Capital growth is great, but you can't live on it day-to-day, so what income will you live on???

For me, good investing is about creating a mix of capital growth and income production.

It's great to have capital growth, but unless you sell the asset and create a taxable event, you have no "income" to live off. You MUST have income producing assets to generate passive income for you to live on, while at the same time you must get capital growth on your assets.

Property, in my opinion gives you the best of both worlds. It produces rental income that you can either spend, if that is your income source, or reinvest if you have other income sources, and it has the added bonus of capital growth that just keeps compounding.

If equities are your thing, then a mix of income (dividend) producing stocks as well as growth stocks is the ideal option. You can always choose to reinvest the dividends for increased compounding - especially if you have other income sources.

The reason I was able to retire early was because all of our investments were targeting BOTH capital growth as well as income production. Our investments produce more income than we can ever spend, while at the same time continue to grow in value via capital gains.

In reality, we will NEVER need to sell any assets in order to live our chosen lifestyle, because our assets produce more income than we need. The income is indexed to the value of the investment, so as the value of the investment increases (capital gain), the income value increases as well... and by more than the inflation rate!

Think of it like this....

If I have assets valued at (say) $5,000,000 that generate a 5% pa return, that equates to $250,000 per year income.

If the asset increases in value the following year by (say) 5%, then the assets are now worth $5,250,000. If these assets are still producing a 5% pa return, my income will now be $262,500

My income has increased from $250,000 per year to $262,500 per year, while my net worth has also increased by $250,000.

Basically, I will never run out of money.... unfortunately, few ever grasp this simple concept.

Here it is again in table format. The assumptions are 5% annual capital gain (I have averaged around 8% annual growth), and a realistic 5% pa dividend or income stream from the assets.

I have picked $5,000,000 as the total asset value as it is an easy number to work with.

Year Asset Value Annual Income

1 $5,000,000 $250,000

2 $5,250,000 $262,500

3 $5,512,500 $275,625

4 $5,788,125 $289,406

5 $6,077,531 $303,876

As you can see from the above numbers, over the course of 5 years, my assets have increased from $5,000,000 to $6,077,531 - an increase of over $1,000,000 (around 20%), while my income has also incresed over the same period from $250K to $303K per annum.

Both the assets and income are ahead of inflation.

The more you have in assets, the bigger the numbers. HOWEVER, you don't need to be sitting on that sort of asset values. The calculations are the same whether you have

$1 million, $50 million or just $500,000.

You just need to know what sort of passive annual income goal you want to set, and then work on building up the income producing assets to achieve that goal.

It really is that simple!

The numbers may look daunting, but is because they are not what you're used to - yet.

I know this because I have lived through it. I managed to do it because I believed I could, and just worked on my plan until I reached my personal wealth goal.

Do NOT settle for mediocrity.

If a mug like me can do this, why not you?!