You Don't Care Who Wins the Beauty Contest -- So Long As You Get Paid

7 Reasons to Invest for Income -- Reason #6

John Maynard Keynes - man offering tropical drink

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In the 1930s the famous economist John Maynard Keynes compared investing in the stock market for capital gains to the beauty contests that British newspapers used to hold to increase reader participation.

The newspaper would publish the pictures of maybe 20 beautiful women. Readers of the newspaper would then be asked to select and rank the woman they thought were most beautiful.

Those readers, however, won a prize of money by correctly guessing which women that most other readers thought the most beautiful.

Keynes Realized that Stock Market Capital Gains Depended on Predicting Mass Behavior

So if your goal was to win money instead of expressing your own personal opinion of which women were most beautiful, you had to figure out which women would be selected by other readers as most beautiful.

So you had to forget about which women most appealed to you personally, and decide which ones would most appeal to the other readers.

When you buy stocks for price growth, you are guessing which stock will be most popular with other investors. And they're doing the same thing.

In the last lesson I mentioned how there have been long periods of time when the stock market on average did not grow at all.

Invest for income, however, and you don't have to care what the market does or what stocks other investors buy. You receive money with every interest or dividend check.

Next: Reason #7 -- The Real Power of Income Investing

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