Invest for IncomeApril 19, 2017
There are 2 ways to make money on the stock market, trading and investing.
Trading is focused on buying low and selling high. Or buying high and selling higher. The profit made on the trade is called capital gains. And its always a one-time thing, unless you repeat the process again.
This presents 2 problem.
Problem #1: Probabilities
Traders repeating the same process of buying and selling a stock is playing the probabilities game. There are times you win, and times you lose. And the highs and lows of trading takes a toll on the trader, mentally and emotionally.
It becomes stressful.
Trading is highly competitive. A zero sum game. For you to win, the trader on the other side must lose. If you are trading a stock, you want to make profit by the other person being wrong on his judgement.
Problem #2: Fees
But you know what? The man in the middle of the transaction is the one that always win. Its the brokers.
When you trade frequently, you accumulate fees. It doesn't look much at first, but it does eat at your investment as you are being charged on both sides of the transaction. Either buying or selling, you pay fees.
Beginners should focus on building wealth slowly. You should invest for income and not capital gains.
When you invest for income, you get 3 great advantages over trading.
Advantage #1: Compounding
Investors don't accumulate fees like traders do. Because we buy and hold on to a stock, we get to keep more of the money, letting it grow and compound.
Its less stressful too.
Priorities are made when you buy a stock. You don't buy it to make a quick profit. You buy it for the income it provide. So you are not worried if it goes up or down.
That income, saved and reinvested for years will grow and compound. Always bigger than the one before.
Advantage #2: Protection from recession
Investors who invest for income know one fact. CASH is KING. Income is cold, hard cash. And a stable source of income gives you protection against recession. And this money is ready for opportunities when recession arrives.
And we are back again to investing to be less stressful.
When recession comes, traders and investors are all worried. But investors who focus on income is less worried than anybody. Because they know that money will still come in, every month, no matter what the economic condition is.
Advantage #3: Money working for you 24/7
Investing for income has less stress and have more freedom. Its only possible if you make money work for you. You may not make money in an hour or minutes like traders do. But that's ok. Its money that you did not have to work for.
What is better than doing nothing and seeing your money come in every month? Ok, maybe not. When you have that free time, you should try to make use of it in the best way you can. Like searching for another company that would provide another source of income?
And it gets fun, and better. Searching for companies that would provide an income is like digging for treasures. A treasure that would provide you with income that could last a lifetime.
John D. Rockefeller (the richest man who ever lived) said,
"Do you know what brings me pleasure? Its to see my dividends come in every month."
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