There are numerous ways to make money in the markets. Stock option trading, bonds, commodity trading, rental real estate, flipping houses, forex, bitcoins, precious metals. I'm convinced that if it exists or can be conceptualized, then somewhere some human has found a way to profit from it. Patent trolls have found a way to capitalize thought itself.
So what is my preferred way on making money in the financial markets?
There are two general types of assets out there.
1: Assets you can buy now and sell later for a profit.
2: Assets you can buy now and sell later for a profit that also pays you to hold them.
Given just this, it seems like owning #2 gives you an automatic advantage, or an edge over #1. The asset that gives income can still be sold for a profit if need be so really there are two strategies possible built into one. I see little reason to focus on non paying assets.
Both of these types of assets come with two problems.
1: You have to be able to figure out WHAT will increase in value in the future to be able to sell it for a profit.
2: You have to be able to figure out WHEN to sell your asset meeting your time horizon of when you will need your profit and if the asset has more upside in price to come or if it is going to drop and you lose unrealized gains. Our two listed assets have these problems because of "buy low sell high." However #2 has the added benefit of income. That is where my edge and strategy lies.
My goal is to generate enough monthly income to cover my monthly bills. If I can do that then I am never forced to sell my assets for profit to live off of. In fact if I am never forced to sell an asset, and my assets generate the income I am wanting, then I never want to sell them. I no longer have to worry about concern #2 in when I will sell if I do not plan to sell for a profit. Additionally I'm less worried about what will appreciate in value as much as what will give me a constant income stream so concern #1 is mitigated somewhat.
I am an Income Investor.
I have one last concern with planning and choosing my strategy. Inflation. It can slowly creep into a portfolio and our lifestyles and lower them. I am in my late 30s. I have another 25 years before traditional retirement. Assuming I live to be 90 I have 25 years of retirement. Thats 50 years of inflation that I have to worry about with my financial decisions today.
To combat inflation I want my income streams to increase every year by more then the inflation rate. Long term that is about 3% - 4%.
I am an Income Growth Investor.
Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
So what is my preferred way on making money in the financial markets?
There are two general types of assets out there.
1: Assets you can buy now and sell later for a profit.
2: Assets you can buy now and sell later for a profit that also pays you to hold them.
Given just this, it seems like owning #2 gives you an automatic advantage, or an edge over #1. The asset that gives income can still be sold for a profit if need be so really there are two strategies possible built into one. I see little reason to focus on non paying assets.
Both of these types of assets come with two problems.
1: You have to be able to figure out WHAT will increase in value in the future to be able to sell it for a profit.
2: You have to be able to figure out WHEN to sell your asset meeting your time horizon of when you will need your profit and if the asset has more upside in price to come or if it is going to drop and you lose unrealized gains. Our two listed assets have these problems because of "buy low sell high." However #2 has the added benefit of income. That is where my edge and strategy lies.
My goal is to generate enough monthly income to cover my monthly bills. If I can do that then I am never forced to sell my assets for profit to live off of. In fact if I am never forced to sell an asset, and my assets generate the income I am wanting, then I never want to sell them. I no longer have to worry about concern #2 in when I will sell if I do not plan to sell for a profit. Additionally I'm less worried about what will appreciate in value as much as what will give me a constant income stream so concern #1 is mitigated somewhat.
I am an Income Investor.
I have one last concern with planning and choosing my strategy. Inflation. It can slowly creep into a portfolio and our lifestyles and lower them. I am in my late 30s. I have another 25 years before traditional retirement. Assuming I live to be 90 I have 25 years of retirement. Thats 50 years of inflation that I have to worry about with my financial decisions today.
To combat inflation I want my income streams to increase every year by more then the inflation rate. Long term that is about 3% - 4%.
I am an Income Growth Investor.
Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
I'm getting a late start, but Dividend and Income Growth Investing has been my focus for the last couple of years. The account largely was funded by some lucky initial trading positions in GLD, SLV, and CEF during the big PM run up. The first day of major selling caused me to instantly comprehend the definition of Blow Off Top, and a lucky profitable position liquidation which I have been slowly redeploying into dividend paying equities, CEFs and a few select bond funds.
ReplyDeleteYour old youtube channel, as well as DFS's, Stocktradingmaster's and Airelon's have been great assets.
Glad to see you over here godzillaunchained. I wasn't sure who was going to follow me from youtube and you were one I was wanting.
DeleteIt falls under my youtube being lazy category. Lots of people saying how important and great they felt my content is.... but only if they can click "play".
Looking forward to the new blog, was following the old one. I don't post much on blogs but wanted to let you know that I appreciate your info. I've also been subscribed to nononsensetrading for the past 6 months and have paid attention to your comments and input there. Looking forward to the future! Thanks.
ReplyDeleteThank you for the feedback. Its always nice to know that people are reading. Yes I can see the page hits in the stats and I know there is the silent majority but its still nice.
DeleteI prefer the dividend growth style too. When you save a high portion of your income, try to spot 20-40 high quality businesses and divide your wealth among them year after year, there is not much that can go wrong. Your household balance sheet will become a fortress.
ReplyDeleteFor me it's such a pychological boost to see my passive income grow, quarter over quarter.
I was basically following this blog from the beginning, in 2011, where you deposited $100 every week, I learned quite a bit from you. Good luck with the reboot.
Pmu I think the changes you are implementing will free up a lot if your time to make solid investment decisions to further out yourself ahead.
ReplyDeleteWhen you get a chance. If you still have your theoretical family figures I'd like a copy of them. I was using those as a benchmark for my progress.