The stock market is often glamorized as a fast-paced, exciting means of growing wealth. Trading stocks on the open markets leads to huge payouts for the lucky few – but this investment approach also involves taking on an equally huge risk.
For investors focused on sustainability in the long term, the stock market may not be ideal. A strategy that minimizes risk is far more appropriate, especially if the end goal is to create a healthy stream of passive income. Income investing could be the answer for investors who want less risk in their portfolio, or who are working toward supplementing their existing income.
Income investing is an investment strategy focused on creating a portfolio that yields a regular “paycheck.” The goal is to create a stream of passive income from payouts and returns on owned assets. Income investing is ideal for later-stage investors who are less focused on growth and more interested in tactics that can sustain them into retirement and beyond.
The most obvious benefit of a successful income investing strategy is the additional stream of passive income. While usually modest, this extra inflow of cash can be ideal to supplement a retiree’s fixed income.
Since the strategy inherently maximizes stability, investors can expect less volatility overall. Investments tend to be in industries essential to the economy, which are less subject to wild fluctuations in value. In addition to peace of mind, this can facilitate substantial capital growth over time.
There are, however, risks associated with every asset class and investment strategy. Inflation in particular can pose a challenge to any portfolio, as rising prices hurt purchasing power across the economy. In addition, economic downturns can cause companies to cut or suspend dividend payments and subsequently reduce the amount of passive income that’s being generated.
It is also worth noting that an income investing strategy doesn’t take advantage of compound interest like investing in the stock market does. That’s because most of the income it generates goes back into the investor’s wallet, rather than back into the market to redouble itself.
As mentioned, an income investing portfolio emphasizes less volatile assets that provide regular payouts. Here are some of the most common:
The key to successful income investing is patience since this is a long-term strategy. It takes years to build a portfolio that is capable of generating a consistent income, let alone one that’s large enough to live on.
Prospective investors should consult qualified financial professionals and be prepared to be strict in their asset selection strategy. Impulsive investments are unlikely to stand the test of time or the pressure of market forces. A healthy income investing portfolio is built on due diligence and diversification.
Although franchise investing has been around for years, it’s a relatively new addition to the landscape of low-volatility assets available to retail investors. The benefits are substantial, including franchising’s ability to resist inflation – but in the past, this was an asset class reserved for either the ultra-wealthy or those interested in full-time ownership.
Note reference to “in the past.” Now, FranShares is bringing passive franchise investing to all investors using a unique fractionalized approach.
You may already be familiar with fractionalized investing, which allows pools of individuals to invest in expensive assets like vacation homes, private jets, and racehorses. At FranShares, we’ve taken this method of ownership and applied it to franchise investing.
Our approach allows both accredited and non-accredited investors from all walks of life to purchase partial ownership in a portfolio of pre-vetted, managed franchise locations with high return potential.
We combine deep industry expertise with a zero-fee approach to ensure our investors maximize their long-term returns – without the risk of losing their shirts. Our mission is to help investors reap the benefits of franchise investing with a unique business model that offers:
Your investment portfolio’s health is of critical importance, especially when you rely on it as a source of income, and diversification is key to this sustainability. A mixture of different assets is a proven way to reduce risk and hedge against potentially damaging market forces like inflation. Investing with FranShares offers a new way to augment a portfolio for income-focused investors.
If you’re interested in adding fractionalized franchises to your portfolio, getting started is easy. With a low-investment entry-point of $500, you can build a more diversified portfolio without sacrificing your time or managing a manager.
Ready to learn more? Read about fractional investing here, or get on our waitlist so you’ll know when our next fund becomes available.
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(1) Portfolio IRR projections are calculated using all cash flows, including the initial investment of $25,000,000 of offering proceeds, annual earnings before interest, depreciation and amortization (“EBITDA”), less estimated corporate taxes, and the sale of the entire portfolio at the end of the fifth year at 5x EBITDA.
(2) Cash Yield projections are calculated as the arithmetic mean (average) of five years of annual cash flows (including EBITDA, less estimated corporate taxes) divided by the initial investment of $25,000,000 of offering proceeds.
(3) Equity IRR projections are calculated using the initial investment of $25,000,000 of offering proceeds and the sale of the entire portfolio at the end of the fifth year at 5x EBITDA.