Growth and Income

guileyrulez

Hi,

Could someone please inform me of the fundamental differences between investing for Growth, and investing for Income?

Thanks in advance,

Alex

grizzly1911

guileyrulez wrote: »

Hi,

Could someone please inform me of the fundamental differences between investing for Growth, and investing for Income?

Thanks in advance,

Alex

AIUI.

The former will look for stocks with long term potential, a good price but little in the way of dividend. the capital will grow hopefully. More aggressive stocks.

Investing for income now would be looking at more stable (defensive) stocks generating good dividends now. Hopefully capital should be stable or show potential for some growth too, but not so aggressively.

If income is reinvested you would also benefit form the compounding effect.

BLB53

Growth funds tend to focus on companies that reinvest a lot of their profits into growing the business - income funds focus on companies that pay out a larger proportion of profits in dividends.

Generally if you are younger and don't need the income you might choose a growth fund - but its not clear cut as I have seen studies which suggest the best way is to go for growth and income funds (accumulation) as the total return over time is higher than just growth.

Here's a link to a recent article on DIY http://www.diyinvestoruk.blogspot.co.uk/2013/03/dividends-are-key.html

dunstonh

Could someone please inform me of the fundamental differences between investing for Growth, and investing for Income?

Growth means you want the investment to grow in value. Income means you want the investment to pay an income.

There are different ways of achieving both (including using growth to fund a regular withdrawal as a form of income or using income reinvested to give you growth).

maryjanell79

In a nutshell....

Growth or sometimes known as accumulation is where any profit made from your investment is re-invested back into your investment.

Income is when you would like the profit of the investment paid back to you.

If your invested in funds the funds are usually marked with Inc or Acc to identify the option.

Hope this helps