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Discover many of the opportunities available to help you plan for your financial future.

Income vs. Growth

Asset management requires focus. It works best when investors have a clear investment objective. For many years, investors became accustomed to extended periods of stock market gain that generated enough capital appreciation from which they could live. However, for the last decade or more, many markets have proven unreliable in providing the consistent, long-term capital gains required to cover spending needs. Buying and holding investments in the hope that prices will eventually go up may no longer satisfy the lifestyle requirements of many investors. 

Therefore, we ask those investors who are concerned about the future of financial markets to consider a different approach. What if your investments were able to generate enough income to meet your expenses even in a flat market? If you could secure a dependable foundation of investment income, would any additional growth in asset values be a bonus? 

At Accrue Wealth Designs, we discuss your income needs and put together a plan for the coming years — an income plan that you can use to monitor your financial well-being. Then, our investments are carefully selected with your income goals in mind. This isn’t a short-term attempt to maximize returns with little attention to risk. 

This is a focus on producing regular income to meet your living requirements while seeking to protect capital in volatile markets.

This is an alternative approach to asset managers who feel they can always beat the stock market. Always trying to beat the stock market can add significant risk and isn’t very useful when the market produces a negative return, as in 2008.

In our experience, planning for income is much more reliable than relying on market values consistently going up. 

Achieving an income level that meets your goals can therefore free you from the constant worry that comes with the need for prices to go up in order to maintain your lifestyle objective.

We often compare our investment methodology to owning a portfolio of rental properties.1 The first consideration for such a portfolio might be the search for, and selection of, quality properties in attractive neighborhoods with financially secure tenants. You would look to acquire these properties at a “good price,” which would provide an attractive level of income and the potential for the property values to appreciate at some unknown time in the future. Ideally, this property and portfolio would produce a consistent rental income stream of cash you can use for living expenses. 

Now, imagine you hear the price of property is falling and your portfolio is now worth less than it was just a few months ago. As the primary objective of your property portfolio is income, you probably wouldn’t worry too much about this decline in value — providing the properties are still in good condition and the tenants remain financially sound.

In fact, a drop in property prices may be an opportunity to review your portfolio with opportunity to pick up undervalued property and thereby generate higher income. This is possible because, if the price of an income-producing investment drops while the income remains the same in dollar terms, your income levels (yield) will increase as a percentage.

1This is a hypothetical description intended to provide an insight into the income benefits and holdings quality of our investment philosophy when applied to income portfolios. Our portfolios typically contain liquid securities traded on U.S. exchanges and covering a wide range of asset classes. Although these portfolios may periodically contain a small percentage exposure to property values, it is rarely a significant asset class.

DIVERSIFICATION: BONDS ARE NOT THE ONLY SOURCE OF INCOME

Today’s markets offer a wide range of income opportunities. At Accrue Wealth Designs, our goal is to construct portfolios that benefit from diversified income streams. Diversification across non-correlated asset classes may increase yields and reduce your exposure to significant losses.

RISK MANAGEMENT

When you make income your primary investment objective, a number of things can change.

Price gyrations may be less of a concern to you as an income investor because you no longer need to rely on prices going up to fund your lifestyle. When markets become volatile, the most important concern becomes: “Will the company behind the investment still be paying income in five years’ time?” instead of “My principal has fallen and I need to sell into a down market.” Income often provides the conservative investor with a comfort factor in difficult markets.

If Accrue Wealth Designs can manage a portfolio that produces a desired income level, chasing capital gains by taking on more risk may become unnecessary. In challenging markets, we may even reduce income levels temporarily in an attempt to reduce risk and preserve principal.

At some stage in life, you may need your investments to provide income that covers your living expenses.

When this time comes, is it wise to continuing focusing on investment growth? When income is something you rely upon, consistent investment yield with an element of capital preservation may be more appropriate. 

1Dividends payouts can rise, fall or be suspended. They are regularly subject to the review of their continuation by the board of directors of the issuing company.

Strategies for Your Financial Future

To schedule a time to discuss your financial future and the possible role of insurance or investments in your financial strategy, contact us at office@accruewealthdesigns.com or call us at 480-565-4363 today!

We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives.

Your investment advisor is not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. You should consult a legal or tax professional on any such matters.

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    Investment advisory services offered through AE Wealth Management (AEWM), LLC, an SEC Registered Investment Adviser. Accrue Wealth Designs and AEWM are not affiliated companies.

    Accrue Wealth Designs is an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs.

    Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product.

    Any references to protection benefits or guaranteed/lifetime income streams on this website generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

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