What if you don’t need passive income?

Although our website is primarily about passive income from passive investments, it is worth mentioning situations where people don’t really need passive income that much.

This could be because they already have more than enough passive income or because they have a good “active” income source, eg. a job or business they enjoy doing, pays well, allows them some degree of freedom and choice in working hours, and that they can continue to do well past usual retirement age.

In such situations investing for passive income becomes less important and less relevant, and it may make sense to tilt your investing strategy primarily towards achieving capital growth (eg. to build up a nest egg for your kids or for charitable purposes etc.), with the need for regular income a secondary factor.

This could mean that investing more in residential property, which we believe is far better for its capital growth prospects than its income distributions, may make more sense.

With shares, it may mean investing in small to mid-capitalisation stocks that have good earnings and long-term growth potential, but are not necessarily paying a dividend right now.

With commercial property, it may mean investing in sites that have long-term re-development potential and/or that are in relatively land-locked areas with lower initial yields, in exchange for their future capital growth potential.

Two typical examples of people that this may suit are IT consultants and medical practitioners, both of whom have good earning capacity and maybe able to manage their working hours by being self-employed and gradually progressing to part-time work as they get older.

We think it is worth considering the above issues when deciding on an asset allocation strategy that best fits with your current and likely future circumstances.

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