Investing can be done in various ways, with income investing and growth investing being two popular strategies, each with its own benefits and purposes.
Income Investing:
The main goal of income investing is to generate steady cash flow. Instead of choosing the most high-potential stocks, this strategy focuses on selecting stable investments that offer predictable returns. These can include dividend-paying stocks, bonds, P2P lending, or dividend funds.
Income investing is often seen as a way to create passive income, allowing you to build a portfolio that brings in regular earnings. By using strategies like dollar-cost averaging, you can start with a small amount and gradually grow your portfolio to produce substantial returns. The ultimate aim is to develop a reliable income source that you could possibly rely on in the future.
Growth Investing:
On the other hand, growth investing aims to increase your wealth over time. Rather than seeking immediate income, it targets investments with high growth potential to expand your portfolio’s overall value. This approach is often chosen when the goal is to accumulate capital for future use.
Growth investments include opportunities that are expected to grow significantly in the coming years, such as small-cap stocks, certain commodities, or foreign currencies with high return potential. However, these investments carry more risk compared to income investments and can lead to significant losses.
While income investing also involves some risk, it’s generally considered lower, resulting in smaller but more stable returns. In contrast, growth investments can be more volatile but offer the possibility of rapid growth.