Investing covers a wide range of strategies, with income investing and growth investing being two of the most popular. Each approach has its own set of benefits and reasons for why someone might choose to implement them.
Income Investing
Income investing aims to generate consistent cash flow, focusing on stable investments that provide predictable returns, such as dividend-yielding stocks, bonds, or diversified options like Peer-to-Peer (P2P) lending or dividend funds. This method is often viewed as a form of passive income. It allows for creating a portfolio that brings in regular income. By using strategies like dollar-cost averaging, you can start small and gradually build a portfolio that offers substantial returns. The ultimate goal is to create a steady income stream that you could potentially rely on in the future.
Growth Investing
On the other hand, growth investing focuses on building wealth over time. Instead of seeking immediate income, this strategy is about finding investments that are likely to grow quickly, increasing the size of your portfolio. This approach is often chosen when the aim is to accumulate capital for future use.
Growth investments are those expected to see significant growth in the coming years. These might include small-cap stocks and sometimes certain commodities or foreign currencies that could offer high returns. However, while the promise of rapid growth is appealing, these investments are also considered riskier, with the potential for significant losses.
Though income investing also carries risk, it is generally seen as lower compared to growth investing. As a result, income portfolios usually provide smaller but more stable returns, whereas growth investments can be quite volatile.