Hi,
I am so new to all this its not funny.
My aim is to get a minimum of 10% return on my investments as regular distributions / dividends etc.
Being new, I am thinking managed funds or the like until I get some sort of trading methodology in place.
Is this feasible or am I dreaming?
Thanks
Jack
This is not Advice Do your own research
Tell them they're dreaming
Only under specific circumstances, would a stable constant income return of 10% be viable
1) high interest rates
2)Taking on extra risk above money in the bank
3) Being a really astute investor.
4) Why is everyone obsessed with income?
High rates:
If interest rates spiked like in the past eg 18% etc. Then you could get 10%+ in the bank. However, inflation would probably also be high during this period and so returns would be eaten away after tax and inflation. If rates did go that high then one could buy a bond or fixed interest product at that point, but for that strategy to work, rates would have to go back down otherwise real returns would continue to be terrible. Also at the moment this does not look it is going to happen any time soon.
Risk/Volatility:
Taking on risk will hurt the returns in two main ways. One, risk of ruin and two volatility of returns.
If too much risk is taken on the investment could go bust or if geared losses could overwhelm the whole portfolio. Also when more risk is taken on generally returns will vary more, which is not what one wants as the goal is too get stable returns for income. Some of these micro loan schemes look great with 8+% guaranteed income etc. But what happen if someone defaults??
Astute investing:
To get to a level of 10% would require significant leg work and a amatuer would be hard pressed to get that year in year out.
Income obsession/ Liquidity risk;
Alot of people seem to be obsessed with income investing. They think that because returns are offered as income or their is a constant payment that somehow it is less risky. This is absolute BS. Dividends are not guaranteed and capital losses can still occur. In my opinion a stable income based strategy should only be used towards the end of ones life when they don't want to take on risk or if someone is really conservative. Whether the gain is from a share price or distribution, it is still a gain. A constant income can occur until a crisis point and this is often forgotten by income investors. Reading history of REITS would show that distributions can be halted and what happens if property touch wood actually does fall once in a while.
Capital gains are just gained locked up in an asset which should be able to be sold anyway on a liquid market. They are more volatile but the differenc in net worth does not change, a gain is again- a loss is a loss.
If the market is returning 7%-12% with 12%-14% std/volatility. How the hell is an income investor going to get 10%, REITS seemed to have worked, but if there is an inflection point investors can get crushed. 10% is too high to expect.
my two cents