Adding an income strategy to your portfolio is the secret to building wealth.
Income strategies have helped investors like Bill Ackman and Warren Buffett grow their funds dramatically.
If you’ve followed the markets at all, you know stocks don’t move in a straight line.
In fact, stocks trade sideways 80% of the time.
If you aren’t collecting income during sideways periods, you’re likely limiting your gains.
For example, the S&P 500 Index with dividends is up 501% over the past 20 years.
Without dividends, the return is only 305%.
That’s a HUGE difference. It shows why compounding income is so important.
But holding dividend stocks is just one way to boost the income in your portfolio.
And it’s my least favorite.
Dividend Stocks Are Overrated
Here are a few reasons why I don’t like dividend stocks:
- Dividends aren’t free money.
The market expects them, so you’ll usually see the dividend amount subtracted from a stock’s share price when paid.
- Dividends are taxed as ordinary income.
Depending on your annual earnings, dividend income can carry a higher tax rate than an equal amount of capital gains.
- Companies that pay dividends are generally low-growth companies.
Most high-growth companies don’t pay dividends. Instead, they use capital to expand their businesses.
Companies with lower growth prospects tend to return capital to shareholders.
I’m not telling you to avoid dividends altogether. I just think there are better ways to build income.
Especially when the S&P 500’s dividend yield is a measly 1.3%.
The Right Way to Create Income
My favorite income strategy? Options trading.
Options trading can create a steady income stream that far surpasses income received from stocks.
You may be familiar with options trading. But most traders are going about it all wrong.
Instead of using options to create income, they use them to speculate.
In my mind, speculating is the wrong way to trade.
I was excited when Ian King began working on a strategy that uses options the right way.
He calls it the Profit Frame.
So far, the results have been amazing. He’s already built up a 78% win rate.
We’ll have more info on Ian’s special strategy later this week in Winning Investor Daily.
Stay tuned for how you can be one of the first to see this system in action.
Research Analyst, Strategic Fortunes
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