuse the tool (capital) with the goal (income). Maybe you need more capital, or maybe you don't need as much - until you look at the income it produces, you have no way of knowing.
Today I want to talk about a bias that has been part of the investing world for decades: Income investing is for "old" people.
There are numerous variations of this. Some financial advisors will tell you that you should take greater risks when you're younger and that you should increase your bond holdings only when you get older. They tell you that you should invest one way your entire working career, and then when you retire, suddenly adopt an entirely different investing method.
I disagree. Why do more experienced investors turn to income investing? Because they are wiser. The most frequent comment I get from HDO members is, "I wish I would have discovered income investing earlier".
In today's free article, I address how an income investment strategy is beneficial for investors of all ages:
Are you ready to become an income investor?
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