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Why is Income Investing so good for returns?

August 10, 2018

 

 

Total Return = Capital Gain + Investment Income

 

When speaking about income investing in the traditional stocks and shares market,

“Historically, dividends have made up a significant portion of the total return from equities. If higher returns are your goal, an effective way of achieving this is to reinvest the income from dividends” According to Michelle McGrade, chief investment officer of TD Direct Investing, writing in 2017. (Article: https://www.globalbankingandfinance.com/the-importance-of-total-returns-and-how-it-enhances-profits-across-different-market-environments/ )

 

She goes on to prove the point with a comparative analysis to growth based investments, which we could take as an analogy for a good part of cryptos today.

 

When considering the difference between investing for capital growth or income, you could consider the BlackRock UK and Schroder Income funds. BlackRock UK has a long-term capital growth focus. The Schroder fund, meanwhile, aims to deliver a good level of income as part of a total return strategy.

 

Past performance is not a reliable indicator of future returns.

Source: Bloomberg      

 

Similarly, from a more global perspective Baillie Gifford International seeks out companies which are able to generate above average earnings growth, while Artemis Global Income aim to achieve a combination of capital growth and rising income via a global equity portfolio.

 

 

 

Past performance is not a reliable indicator of future returns.

Source: Bloomberg   

 

Furthermore, McGrade goes on to note that re-investing of dividends, as Thrupny is planning to do, is also a very effective way of growing capital:

 

“You can see from the chart below the difference between the returns you would have gotten from a £10,000 investment in the FTSE All Share index over the last 20 years without dividend reinvestment (£19,235), illustrated in the chart as price return. By comparison, reinvesting the dividends would have delivered a much higher return of £36,769.”

 

 

 

Past performance is not a reliable indicator of future returns.

Source: Morningstar Direct as at 31st December 2016 of compounding.

 

The other great advantage of income investing from a crypto point of view is it gets rid of instability, erratic price change nature that has kept people away for so long.

 

Our Improvement of Stable Coins - The Income Coin

 

Income Coins give all the advantages of a stable coin with profits on top.

 

As with Unit Trusts based on income stocks and shares, we aim to seek high income generating assets to both pay dividends and increase the value of the fund.

 

Income focused investment produces more stable growth of value as it has two sources of growth, the value of assets and their dividends or revenues. In the case of Thrupny, the revenue portion will be mainly from property rental but may include other elements such as property operation or business revenues. Therefore...

 

Income investing for the millenial, should be our tagline!

 

So an Income Coin using these principles in a well governed and diversified manner can give more stability and potentially significant returns over the medium term.

 

If you are interested in our project, have a look at the white paper https://www.thrupny.com

 

 

 

 

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