Pros and Cons of Investing for Cash Flow

It’s one of the more hotly contested debates there is in investing.  Income, or cash flow, vs. total return investing.

Each camp has its proponents and detractors. But the facts are that the way most investors approach investing for cash flow leaves some things to be desired.

As our good friend Jim Dahle at The White Coat Investor explains in this post, there are plusses and minuses to the income investing concept and methodology, so it’s best to go into your decision making with eyes wide open and a full understanding of the process.

I often run into people who are somewhat dogmatic about cash flow investing. The typical vehicle of choice is real estate, although occasionally it is high dividend yield stocks.

By cash flow, I mean that they simply work at building a portfolio of investments that generates cash flow, and when the cash flow is equal to what they generate from their day job, they consider themselves financially independent. Seems simple and intuitively smart, right? Not so fast.

While there is no doubt that investing in this manner “works” and, in fact, is a great way to become wealthy, there are a few things that really need to be pointed out before jumping on the “Kiyosaki Bandwagon.” (By the way, there is no rich dad.)

What Is Income Investing?

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The basic idea behind income investing is that you only spend the income from your investments. Seems like a great idea, right?

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