The stock market goes up and down reflecting the state of the economy. However, it seems like no matter what is going on, some people always seem to be making enough money and are not worried about the ups and downs of the economy. How do they do it? What is their secret? The answer is a conservative investment model.
The Stock Market
The concept of buying low and selling high to make profits on stocks exchanged all over the world is a concept that most people are familiar with. Conservative investors also use this principle, but instead of investing in small companies, they invest on track record, 5 and 10 year growth, and company profitability and expansion. Companies that explode too quickly do just that. Explode and they suddenly implode on themselves. Companies like Sears, McDonald’s, and Target that have been around for years and have consistent returns are good investments. Conservative investors also look for stocks that pay dividends. These dividends can be reinvested, or taken as a cash payment that can be used however you would like. Typically when you are younger, dividends are better reinvested than taken as income.
Investing within an IRA is also something that conservative individuals do because there are no tax consequences for stock trades within a Roth IRA vehicle. Stocks can be bought and sold at will and there will never be a capital gains tax on that sold investment as long as it is sold within the Roth IRA vehicle.
Conservative individuals invest in their life by buying life insurance for their family to provide them with lost income in the event of their death. They also buy the insurance to collect wealth while alive by purchasing permanent life insurance. This type of insurance is more expensive over time, but with each premium paid, a percentage of this goes towards your cash value. This cash value accumulates at a fixed percentage and can add up to a very large sum of money over the years. At retirement age, you can annuitize this sum of money to provide you with life time income. This will probably not be enough to live on, but will be a consistent income for you for the rest of your life.
Conservative investors also invest in real estate as a long term investment. Consider this. In 1979, a 2000 square foot house cost roughly $90,000. This same 2,000 square foot house, even in 2009 when the market was down, would retail for $165,000 (median home price in Ripon, WI based on Century 21 listings of median home selling prices). This is nearly $2,500 per year of profit, not to mention any rental income you have received from the property.
These three investment tools can build you a conservative portfolio of investments that will give you multiple income sources to weather any storm. Remember that a drop in prices of a stock or real estate is nothing more than a buying opportunity. If you haven’t cashed out yet, then you haven’t lost anything.