There are many fine points to review when you look at building a residual income investment portfolio, especially if you are looking for residual income to outlast your original capital investment.

Consider the initial cost of your investment and whether it will be enough to build an income stream based on the current and potential return. Additionally, is the investment one, which can be long-term and generate residual income over time?

In the financial world, history has always been used as a prognostication for the future. A company that has performed well in the past is expected to repeat the performance, but businesses do tend to operate in up and down cycles, usually in tandem with either a season or the life of the product or service they provide.

DuPont had the right idea in the 1920’s in creating his executive trust fund, one of the first retirement plans studied, and other companies have followed with incentive bonuses in the form of stock options. This gives those who hold these options the incentive to contribute to the company’s future growth as well as giving them the opportunity to build a residual income investment portfolio.

However, as the mythical farmer learned years ago, keeping all your eggs in one basket is not always a good idea. Taking that investment and splitting it if varied forms can add differing income streams that help build the resources you will need to enable you to live off your residual income investment.

When you begin looking to other areas of investment, once you have designated an amount of your capital to invest, to more accurately predict your residual income potential, you must calculate the possible risk involved and its ratio to potential growth. Consider the time you plan to allow for growth and calculate your earnings potential.

By looking at the potential involved, subtracting your capital and risk figures, you can determine if the growth profits are going to generate a sufficient residual income from your investment to meet your goal. When looking at what your potential of residual income will be, you should not include the amount of initial capital invested.

While it is difficult to find a guaranteed future growth article, potential loss is part of the risk factor of a residual income investment and should be figured in with the entire package. Belief in the possibility of negative gains should start you looking for another source of an income stream.

When looking at a possible investment, look more towards the market side of potential as opposed to the firm’s side. Since the market controls the money, with most investors choosing to diversify, the firm’s control is diminished based on the whims of the investors.

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