The Dark Side of Income Investing - What Could Go Wrong With Your Retirement Plan

Ready for a reality check? While income-focused investing can be a cornerstone of retirement success, it's not the bulletproof strategy many believe it to be. In this eye-opening episode, host Brandon Roberts pulls back the curtain on the hidden risks that could derail your golden years.

What You'll Discover

The uncomfortable truth: There's no such thing as risk-free retirement investing. But knowledge is power, and understanding these risks is your first line of defense.

Real-World Risk Scenarios That Hit Close to Home

🏢 The COVID Wake-Up Call
Remember when everyone thought commercial real estate was doomed? Brandon breaks down how REITs weathered the work-from-home storm - and what income investors learned about sector risk versus interest rate risk. Spoiler alert: Those who panicked missed out on some serious opportunities.

💰 When Your "Safe" Investments Turn Against You
Discover why bonds - traditionally considered the safest income play - can become your portfolio's worst enemy when interest rates shift. Brandon explains the mechanics behind bond price fluctuations and when holding to maturity might not be enough.

📉 The GE Dividend Disaster
A cautionary tale that every income investor needs to hear. Learn how one of America's most trusted dividend payers became a case study in why individual stock concentration can devastate retirement plans.

The Six Critical Risks Every Income Investor Must Navigate

1. Share Price Volatility - Why your "stable" income investments still fluctuate in value
2. Income Cuts - The warning signs that your dividends might disappear
3. Liquidity Traps - Why income investments make terrible emergency funds
4. Counterparty Risk - When the companies paying you might not be able to
5. Inflation Erosion - How your "guaranteed" income loses buying power
6. Government Policy Shifts - The regulatory changes that can blindside your strategy

Your Defense Strategy Toolkit

Beyond Basic Diversification
Brandon reveals advanced strategies including:

• How REITs can hedge against inflation (and when they can't)
• The leverage trap in closed-end funds and MLPs
• Why cash isn't just king - it's your strategic weapon
• The counterparty risk hierarchy: From bulletproof CDs to shaky corporate bonds

The Income Investor's Safety Net
Learn why income-focused assets actually showed MORE resilience during recent market turmoil than high-flying growth stocks. It's not about avoiding risk - it's about choosing the RIGHT risks.

The Bottom Line

This isn't doom and gloom - it's preparation. Brandon's message is clear: "Real wealth doesn't just add up, it writes checks." But first, you need to understand what could stop those checks from coming.

Perfect For:

• Pre-retirees building their income strategy
• Current retirees wondering if their plan is bulletproof
• Anyone who thinks income investing is "set it and forget it"
• Investors burned by recent market volatility

Warning: This episode will change how you think about "safe" investments. You'll never look at your dividend stocks, bond funds, or REITs the same way again.

Subscribe to Yield to Reason wherever you get your podcasts, and join the community of investors building retirement plans that actually work in the real world.

Transcript

00;00;00;00 - 00;00;47;06
Brandon
You are listening to the Yield to Reason podcast, where we strive to help you build the most important part of your retirement strategy. Because a retirement plan built with robust income sources is a retirement plan built for success. I am Brendan Roberts. This is episode number ten, and today we're talking about the risks of income focused investing. It's time to get serious about what could go wrong.

00;00;47;10 - 00;01;22;22
Brandon
As we set off on a journey to help you build the retirement you deserve and the one you actually want. Income focused investing is great, I love it, I advocate for it, obviously, but it's not the panacea in terms of riskless investing, which I know a number of people are interested in. And I'm going to deflate all hope now in letting you know that I don't believe there is a way to prepare yourself financially for retirement or financial independence in a way that is entirely risk free.

00;01;22;24 - 00;01;52;04
Brandon
There are certainly ways you can mitigate it, and income focused investing definitely has a number of things going for it in the face of many, many risks. And we're going to cover them today. However, there are things that can go wrong with an income investment. There are things that could go against your favor. So we're going to dive into those things that may not be excellent circumstances for an income based portfolio, so that you can be prepared for them.

00;01;52;05 - 00;02;13;09
Brandon
More on that near the end of today's episode. So what risks are you facing when it comes to income focused investing? Well, many of them are the traditional ones that you see the usual suspects that are brought up in a many different investment forums or discussions. Things like sector risk, things like systemic risk. Things like government policy risk.

00;02;13;11 - 00;02;42;01
Brandon
There are though, some things that that are much more unique, uniquely important to income focused investing. Not that they're impossible scenarios for a growth or value style investor, but they they tend to have a little bit more impact or a little bit more worry for an individual who is a solid income focused style investor. So these are things like interest rate risk, counterparty risk, inflation risk, and to some degree, liquidity risk.

00;02;42;03 - 00;03;12;23
Brandon
Now it is extremely rare for a single risk to manifest when you have an income style portfolio and be the only thing that's causing some anxiety or problem. Generally speaking, these things happen in combination of a couple of things, a couple of these risks unfolding at the same time. And oftentimes the beginning of one leads into the reality of another.

00;03;12;25 - 00;03;47;26
Brandon
Now I do not want to spend any time today doing a very elementary style. This is what systemic risk is. This is what counterparty risk. Now we're not gonna do that. Instead, we're going to go through real life scenarios and things that have happened in the recent past to identify the risks that existed. Try to measure how significant they were with respect to various income style assets, and determine what you could do to strategize in a way that that might minimize the net impact on you.

00;03;48;03 - 00;04;17;10
Brandon
If you are an income style investor and you own some of these assets. So we're going to start with the notion of share price fluctuation. The fact that you could lose value and have an unrealized loss. At the very least, when you open up your investment portfolio account. Now, this is a truism for most investments in general, certainly true for a number of assets that you could buy for income purposes.

00;04;17;13 - 00;04;40;10
Brandon
And really the only exceptions to this would be, in my mind, CDs and fixed annuities. So those are things that generally are immune from reduction in value year over year. But the other things that you could be invested in, things like dividend paying stocks, dividend focused exchange traded funds, closed end funds, master limited partnerships, things of that nature.

00;04;40;10 - 00;05;13;17
Brandon
They have shares. Those share prices fluctuate, and most commonly, they fluctuate based on buying and selling pressures that exist on an open market. So when demand is up, price goes up. When demand is down, price goes down. And this is a reality of investing and it is something that we all kind of have to get used to and have to have a certain degree of acceptance for if we're going to dip our toes in the water of any style of investment, that again, is outside of of bank products and insurance products.

00;05;13;20 - 00;05;38;13
Brandon
Now there can be a multiple sources or reasons for the decline in shares of various assets you might hold for their distributions or their dividends or whatever, have you. But these risks that we're going through today are generally root causes. I'll use what happened to rates following Covid and the work from home a paradigm shift as an example here.

00;05;38;13 - 00;06;00;06
Brandon
So we have two kind of risk headlines at play. We have sector risk. The the real estate sector was in some trouble or at least perceived to be in some trouble if people were no longer going to be reporting to the office. That left a lot of questions in people's minds about what that meant for the value of commercial business, real estate.

00;06;00;10 - 00;06;28;00
Brandon
So people who owned it were obviously in a less than ideal situation when it came to collecting rents, or at least renewing leases once they came due for renewal. Now, on top of that, we also had an interest rate environment that was leading to a change in the yield people achieved with other assets. CDS became more attractive, cash became more attractive, treasuries became more attractive.

00;06;28;05 - 00;06;56;07
Brandon
And when all of this happens and these are perceived as lower risk options with yields that are increasing, there tends to be a behavior among investors to exit certain income focused style investments that have more risk like rates, and into those other assets that have yield that may not match, may not match what the old asset had, but the risk premium of the old asset no longer seems worth it.

00;06;56;09 - 00;07;20;28
Brandon
So two bad things one, a sector problem of sentiment turning negative on the real estate sector. But then to an interest rate situation that led to people deciding that what they got paid to hold, for example, treasuries, was good enough and they didn't need the additional income that REITs represented because the risk that was also there wasn't worth the the journey in their minds.

00;07;20;28 - 00;07;58;08
Brandon
So we saw a lot of REIT prices drop pretty significantly as Covid in work from home started to become a reality for everybody. But it turns out the shift in work environment wasn't a permanent one, as we've seen many companies decide that work from home was nice and somewhat necessary during the Covid situation. It ends up not being the most ideal circumstance for a number of businesses for a variety of reasons.

00;07;58;11 - 00;08;28;05
Brandon
And so the return to work aspect of the real estate sector is now going on in the commercial business office leasing, commercial real estate sector and REITs focused in that area are now starting to see profits increase and share prices also go up. But but here's the other thing that happened. During the decline in REIT prices, income from REIT remained relatively stable.

00;08;28;07 - 00;08;51;29
Brandon
So while it's true a number of them may have had a bit of compression in terms of profit margins, they didn't necessarily face so much stress that they had to drop distributions to shareholders. There's a number of reasons why this played out the way it did, and it's specific to this circumstance. Not every situation involving a sector risk like suddenly people aren't renting.

00;08;51;29 - 00;09;12;17
Brandon
Commercial real estate pays spaces. It has to do with the fact that a number of commercial real estate leases are lengthy. They go on for several years. So even if a business decided, all right, we're not going to fill the cubicles to capacity because people are working out of their living room, that doesn't necessarily mean that they get to just cancel their lease with their landlord.

00;09;12;20 - 00;09;41;26
Brandon
So they carried the cost of the building with the intention to just walk away from the lease when its term ended. But in some cases, they shifted opinion as they decided work from home was not going to work for everybody in all situations and brought people back. And this didn't ultimately end up in as many commercial office real estate or, excuse me, commercial office leases terminating as was originally expected.

00;09;41;26 - 00;10;10;16
Brandon
And these rates have carried on collecting the income that they were going to carry on. And the negative sentiment has shifted more in the positive direction, pushing shares back up. In addition, we know that interest rates have started to go down not as rapidly as we thought, but has started to go down. Treasuries are not yielding what they were just a few years ago, and now people who want the additional income are having to choose to move into things that are potentially a little more risky in order to maintain income.

00;10;10;23 - 00;10;51;14
Brandon
But for those who remained invested in rates at this time, their income numbers didn't really change much. And if they were reinvesting the income collected from rates, they had a number of opportunities to buy additional shares at very high yields, relatively speaking. So their income building has gone up compared to those who sold out because they either thought the real estate sector was doomed or they just decided they wanted to swap out the risk profile of income from reeds for income from treasuries, for example, at the same time as the REIT share price drop, we were also watching the bond market take it pretty hard on the chin when it came to capital appreciation.

00;10;51;16 - 00;11;21;19
Brandon
Bonds are notoriously sensitive to interest rate policy and interest rates. Broader in terms of movement market wise. So as interest rates go up, this is bad news for bonds. And as interest rates go down, it's great news for bonds. It is the primary reason why certain bond investors gain great fame and notoriety through the 90s, due to a prolonged period of gradual decline in interest rates coming off highs created from the late 70s into the 80s time frame.

00;11;21;22 - 00;11;55;02
Brandon
So the interest rate activity that took place as a measure to combat some problems that were perceived unfolding from Covid and other circumstances. At the time, there was a pretty dramatic drop in bond values. This happens because if you currently own a bond, paying whatever rate of income and interest rates go up now, new bonds that will enter the market will be paying more income per dollar in than yours.

00;11;55;04 - 00;12;17;25
Brandon
If you wanted to sell your bond, nobody wants it at that deal because they can get a better deal on the open market. For newer issued bonds, you have to drop price to compensate for the fact that your income is less than income. That could be derived from newer issued bonds. So if you're holding to maturity, it's not such a big deal.

00;12;17;28 - 00;12;55;03
Brandon
But from a liquid value standpoint, if interest rates rise, you have to take a discount if you want to sell the bond. And again, if you're solely focused on income, this is somewhat immaterial. However, if you are watching account value, you will certainly see a drop in what your bonds are worth. If interest rates go up. The inverse is also true, and there have been times that people have locked in gains, so to speak, from bonds that they purchased at higher interest rates.

00;12;55;05 - 00;13;28;14
Brandon
Rates go down now, they can sell it at a premium because you can't buy that bond giving that yield today. Next, let's talk about income changes. They happen. They haven't been super frequent lately. But they they do materialize from time to time. Much more a risk associated with singular positions. So when you own an individual company stock, for example, there's always a risk that they have a bad quarter or change their sentiment on business activity and they have to change their dividend.

00;13;28;16 - 00;13;57;12
Brandon
Really, really stark example is what happened to GE not all that long ago when their dividend was cut dramatically, share price was just obliterated and still has not recovered and will never recover to the point that it was at some time ago, based on the fact that GE has has spun off a number of operations resulting from business activities that just have gone in a different direction than what existed for the company.

00;13;57;15 - 00;14;25;15
Brandon
Up until, kind of the late 2000 s time frame. Not all that surprisingly, probably fairly intuitive when a company or even a fund announces a cut to distributions or dividends that generally results in a drop in value because there's some selling activity, people decide that they don't want this share anymore or this this asset anymore because it no longer pays the income it did.

00;14;25;15 - 00;14;43;24
Brandon
Or there's concerns that if they're dropping the distribution, that means that there's some problem afoot. So we probably want to get out of this and into something else. It can be a little bit of a chain reaction type situation. And again, the risks that underlie this can be somewhat varied. Sector risk is always almost always on the table.

00;14;43;27 - 00;15;18;15
Brandon
But then there are other things like interest rate risk again which could play into this. For example closed end funds often use leverage. If interest rates rise, the cost of that leverage increases. This reduces the number of opportunities the fund manager can use when it comes to borrowing money to make investments, because now the net return on the investment may not be positive, and therefore we're not going to pursue that activity based on the cost of borrowing money to do it, which is ultimately going to result in making less money.

00;15;18;15 - 00;15;56;05
Brandon
And making less money means we don't have as much money to pay out to be shareholders, so distributions may go down. Alternatively, the closed down fund might also decide that if interest rates are rising, they need to reduce some of their outstanding debt in order to keep their leverage ratios in line with their stated leverage ratio. Goals and that could also result in capital going towards the reduction of debt because of rising interest rates, which comes away from profitability or income and therefore reduces the ability to pay distributions.

00;15;56;07 - 00;16;23;14
Brandon
Those two situations don't really exemplify a circumstance of bad things unfolding the fund going bankrupt, for example, but they certainly result in reductions in distributions. And that has happened somewhat more recently and has existed for the entirety of closed end funds. And some people can be annoyed and may sell a fund because of that. But it's, it's it's a function of the way closed end funds work when they're dealing with leverage.

00;16;23;14 - 00;16;54;25
Brandon
And in fact, for the people who are worried about leverage, this is truly the biggest risk you face with closed end funds. It's not failure because they borrowed too much and went bankrupt. It's the reduction of distributable income because they have to manage the amount of leverage that they're using. And sometimes if that cost increases, it's going to either eliminate some of their opportunities or it's going to require some of their money be used to pay down, balances in order to or to maintain the ratios that they have promised they're going to operate at.

00;16;54;27 - 00;17;28;13
Brandon
The same could be said of, of, master limited partnerships, which also can make use of leverage to pursue their investment activities, which operate similarly to close in funds only, more specifically in the the oil exploration sector most of the time. Next up, I want to talk about liquidity, because when people hold investments, there's generally a sentiment among the professional investment community about what you might do or need to do with your investments in a time of crisis.

00;17;28;13 - 00;17;51;01
Brandon
And crisis may be hair on fire. The world is falling apart where it might be something like you got laid off. However serious the situation. Crisis is crisis, and those often lead to larger capital needs. So potentially the requirement is you got to sell some positions to raise the money to deal with whatever expense might be facing you.

00;17;51;03 - 00;18;29;13
Brandon
And I will tell you now that I don't view income focused investments for the most part, as ever, being good assets held for the sake of of quick liquidity needs. So it's very true that if 100% of your portfolio is income focused, unless you generate a an immense amount of income from that portfolio, you are making a mistake because you need some cash on the side to deal with liquidity needs, income style assets are never going to be strong in that situation.

00;18;29;16 - 00;19;09;01
Brandon
So whether it be the the fact that you lost your job and now you need to cover fixed expenses for several months, or it be you just found out that there is some sort of major medical catastrophe that has faced you or your your spouse or your kids, and you need some money to deal with it. Income style investments are the last place to go because they they represent their ability to generate income and their liquidate ability is going to be very iffy in terms of timing and you hitting the timing exactly right.

00;19;09;06 - 00;19;27;23
Brandon
Sure. They're going to be people who own an asset that pays them income. It has appreciated. They could sell it for very good gain, and they could take that money and go deal with whatever, whatever capital need they have. Yes, it's true, but it doesn't always work out and you're setting yourself up for failure if you're not taking this into account.

00;19;27;26 - 00;19;53;12
Brandon
Another big risk, and I'm sure this one is probably on the top of the list of most industry professionals is counterparty risk. So when you own an income style investment, for the most part you're signing up for an arrangement where a entity has obligated itself to pay you income for some set of time. Now, I realize that can be a little different if it's a more dividend style investment.

00;19;53;14 - 00;20;23;01
Brandon
Owning, ExxonMobil, Exxon doesn't really have an obligation to you to pay dividends. They're doing it from profits that they generate, and that's generally what they've done. But they're not obligated in the sense that come next quarter, they must, under all circumstances, pay you some number that they agreed upon when you bought the shares of the company. Bonds are different when bonds are issued, there's an obligation that the borrower is making to pay the lender, which is the investor money.

00;20;23;01 - 00;20;51;21
Brandon
And if the borrower can't pay the money, then they'll default on the loan standing. And that's not a good thing. It's also not a good thing if an individual company decides it wants to cut its dividend, they just have more flexibility to do that and survive another day, for example. So counterparty risk is frequently something income investors think about, at least when they're evaluating things like debt instruments.

00;20;51;23 - 00;21;22;22
Brandon
Not so much. A discussion on the stock dividend payment side. And realistically, not usually something that gets discussed at length for something like a closed and fund, a covered call ETF, or a master limited partnership. It is something else, though, that could come up when you buy CDs because the bank could could become insolvent. And it's also something that comes up when people buy annuities because the insurance company could become insolvent.

00;21;22;25 - 00;22;00;07
Brandon
Now CDs have depositor insurance. So FDIC, NCUA insurance can protect you in large part from the ugliness of a bank failure. If you own CDs issued by the bank, annuities being issued by insurance companies, the insurance industry is incredibly well capitalized, and insurance company failures are very, very few and far between these days. There was a time many decades ago when that wasn't the case, but today, the number of insurance companies that fail and the number of people who own insurance products who are just left holding the bag during failure, is almost zero.

00;22;00;10 - 00;22;28;01
Brandon
And so those risks are very, very small in terms of counterparty risk when it comes to annuity income or CD income bonds, it varies considerably depending on the issuer of the bond. Large, highly rated companies have far fewer issues then smaller companies that have much shakier credit ratings. In the municipal world. It depends a couple of different ways.

00;22;28;01 - 00;23;10;10
Brandon
One, the financial health of the municipality, but also the style of muni bond. So if it's a general obligation bond, you're going to get paid pretty much without out a whole lot of concern for the profitability of whatever the need to borrow the money was. If, on the other hand, it's a revenue tied bond where, let's say, a municipality is going to build a toll bridge and the income payable on the muni bond is 100% supported by the tolls collected by the toll bridge.

00;23;10;17 - 00;23;36;12
Brandon
There's a little more risk that counterparty risk could come into play, and the municipality could default the bond. If the toll bridge doesn't bring in the money that was assumed. Next, let's talk about inflation for a minute or two, because it matters when it comes to more fixed income style investments like owning direct issuances of bonds, CD interest, annuity income, a lot of those things tend to be static.

00;23;36;14 - 00;23;56;12
Brandon
So if you're collecting the same amount of money every single year, the good news is you're collecting the same amount of money every single year. And there's a pretty good, guarantee that that's going to happen for you. But there's also a chance that in periods of higher inflation, what that money. But what that income buys is less and less.

00;23;56;18 - 00;24;26;17
Brandon
So effectively your income is going down even though the nominal dollars haven't changed. This is, of course, a risk that anybody involved in fixed income style investing is going to have to think about. And it it is a function of economic societies, but also something that that can be strategically planned for by, for example, laddering investment decisions to try and create additional purchases at different yields that are potentially increasing.

00;24;26;22 - 00;24;54;15
Brandon
Now for things that are less fixed, like distributions from, stocks closed and funds limited partnerships, covered call ETFs, or just dividend focused style ETFs. Generally speaking, if you've got a little bit of capacity to reinvest in your initial investment or you're going on buying other investments with some of the income that you generate, you are probably going to be able to keep pace with inflation or even outpace inflation in a number of situations.

00;24;54;18 - 00;25;27;14
Brandon
Last risk to talk about is government risk. So this is what happens when various regulatory bodies change their mind about the rules of the road, the tax code or whatever else have you. So these are things that can influence the movement in assets, or it can change the taxability of the income that you are collecting. And sometimes these things don't have to be a direct impact on you in order to have an implication to your portfolio.

00;25;27;16 - 00;25;52;17
Brandon
So for example, let's say that there's a change in the way dividends get taxed, and that change isn't necessarily something that you personally have to worry about. Maybe maybe there's a change in capital or any small capital gains rate, but there's a change in dividend income or dividend distributions based on the amount of income that you have overall.

00;25;52;19 - 00;26;23;20
Brandon
And you simply don't hit those income thresholds so you don't have to worry about it. Well, that could still cause some selling activity among higher income individuals, which could have an impact on the share value or the share price of some of the assets that you hold. So there are times that these policy shifts can take place. And while you may not think in the beginning, it impacts you, you may find there's something that unfolds that does, in fact cause some degree of negative result for you.

00;26;23;22 - 00;26;47;11
Brandon
This also can influence where you decide to go around the country, because state by state policies can change and and can have an impact. But up until very, very recently, the live free or die income tax free state of New Hampshire collected a fairly significant amount of taxes on passive investment income. Not anymore, thankfully, but but that's that was a policy at one time.

00;26;47;11 - 00;27;12;27
Brandon
And so if you lived in a relatively low tax state and decided you were going to move to New Hampshire, but you had substantial passive investment income, you might find that the income tax burden in the Granite State was pretty burdensome. Now, I already brought up things related to interest rate policy, which is tied to monetary policy. But this can be another area of government policy change that can absolutely impact an income portfolio.

00;27;13;04 - 00;27;38;09
Brandon
So if the fed decides to tighten or ease, that will play some role on a number of income style assets that might make share values go down, it might make them go up, it might also result in a an eventual change to the income that you are receiving from the assets that you hold. So now that we've spent all this time talking about all these ugly things, how how do you go about avoiding this?

00;27;38;12 - 00;28;07;01
Brandon
Well, I hope you've kind of gathered by the complexity of the potential risks that an income portfolio faces, which is not unique to income investing, by the way, growth investing and value investing both face a similar array of risks. But you should gather by now that there isn't a singular answer to avoiding the various risks that may unfold that have a negative impact on your portfolio if you are income investing.

00;28;07;01 - 00;28;39;23
Brandon
So your strategy is obviously one about preparation, because if you know what to anticipate, that means you know what to do next. When things are going on, you're never going to get 100% right. But having a plan and an understanding of these risks and how they might influence your portfolio will put you in a position where you have more or less exposure to very various risks, as well as a strategy to deal with them if they come to pass.

00;28;39;25 - 00;29;10;06
Brandon
So this obviously is an item that can be addressed with diversification to a certain degree. And that's always going to be a relatively good idea. And sometimes that diversification is looking at different income sources and how they might react to inflation. Take for example again rates which have a bit of an inflation hedge built in most of the time, at least when it comes to reach that, that are focused more on commercial real estate.

00;29;10;09 - 00;29;37;03
Brandon
Because most commercial real estate leases have an inflation clause that allows the landlord to increase rents when measures like CPI are on the rise. So that gives them the ability to collect more money when inflation is high, and that additional money collected is obviously feeding into the distributions that get paid to shareholders. But it's important not to over exposure yourself to a sector.

00;29;37;05 - 00;30;18;29
Brandon
So I think utility closed end funds are fantastic. But owning all of your portfolio in a utility style closed and fund would be a very bad idea because there are certain risks that that sector can face individually. That would be problematic if everything were concentrated there. When it comes to counterparty risk, there are ways to establish a certain amount of more guaranteed income, like CDs, and making sure that you don't buy up more than the FDIC or NCUA limits at any one institution, or annuities, which have proven to be very solid income providers with a very, very low to virtually nonexistent, failure rate among insurance companies.

00;30;19;01 - 00;30;58;20
Brandon
If you see a move in interest rates, it may be important to look at the positions you have and try to determine what ones are most susceptible to negative changes due to interest fluctuations, and move out of those positions into something else that's more resilient and cash. Cash is important. Cash is a fantastic buffer. You may run into a situation where something comes up that's less favorable to an asset that you hold because of a specific sector situation or an interest rate policy, but if you hold the cash, that can kind of absorb, absorb to some degree the negative impact on, let's say, income or even share price value, then you're not so much worried

00;30;58;20 - 00;31;23;04
Brandon
about what is happening in that specific moment, and you might be able to buy yourself enough time, be it 12, 18, 24 months where things can come back to normal or back to where you were hoping them to be because you had the cash to ride it out, or you had the cash to deal with an emergency expense or situation where income from wage earning activity was changed because you were laid off, or something like that.

00;31;23;10 - 00;31;46;17
Brandon
Cash, the emergency fund thing. It is a great buffer for all investment styles, and even if you are retired, having a cash position for liquidity needs is a critical component to portfolio building. And anybody who tells you that you need to take all of your money and invest it because you're giving up returns is foolish. Simply foolish. And that's not advice you should ever take.

00;31;46;20 - 00;32;38;18
Brandon
But lastly, keep in mind that income focused assets have income to fall back on. And so when you have income as a backstop to the investment strategy, the tendency for those assets to decline rapidly in value is less than when you are purely beholden to the value that is perceived by the market in general. So even this the beginning of this year, when many, many, many stocks openly traded on the US stock market were pretty badly, beat up after Liberation Day, there were a number of more income focus style assets, be they ETFs or closed down funds that didn't take that situation nearly as rough as an Apple and Nvidia.

00;32;38;21 - 00;33;16;11
Brandon
And I realize a lot of these things have come back and then some, since the April, time frame. But the worry, the frustration, the panic that ensued for some people in those positions and those who did sell losses, there was far less decline, if any decline at all, among a number of, assets that were much more focused on the income side, because, as we know, even when things aren't looking so good around us, if we still have income being generated by our assets, that is value.

00;33;16;14 - 00;33;44;04
Brandon
And it oftentimes is worth holding on to. That's it for me today. Thanks so much for stopping by. And of course, I'll be back next week with more tips and tricks to help you build a rock solid financial future. And until then, please remember real wealth doesn't just add up, it writes, checks.