Capital Growth and Income – Why You Need Both For A Good Investment

By Dale Gillham

In a previous article I discussed the first of the three laws to successful wealth creation, which was to ’spend less than you earn’. The second rule to creating wealth is to ‘invest your money wisely’. All too often people do what is simple or easy rather than what is wise when it comes to investing. A wise investment, however, must have two components – it must give you capital growth (your assets appreciate in value) and it must give you income.

If your investments or financial assets, as I like to refer to them, do not have both of these components, then someone else is benefiting from the component you are not getting. For example, if you invest in a bank term deposit, you will receive income but not capital growth. If your superannuation fund is a unit trust, this investment has the potential to generate capital growth if it makes a positive return, but it does not provide you with an income until you retire. Investments that do not have both components are considered average investments in which you have to accept average returns.

The best method for investing that delivers both income and capital growth is to invest directly in property and shares. Investing in these types of assets is higher risk but the reward is worthwhile if you are willing to attain the required knowledge and skill to lower the risk and minimise your losses.

Given that you have worked hard for your money, doesn’t it make sense to invest some time to learn the knowledge to ensure your investments are profitable? If I work one hour to earn $50 and I put that money on a share hoping to win and I actually lose, that $50 can never be replaced – it is impossible for me to work that hour again. Given this, why would I place my hard-earned capital at stake unless I had a high probability of success?

Remember the fastest way to stop losing and start making money is to follow these rules to wealth creation. While they may seem mundane, let me assure you they will produce bountiful returns if you are willing to follow them. Part of your success, however, will be dependent on how you manage your investments once you invest.

Dale Gillham is the director and founder of Wealth Within, a company specialising in share market education and independent investment advice. Dale is a leading share and stock market commentator, trader, and the author of the best selling book ‘How to Beat the Managed Funds by 20%’. Wealth Within offers a variety of share investing courses including Australia’s first and only accredited Diploma of Share Trading and Investment. This course is available online from anywhere around the world. For information visit http://www.wealthwithin.com.au

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