Income First Total Return Strategy®
At Northstar, our mission is to help our clients build portfolios to last their lifetimes. What that means is we help clients both build investment portfolios for retirement and live off the returns from those portfolios during retirement. To help clients achieve these goals, we follow what we call our Income First Total Return Strategy®.
The “total return” for an investment portfolio is made up of two components: the price change from the securities you own plus the value of any income produced by those securities. Add the two together, and that’s your total return. Price changes in any given year can be positive or negative, but income production is always a positive addition to accounts. We want a strong total return for portfolios, and we focus on the production and growth of the income first, instead of trying to predict short-term price changes.
There are three primary reasons why we focus on growing income production:
- Income production is always a positive addition to portfolio returns
- Income is more consistent and less volatile than price changes
- As income grows, the securities producing the income become more valuable
The strategy is based on the time-tested theory that the current and future value of any investment is directly related to the cash flow it produces over its lifetime. As the income rises from the securities we own, the price generally follows. Consequently, we focus on investing in securities that provide us with growing cash flow, primarily in the form of stock dividends or bond interest.
We run a portfolio of individual stock and bond holdings that is designed to help us achieve a strong total return over time, but also with less volatility. We do our own research on the securities in the portfolio, and we believe in knowing what we own.
Our Income First Total Return Strategy has several practical advantages:
- Higher probability of building both wealth and income
- Less volatile composition of returns
- Cash flow that can serve as additional savings or a source of distributions
- More control over your investment results