An outstanding point by one of my commenters:
What's the point of trying to save $300,000 in a retirement plan paying
2%? That's only $6,000/yr in income... so, does that mean if you start
up a website that generates $500/month income that it also is worth
$300,000?
If so, I'd say it's a helluva lot easier to start the
website than to save $300,000 - especially since it will take 36 years
to double your capital with interest compounding at only 2%.
This was in response to my original post that given the insane valuation multiples of the stock market, I can get a higher rate of return by investing in stupid ideas like this. Yes, it's not as liquid, yes, there are no perpetual, magical "capital gains," but the cash flow (which once again is the ONLY thing that drives the value of any investment) is a lot more than a paltry 2%. Ergo, if you really want to look forward and not be part of the 401k Clergy Sheeple Congregation, in addition to your 401k or IRA you may want to put forth a little effort into starting a little business on the side.
3 comments:
The biggest problem is that blog income is taxed as ordinary income which, depending on your bracket, can be more than double that of investment income.
As a small-business entrepreneur (software development and sales), the holy grail would be to figure out a way to recategorize the income as capital gains. Haven't cracked that nut yet.
Small business, self-employed entrepreneurs are the most highly taxed entities in the country. And it will only get worse under an administration and Congress who hate and envy the productive classes.
No wonder entrepreneurship is falling off in the US.
A lot of companies pass their earnings on to shareholders through stock buybacks. If you only focus on dividends you are missing a big part of the picture.
the holy grail is to find a small business that is extremely profitable and scales well.
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