The Income Factory: An Investor’s Guide to Consistent Lifetime Returns. 2020. Steven Bavaria. McGraw-Hill Education.
Professional investors can find unique, well-differentiated ideas among the abundant output of many contributors to Seeking Alpha, a crowd-sourced content service for financial markets. A standout among the many contributors is Steven Bavaria, with his message of long-term returns (ideally, longer than 20 years) produced entirely by income from dividends, interest, distributions, and their reinvestment and compounding.
In The Income Factory, Bavaria convincingly demonstrates how wealth building is possible by focusing solely on income from dividends, interest, distributions, and their reinvestment and compounding, rather than the more traditional approach of balancing growth and income. This perspective is deeply fundamental, rooted in credit and risk analysis supported by decades of experience in banking and credit.
Bavaria’s approach shows that double-digit returns need not be derived from either growth or growth and income but are achievable from income and its reinvestment alone. He substantiates this approach throughout the book, using various return assumptions and investment blends, providing a unique perspective for portfolio managers of both individuals and institutions.
Key Points:
- Bavaria’s approach focuses on wealth building entirely from dividends, interest, distributions, and their reinvestment and compounding.
- The book outlines a philosophy and strategy divorced from the traditional approach of balancing growth and income.
- An emphasis on credit and risk analysis, supported by decades of experience in banking and credit, underpins Bavaria’s perspective.
- The Income Factory method provides a sense of security in volatile markets and discourages defensive actions that could be costly over the long term.
According to Bavaria, the book essentially comprises three parts. Book One describes the overall philosophy and strategy, Book Two provides the building blocks for constructing an Income Factory, and Book Three discusses in-depth the risks and rewards of various equity and fixed-income sectors, especially the highest yielding ones that can potentially enhance returns.
Key Points:
- Book One lays out the overall philosophy and strategy behind the Income Factory approach.
- Book Two provides the building blocks for constructing an Income Factory, including a blend with traditional investing and a selection of top-quality closed-end funds.
- Book Three discusses the risks and rewards of various equity and fixed-income sectors, emphasizing the highest yielding ones that can potentially enhance returns.
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