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Marcus Korsten
Emily Appleton

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Long-term Investing With Jack Lloyd: How To Combine Income And Growth
Long-term Investing With Jack Lloyd: How To Combine Income And Growth

marcus korsten investment, 9/13/2018 - Here’s some good news. Investors don’t have to choose between income and growth. Smart savers looking to grow their assets over the long-term can diversify and invest for both.

Income and growth styles

Investments can be split into two broad groups: income and growth.

As the name suggests, income investments are focused on shares paying a decent dividend – or on other assets such as bonds that pay a regular income.

They’re often sought by older investors who might perhaps use this income to supplement a pension. But they appeal equally to younger people, who can reinvest this income to boost overall returns.

A common way of comparing the income is to look at the yield from an individual investment. If you bought a share for £100 and it paid a dividend of £3 a year, this would be a 3 per cent yield.

Investment funds aiming for growth, however, are more focused on capital appreciation and rising share prices. They tend to invest in companies that pay low or no dividends.

Typically, growth stocks are younger companies that will reinvest profits in growing the business, rather than paying them out to investors through dividends.

In contrast, income funds tend to concentrate on larger well-established companies that have mature profit streams. These include utility providers, oil and gas companies, pharmaceuticals and some financial institutions.

As with any investment, though, past performance can’t reliably tell us about future returns. If a company runs into financial difficulties, it may reduce or stop paying dividends. This happened to many banks after the financial crash of 2008.

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