WEALTH vs. INCOME: They are not the same thing.
Income is the money you earn. It can come from your job, a business, rental property, or even investments. It’s what comes in each week, month, or year — like your paycheck or dividends. Wealth is what you own. It’s the value of your assets — your home, savings, retirement accounts, investments, and any other things of value — minus what you owe (your debts). Why They’re Not the Same A family can have a high income and still not have wealth, especially if that family spends everything they earn or carries a lot of debt. On the flip side, [...]
Thoughts On: Uses of Cash in the Portfolio
Should we go to cash? Why cash? Periodically, clients ask if we should “go to cash” with their portfolios. They never ask this question while stock prices are going up, but only when prices have been coming down. This is due to the human tendency to buy at the top and sell at the bottom, which is a bad tendency. To combat this tendency, I want to look closer at the role of cash in an investment portfolio. An investment portfolio has at least a five-year time horizon; it is NOT short-term spending money. Short-term spending money belongs in cash [...]