When it comes to investing incomes and any other form of investment into financial securities, the government wants us to remember that, "Past returns do not guarantee future results."
Listen to Government Warnings
I personally think these are some of the truest words ever written by a government. It's just too bad that so many people are so used to seeing this phrase in advertisements for investing and trading systems that they totally ignore or discount them.
That's like the millions of smokers who ignore the warnings about lung cancer on packs of cigarettes, buying and smoking them despite the adverse health effects they've been proven to cause.
They're persuaded by the ad copy and testimonials that this system, this formula, this software, this newsletter, this guru can return market beating results.
We Want to Believe the Market Can Be Beaten
They're not aware of the vast amounts of research -- and simple logic -- that shows this is not true.
Voices of reason dash cold water into the face of their dreams of acquiring simple and easy wealth.
We Want to Believe We're Smart Enough to Beat It
The most intelligent investors, those who read such books as A RANDOM WALK DOWN WALL STREET by Burton Malkiel, COMMON SENSE ON MUTUAL FUNDS by John Bogle, THE FOUR PILLARS OF INVESTING: Lessons for Building a Winning Portfolio by William J. Bernstein, CAPITAL IDEAS by Peter Bernstein and FOOLED BY RANDOMNESS: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb are also the ones most likely to believe they are smart enough to find a way to beat the market.
I think I had to read Malkiel's book three of four times before the message finally sank in.
After the Face Data Mining is Doesn't Work in the Future
It also helps to learn enough about how data mining of statistical data works to understand that past correlations do not necessarily mean you've found a hidden causation you can use in the future.
That's most obvious when people point out the correlation between the stock market's annual results and the results of the Super Bowl.
One study ran countless numbers of economic statistics through a computer program and found that the factor which correlates most closely to the performance of the S&P 500 is the price of butter in Bangladesh.
(Some authors make fun of this. I'm not so sure that's warranted. Bangladesh is an extremely poor Asian country. Therefore I suspect that only upper class, Western educated Bangladeshis even eat butter. If the price of butter goes up, that implies these people have more money, and that could logically correlated with worldwide economic performance, which also boosts the S&P 500. However, I agree this indicator is not useful for predicting future S&P 500 performance.)
Income Investments Do Pay Income
However, when it comes to investing incomes, I believe the government allows me to write that if you buy financial securities, such as dividend-paying stocks and bonds, that pay income, they'll continue to do so.
Now, nothing in life is 100% guaranteed. Effective 2011, one entire class of income investment -- the Canadian business trust -- will disappear.
It'd Take Worldwide Financial Catastrophe to Stop All Your Income
I can't guarantee that the U.S. government won't go crazy and someday start taxing Real Estate Investment Trusts and Master Limited Partnerships.
However, many corporations do pay dividends, and they know many investors would dump their stock if they didn't. This is especially true of utilities.
And the federal government itself guarantees payment of federal bonds. For all bond issuers (federal, municipal and corporations) to stop paying interest would mean a massive default that implied a total economic breakdown.
And it'd have to be worldwide, because I advise investing in similar securities in other countries, not just the United States.
If that happens, you better have those gold coins, stored food and a cabin in the woods . . .
Of course, I can't predict -- and don't pretend to -- how much income you'll receive in the future from the various stocks and bonds. Stock dividends historically have gone up to at least match inflation. Bond interest varies with the overall interest rate.
I can't predict those things, and neither can you, or anybody else.
The Stock Market Lost Eleven+ Years, but Income Investments are Sending Out Checks
But unlike the stock market, which is still stuck in the area it first reached in the spring of 1999, income investing has continued to pay out checks.
Until the total financial breakdown which we hope never happens, I'm confident that some financial securities will continue to pay dividends and interest, making investing incomes something you can count on for your future.
Author Information: You can build a large portfolio of income-generating securities. Click here to get the information you need to effectively make money from your investments whether the markets go up or down. If you're ready to discover how investing incomes can help you retire with financial security, visit this page, enter your email address into the form and click on the Submit Button. Then go to your inbox and verify that. It's free for the taking. http://www.incomeinvesthome.com/.
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