When 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
* 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.