[dropcap]Q[/dropcap]: Has it been better over the years to invest for growth or for income?
[dropcap]A[/dropcap]: It depends on which decade(s) you were invested.
Generally speaking, if you want to invest for growth you will choose the stock market. Historically it has offered higher returns – but also higher volatility – and thus more risk if you needed to get to some (or all) of your money. For steadier returns, investing in bonds has been the choice for many who want a somewhat more predictable income.
In the decades of extended economic growth (1940s, 1950s, 1960s, 1980s and 1990s), the stock market has produced an overall better return for investors, although with perhaps more excitement than some prefer. In decades that saw depressions and recessions (1930s, 1970s and 2000s), income investors faired better than those who had aggressively banked on a growth strategy.
So what should we do now? While every investor is different and has unique circumstances, emotional risk tolerances, time horizons, tax implications, and existing portfolio considerations, the general answer is twofold.
First, looking forward, do you feel that the economy is in an upward or downward trend? If you think that you have a sense of the general market direction, invest accordingly.
Second, if you are not sure, you may want to hedge your bets and create a portfolio that includes both strategies, as well as other asset classes. Past trends are not guaranteed for the future.
Our problem today is the world has become so interconnected, unpredictable and explosive that it makes long-term trend predictions quite difficult. Bank rates are nearly zero, so we are forced to look elsewhere for reasonable places to invest.
Your professional investment advisor may help you feel more confident about opting for growth or income in your portfolio.
BY: Bill and Cindi Porter
Aileron Investment Advisors
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The views expressed in this article are not necessarily that of Suwanee Magazine.