--- title: "Managing Expectations: Income Investors Often Take Investment Results Out of Context" description: Comparing the S&P 500 to a diversified investment portfolio designed to generate monthly income is an apples-to-oranges analogy. Here's why. image: https://www.4tfg.com/hubfs/Blog/4Thought-Managing-Expectations--Income-Investors-Often-Take-Investment-Results-Out-of-Context.jpg --- [![4thought\_footer-logo.png](https://www.4tfg.com/hs-fs/hubfs/4thought_footer-logo.png?width=335&height=101&name=4thought_footer-logo.png "4thought_footer-logo.png")](https://www.4tfg.com/) - [![4Thought Financial Group](https://www.4tfg.com/hubfs/4thought_footer-logo.png)](https://www.4tfg.com/) [![4Thought Financial Group Compass](https://www.4tfg.com/hubfs/4Though-Compass.png)](https://www.4tfg.com/) - [About 4Thought](https://www.4tfg.com/investment-methodology) - [Our Investment Methodology](https://www.4tfg.com/investment-methodology) - [Management Team](https://www.4tfg.com/management) - [In the Media](https://www.4tfg.com/media) - [Contact](https://www.4tfg.com/contact) - [Services](https://www.4tfg.com/investing) - [Private Individual Investing](https://www.4tfg.com/investing) - [SMAs for RIA /Institutional /Family Office](https://www.4tfg.com/financial-advisors-and-institutions) - [Services for CPAs](https://www.4tfg.com/cpa-investing-services) - [Private Wealth Management](https://www.4tfg.com/wealth-management) - [Retirement Plan Services](https://www.4tfg.com/retirement-plan-services) - [Resources](https://www.4tfg.com/resources) - [Financial News](https://www.4tfg.com/resources) - [Portfolio Review](https://www.4tfg.com/portfolio-review) - [Investment Performance](https://www.4tfg.com/performance-requests) - [CPA Continuing Education](https://www.4tfg.com/cpe-continuing-education) - [FAQs](https://www.4tfg.com/faq) - [FAQs](https://www.4tfg.com/faq) - [Contact](https://www.4tfg.com/contact) - Log In - [Goldman Sachs Accounts](https://custodysolutions.gs.com/client-app) - [Wealth Management](https://wealth.emaplan.com/ema/SignIn?ema) - [Consolidated Reporting](https://client.myadvisorlink.com/auth/users/webportal/4tfg) - [Retirement Plan Services](https://www.4tfg.com/rps-login) - - Log In - [Goldman Sachs Accounts](https://custodysolutions.gs.com/client-app) - [Wealth Management](https://wealth.emaplan.com/ema/SignIn?ema) - [Consolidated Reporting](https://client.myadvisorlink.com/auth/users/webportal/4tfg) - [Retirement Plan Services](https://www.4tfg.com/rps-login) ## 4Thought Investing Resources ## 4Thought Investing Resources [Financial News](https://www.4tfg.com/resources/) [Investment Strategy](https://www.4tfg.com/resources/topic/investment-strategy) [Personal Finance](https://www.4tfg.com/resources/topic/personal-investing) [Business Finance](https://www.4tfg.com/resources/topic/business-finance) [For Professionals](https://www.4tfg.com/resources/topic/financial-professionals)[Compass and Crosshairs](https://www.4tfg.com/resources/topic/compass-and-crosshairs) SUBSCRIBE Subscribe for free tips and articles to help you lead a smarter financial life. [Financial News](https://www.4tfg.com/resources) ,[Investment Strategy](https://www.4tfg.com/resources/topic/investment-strategy) ,[Financial Advisor](https://www.4tfg.com/resources/topic/financial-advisor) ,[Financial News](https://www.4tfg.com/resources/topic/financial-news) # Managing Expectations: Income Investors Often Take Investment Results Out of Context Comparing the S&P 500 to a diversified investment portfolio designed to generate monthly income is an apples-to-oranges analogy. Here's why. \[fa icon="calendar"\] Jun 4, 2019, 1:02:30 PM by [Martin E. Levine, CPA, ChFC, CAP](https://www.4tfg.com/resources/author/martin-e-levine-cpa-chfc-cap) ![Managing Expectations: Income Investors Often Take Investment Results Out of Context](https://www.4tfg.com/hubfs/Blog/4Thought-Managing-Expectations--Income-Investors-Often-Take-Investment-Results-Out-of-Context.jpg) Info Sheet - PDF Download [![](https://www.4tfg.com/hubfs/Collateral/Wealth-Management.png "Wealth Management and Financial Planning")](https://www.4tfg.com/hubfs/Collateral/Wealth-Management.pdf) ### **Wealth Management by 4Thought Financial Group** "The comprehensive wealth management we provide involves the coordination and execution of four different types of financial planning: Investment Planning, Estate Planning, Business Succession Planning and Fringe Benefit Planning." [View the PDF](https://www.4tfg.com/hubfs/Collateral/Wealth-Management.pdf) [Save the PDF](https://www.4tfg.com/hubfs/Collateral/Wealth-Management.pdf.zip) [*Learn more about Wealth Management and Financial Planning*](https://www.4tfg.com/wealth-management) When a client and I first meet, we [prepare a financial plan](https://www.4tfg.com/resources/do-you-have-a-personal-financial-plan). Within the plan, we assess cash flow needs and determine how much the portfolio must generate in order to make up any monthly income shortfall, and thereby [provide for the client’s lifestyle](https://www.4tfg.com/resources/investing-for-retirement-should-not-cost-your-retirement). By figuring out what the shortfall is, we can determine how to [position the investments](https://www.4tfg.com/resources/bear-bull-wolf-eagle-markets-reimagined-redefined) and other income sources. When a portfolio needs to generate steady monthly income, the traditional approach has always been to use a combination of various fixed-income vehicles, such as certificates of deposit, bonds, insurance products and dividend-paying stocks. In the low-interest rate environment of the past decade, this has been very challenging. The search for yield has led investors to take more risk in their portfolios—often leading to a higher allocation to stocks. During the last several years, the most common approach to generating this steady monthly income has shifted to the [“total return” approach](https://www.investopedia.com/articles/investing/121015/yield-vs-total-return-how-they-differ-and-how-use-them.asp). A total return approach uses portfolio growth and income (versus income alone) to generate portfolio withdrawals. When you’re talking growth, you’re typically talking about stocks. Instead of just taking the interest or dividends as withdrawals, part of the principal is also distributed (which is hopefully generated by the growth of the underlying stocks or other investments). When the withdrawal needs to be generated each month, if the stocks go down in value, or the bonds go down in value, then a loss will result, because a sale will have to be made. *So that’s where the confusion lies!* All the financial headlines talk about the S&P 500 Index and how it is doing. To compare the S&P 500 to a [diversified investment portfolio](https://www.4tfg.com/resources/how-a-diversified-investment-advisor-can-help-you) that is designed to generate monthly income is an apples-to-oranges comparison. As the baby boomers [begin to retire](https://www.4tfg.com/resources/if-your-retirement-plan-is-out-of-date-or-in-non-compliance-you-are-at-risk) (or position themselves to soon retire), in most cases, their portfolios should be adjusted to become more conservative. Designing a [more conservative investment strategy](https://www.4tfg.com/resources/plan-along-with-planning-needs-to-minimize-retirement-liabilities-financial-advisors) usually entails less stock exposure, which also means less S&P 500 exposure. Another factor that adds to the confusion is the types of stocks purchased. If someone is looking for income, a higher allocation to high-dividend-paying stocks may be used. These dividend stocks are usually not purchased for growth. Yes, it is possible that they will also grow, but that is not predominantly why they are purchased. Alternatively, stocks that are purchased for growth may or may not pay a dividend. This latter group of stocks have traditionally grown more than their brethren, the dividend-paying stocks. So that’s part of the story that needs to be remembered when comparing [investment portfolios](https://www.4tfg.com/investment-methodology) to the S&P 500. Nomenclature associated with stocks, such as value, growth, large cap, mid cap, small cap, international developed and emerging markets, were created chiefly to differentiate between various types of stocks for the purposes of [building diversified portfolios](https://www.4tfg.com/wealth-management). The same holds true with fixed-income investments, such as bonds and annuities. One of the best ways to prepare for your portfolio to [generate income during retirement](https://www.4tfg.com/resources/consolidate-your-retirement-assets-retire-comfortably) is to start by having a financial plan created. Make sure you speak to an [experienced professional](https://www.4tfg.com/resources/finding-your-financial-advisor) and [consider getting a second opinion](https://www.4tfg.com/resources/importance-of-investment-portfolio-second-opinion-review). 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Contact 4Thought Financial Group to [Schedule a Second Opinion](https://www.4tfg.com/portfolio-review) on Your Investment Portfolio, Today.** [![Contact Us](https://no-cache.hubspot.com/cta/default/2201374/4a0854da-f418-4296-8ae4-db3ef0bd9f52.png)](https://cta-redirect.hubspot.com/cta/redirect/2201374/4a0854da-f418-4296-8ae4-db3ef0bd9f52) Financial Planning and Investment Advisory Services are offered through 4Thought Financial Group Inc., an SEC Registered Investment Adviser. This document is for informational purposes only and does not constitute a complete description of our services or performance. This is in no way a solicitation or offer to sell financial planning or investment advisory services except, where applicable, in states where we are registered or where an exemption or exclusion from such registration exists. This information is not to be construed as legal or tax advice. Consult with an attorney and/or an accountant before taking any action on the information provided. ### Author: Martin E. Levine, CPA, ChFC, CAP ![](https://www.4tfg.com/hubfs/Email/MartyLevine-EmailSignature.png) [mailto:marty@4tfg.com](mailto:marty@4tfg.com) Martin E. Levine is the Chief Financial Officer of 4Thought Financial Group, an SEC-Registered Investment Adviser (RIA). He holds a BBA from University of Miami, an MBA from St. John’s University, and is a Certified Public Accountant (CPA), a Chartered Financial Consultant (ChFC) and a Chartered Advisor in Philanthropy (CAP). Martin has more than 34 years of experience in wealth management, and specializes in holistic financial planning by coordinating all aspects of a client’s financial life. He is also a licensed life and health insurance representative. 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Disclaimer [Form CRS, Firm Brochure (ADV Part2), Privacy Policy Notice, and Wrap Fee Program Brochure](https://www.4tfg.com/hubfs/Firm_Brochure_ADV_Pt2-Privacy_Policy-Wrap_Fee_Program_Brochure.pdf) [Disclosure](https://www.4tfg.com/disclosure) [BrokerCheck](http://brokercheck.finra.org/) Investment Advisory Services are offered through 4Thought Financial Group Inc., an SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. The content presented here is for informational purposes only and does not constitute a complete description of our investment advisory services or performance. This website is in no way a solicitation or offer to sell securities or investment advisory services except, where applicable, in states where we are registered (or notice filed) or where an exemption or exclusion from such registration exists. Information throughout this site, including, but not limited to, stock quotes, charts, articles or any other statement or statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing on this website should be interpreted to state or imply that past results are an indication of future performance. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the user. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION POSTED ON THIS OR ANY LINKED WEBSITE. Any opinions presented here are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. \*4Thought Financial Group claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. The GIPS firm definition excludes any third party asset management programs over which 4Thought maintains oversight advisory agreements on behalf of its clients, any arrangements under which 4Thought provides recommendations for client self-implementation, and any assets under advisory but not under direct management (in which 4Thought provides allocation changes or trading signals to third party firms but does not take discretion over the trading of client accounts). GIPS-compliant performance information for 4Thought's strategies may be obtained by email at [info@4tfg.com](mailto:info@4tfg.com); on the 4Thought website at [https://www.4tfg.com/performance-requests](https://www.4tfg.com/performance-requests); or by phone at (516) 300-1617. ```json { "@context" : "http://schema.org", "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "", "addressLocality" : "Syosset", "addressRegion" : "New York", "postalCode" : "11791", "streetAddress" : "6851 Jericho Turnpike Suite 120" }, "alternateName" : "4 Thought Financial Group", "areaServed" : { "@type" : "GeoCircle", "geoMidpoint" : { "latitude" : "+40.8100713", "longitude" : "-73.5172286" }, "geoRadius" : "150 km" }, "description" : "Comparing the S&P 500 to a diversified investment portfolio designed to generate monthly income is an apples-to-oranges analogy. 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