Never Spend Return On Your Investment If You Want to Build Wealth

[Jasmine]

For a lot of people investment is a way to build a passive income source, therefore, they invest in high yield dividend stocks, security bonds, mutual funds, S&P 500, etc and start withdrawing their return on investment and use it to pay for the things that always wanted to, for instance buying car, going on a vacation, etc.

It might look good strategy because you are only utilizing return on your investment while your principle investment remains the same, however, this is not a good strategy if you want to build wealth.

If you have invested $1000 and receive 10 percent return on investment in a year, you can either withdraw $100 and spend it or reinvest your return on your investment and try to compound your returns and make your portfolio grow by 2-3 times in 2-3 years. Doesn’t it look good when your $1000 portfolio becomes $2000 in 5 years, instead of spending all your profits.

 

[Mika]

For a lot of people, investment is a way to generate passive income, and by building passive income they believe that will have additional money to spend. When people receive a return on investment such as stock dividends, they either use it to buy assets (buy properties, for example) or liabilities (a car for example). They even buy luxury with their return on investment (buy expensive items, go on a vacation, etc.). If you are financially in a better position, there is nothing wrong with spending your return on investment, you are only using your profits, your principle amount is still there. However, if you are not in a stable financial position, it does not make sense to spend your money. You should rather compound your returns to make newer investments so that you can build your portfolio. If you cannot enjoy money when you can, what would you do with the money in old age?

 

[Shaf]

In the long run, it's more beneficial for someone who wants to grow his or her wealth and portfolio to continue reinvesting any profits made. This ensures that you make more profits each time you invest instead of the same amount all year long.

I have spent my profits and I've also reinvested it at different times. Having this experience, it's best to say that one should do whatever they feel comfortable doing. Sometimes indulging in a bit if luxury is good for ones peace of mind and mental health, whole building a portfolio keeps you happy too. Like the previous poster said, if one is in a good financial situation, there is no harm in spending profits on luxury.

One can also do both, spending a percentage on luxury and reinvesting some of it, doing it at the same time, or at different times in the same year. That's a nice way to kill two birds with one stone.

 

[GreatSuccess]

For a many individuals, venture is a method for producing recurring, automated revenue, and by building recurring, automated revenue they accept that will have extra cash to spend. At the point when individuals get a profit from venture, for example, stock profits, they either use it to purchase resources (purchase properties, for instance) or liabilities (a vehicle for instance). They even purchase extravagance with their profit from speculation (purchase costly things, go on a get-away, and so forth.). In the event that you are monetarily in a superior position, nothing bad can be said about spending your profit from speculation, you are just utilizing your benefits, your standard sum is still there. In any case, on the off chance that you are not in a stable monetary position, it doesn't make sense to spend your cash. You ought to rather intensify your profits to make more up to date speculations with the goal that you can assemble your portfolio.