Can You Live on Your Stock Earnings?

planningWhen the economy tanked in 2008, people lost over 40% of their retirement portfolio within a matter of hours. To add insult to injury, those who were already retired suddenly found themselves virtually penniless and with no way to recapture their losses.

Sadly, many people today continue to believe that they can live off any profit they may make from stock investments. Aside from endangering your ability to pay the bills, this type of planning can actually destroy your portfolio.

What Potential Growth Means To You?

Consider a situation where you get a job in which you are promised a promotion within 6 months. If you are creating a yearly and 5 year income plans, you may decide to do your projections, based on the expected raise.

If you get sick, lose your job, or someone else gets the promotion, your income projections will be off by a significant amount. In a similar way, it is never a viable option to base your future living allowance based on potential growth of your investment portfolio. While you can always be aware of potential growth, it is best to wait for that money to be in hand before you actually decide to use it for daily living needs.

Are There Suitable Guaranteed Growth Investments?

Today, many people invest in the stock market because they believe they will never make enough money on CDs, bonds, and annuities. That said, if you are looking for a stable yearly spending allowance, these guaranteed growth instruments can easily meet your needs.

Here are just a few options that should form a major part of every investment portfolio:

* Real Estate Investment Trusts
* Preferred Stocks
* CDs
* Tax free municipal bonds
* Corporate bonds
* Immediate annuities

How to Balance Potential vs. Guaranteed Growth Investments?

It is very important to realize that no investment portfolio is complete without some type of rapid wealth generator. In this case, you will be using indexed stocks to create rapid growth, and then put a significant portion of your profit into guaranteed growth instruments.

Even though it may take a few years before your CDs and other investments give you enough to live on, you will never need to touch the money from your stock investments. At the very least, if the cost of living goes higher than expected, or you need large amounts of cash for some other reason, guaranteed growth investments will make it easier to re-generate and protect your other investments.

There is no question that people of all ages are still reeling from the economic crash of 2008. While some people are desperately trying to work their way out of the chaos, others are doing even more damage to their portfolio by making withdrawals from stock dividends.

Rather than continue making this mistake, you will be better served by moving some of your investments into guaranteed growth structures that will give you some spending money while your stocks can be left alone to generate income faster.

Don’t Let Failure Destroy Your Investment Portfolio

diceIt is very important to realize that your investment portfolio is a dynamic, living thing that needs attention on a regular basis. This includes acquiring new investing skills as well as making sure that you understand the economy that underpins all of your investments.

Overall, the single most dangerous mistake you can make is to live in a world of complacency. When you aren’t looking for ways to grow and develop as an investor you will lose your chances of making money. Perhaps even worse, when you aren’t paying attention to your portfolio, you could lose everything you have because you didn’t act quickly enough to protect your money and assets.

Information is Useless Without Action

Consider a situation where you picked a series of blue stock companies to invest in, and then found a really exciting book that described Formula 1 investing. From there on out, perhaps you also learned about the benefits of indexed stocks vs managed mutual funds.

Even if you become very knowledgeable about how stock investment works, that information will do no good if you don’t apply it. For example, if your portfolio still contains many mutual funds that are taking a loss, you will be well served by converting to indexed stocks.

Never Stop Acquiring Information

When Benjamin Graham essentially pulled the United States out of the Great Depression, hundreds of students, including Warren Buffet sought to improve upon his initial design. Chances are, you already know that Buffet and other investment gurus are constantly on the lookout for new investment strategies.

No matter whether they decide to work with trade signals, options, or some other means to protect their investment, they are in a constant state of acquiring new knowledge.

If You See Value, Act On It With Prudence

It is very important to realize that not all information is useful. For example, if you read a stock investing guide from the 1980‘s, it will say nothing about investing in web based IT. On the other hand, if you miss out on this ever expanding industrial sector, you will be losing out on many chances to make money.

That said, just because you see some valuable advice, it does not make much sense to sacrifice everything and then lose. In the arena of stock investing there is truly a thin line between the power of discernment, excessive complacency, and taking foolish risks.

As you learn more about the art and science of stock investing, you will soon realize that it takes years to become proficient. While you may have a gift for spotting winning stocks, it will truly take time to hone your skills and acquire enough experience to understand how corporations and investor actions impact your ability to make a profit.

If you feel yourself becoming too complacent, start looking for new information and seeing how you can use it. Typically, as long as you are still asking question and moving forward, you have the chance to make money and enjoy more of it during your retirement years.