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Investment 101: Choosing and Selling Profitable Investments

While it is important to save, a comfortable retirement is often not made of savings alone.

In “How to Fund Your Retirement Without Selling Off Your Investments,” The Motley Fool explains the two ways people usually make money after investing in stocks and bonds: selling once the investment is worth more (capital gains) or getting a monetary reward from the organization you invested with (dividend or interest).

This explanation points the way towards how one can retain investments and still profit from them:

“Choosing investments that will produce lots of income for you is an important part of retirement planning.”

When you have an investment that offers dividends or interest, you profit without selling. And a profitable investment that offers dividends or interest once may very well do so again since “getting dividends and interest is an ongoing income stream, which makes it a perfect option for retirees.”

You may find that you want to sell an investment that has already produced profit for you at some point in the future but you need to plan carefully. You need to make sure that selling is the best move since you will no longer profit once you make the sale.

If you didn’t know already, dividends are not exempt from taxation. Stocks that are part of a retirement account are not taxed as long as they remain in that account. Stocks that are part of a Roth IRA will not be taxed at all.

If this sounds at all daunting, work with a Fee-Only financial planner to chart your course towards or during retirement. On the other hand, you may do very well picking profitable investments on your own but you could do even better with expert help. A financial advisor can you choose a variety of investments that can offer an income stream in retirement if that is your goal.