Everyone has different goals when it comes to their finances, but investors are often placed into one of two categories; those who are investing for income and those who are investing for growth. These two groups will make different decisions about where to invest money in order to reach their goals.
Income investors are looking for extra income on top of any existing money they receive. This can be generated from investments that make regular payments, such as shares that pay dividends or bonds that pay interest.
Retirees are typically income investors, using the income to supplement any pensions they might receive. Investors should remember that investment income varies and isn’t guaranteed.
The goal for growth investors is to increase the value of the investment itself, known as capital appreciation or a capital gain. In stocks and shares for example, growth is the result of a rise in the price of the shares.
Someone who has just started their first job and joined a pension scheme might be a growth investor. They are likely to hold their investments for a long time and are hoping to grow the overall value of their investments.
Most investors will combine a mixture of these two strategies. An income investor might, for example, reinvest their income (hopefully resulting in capital growth), or a growth investor might gradually sell their holdings to take an income.