How to Live Off Your Investments

By Bill Bonner

02/11/11 Baltimore, Maryland – “Most people want to be rentiers,” said Elizabeth. “I know I do.”

Rentiers are people who collect “rentes” – that is, they are people who live on their investments. If you have an investment in an apartment building, for example, you collect rents. That’s why you own the building. You want the income.

That makes you an investor. If you buy the building because you think it is going up in price you are not an investor; you’re a speculator. You’re speculating that you’ll get an increase in your capital.

“Most people who call themselves ‘investors’ are not really investors,” we explained, to know one in particular.

“If you are a real investor, you have to study your investments carefully and make sure they produce a stream of income that justifies the investment. But very few stocks provide enough in dividends to give you any real return on your money. The dividend yield is only about 2%, on average…or about the same as the official inflation rate. The real inflation rate is much higher…meaning, you lose money unless your stocks go up in price.”

How likely is it that stocks will go up in price? Everyone seems to think they’ll go up. Ben Bernanke – the most powerful economist in the world – says he’ll make sure they go up. And they’ve been going up for almost 2 years.

So… Why not buy stocks?

And guess what…they’re cheaper today than they were yesterday.

The Dow went down 10 points yesterday. If the Dow goes down another 5,000 points, we’ll be a buyer too.