The only true goal of investing is GROWTH. Bonds, bank accounts, and annuities are, in many ways, speculations — primarily because of inflation risk. One of the great wonders of finance over the last four thousand years has been the extended periods without government-sponsored inflation. Just over a century ago, Roger Babson proposed that focusing on growth — rather than dividends or book values — could lead to improved investment outcomes.

The payoff from investment growth comes in two forms:

1. Current, spendable income
2. Compounded long-term growth

Income typically comes from three sources: dividends, selling options, and selling assets.

**Dividends** can be spent, reinvested in other securities, or automatically reinvested through a dividend reinvestment plan (DRIP) offered by the issuing company. In addition to evaluating a stock’s fundamentals, it’s important to assess how the dividend and DRIP will impact your portfolio. Some companies offer dividends that are arguably too high, relying on reinvestment plans to recapture those funds. Sustainable growth is essential for maintaining — and increasing — dividends over time, especially in …

**Selling options** to increase income has been practiced for more than 500 years, dating back to the early days of stock exchanges. In essence, the investor trades away the possibility of future gains in exchange for immediate income. This strategy is gaining traction in today’s low-yield environment. However, as more investors pursue options strategies, the risk grows for issues with the institutions guaranteeing those contracts — a challenge we saw firsthand during the 2008 recession.

**Selling appreciated assets** to generate income is a standard and reasonable part of our approach — especially when the portfolio is growing.

Katz Family Financial