Buy And Hold - Is this the best use of limited capital? - Part 2

Buy And Hold - Is this the best use of limited capital?

There will never be short of debates on passive income vs capital gain.  No absolutely right or wrong method.

I like both but treat them differently. My income from stock dividend just forms part of the minimum sum of Yearly Earning Goal.

Yearly Earning Goal = Stock Dividends + Capital Gains

I split my portfolio into two parts:

Passive Investing: Passive Income from stock dividends
Active Investing:  Active Income from capital gains.

Passive Income forms part of the safety net if I fail to make Active Income from capital gain in any year.

In good times, the bigger part of the yearly earning goal will come from capital gains due to compounding effects after each successful trade.

Here is the case study and let do the maths.

Let say I have $10K for each set of Capital 1 -5.

If I focus on all passive income strategy and invested all five sets of capital into 10% dividend yield REIT or high yield non trade-able stocks. I then re-invested the dividends. At most, I can expect the total return is up to 15% in one year.

Instead of all passive income strategy, I have included capital gains strategy too and re-cycle one set of capital at a time and slowly into the stock market.

"Buy slowly. Sell slowly." - CreateWealth8888

During good times, the return from each capital will be compounded at every successful trade; but not all sets of capital will be compounded at the same rate, some will out perform others.

The total returns from Active Income will be far better than Passive Income during good times. Since good times will never last long and we must learn to realize it and seize the opportunities when presented and then move on.

See the compounded returns in the below table: