All assets fluctuate in price. The problem is most people want to time the fluctuations and seek to adroitly maneuver out of assets like stocks and bonds at the top (and bottoms) and end up doing more harm than good. I’d like to give you another perspective on assets, investing, and the capital markets.
Focus on cash-flow.
All of us have monthly bills, $250 for electricity, $150 for wireless service, groceries, gas, memberships, etc. You get the point. All these monthly bills can add up….and now you are responsible for thousands of dollars each month in bills! What if we looked at our collection of assets the same way? What if we focused on adding income streams every month? $1,000 per month from common stock dividends and maybe $1,000 from a rental property. All these income streams can add up…and now you are receiving $2,000 per month in cash-flow from investments. Is there any mention or thought to the daily overall value of these income streams? No, because it’s the cash flow that matters!
Instead of trying to time the price movements out of stocks and real estate, my experience has been to focus on quality assets with predictable income streams and especially those with the propensity to increase that cash flow consistently in the coming years. Time will take care of the rest.
As Ben Graham said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
So the next time you find yourself trying to time an asset class based on dreadful or scary news headlines, do this. Block the Noise – take inventory of your monthly cash-flow and decide to increase your holdings in more of what is paying you each month in cash dividends and/or rental income.
The formula for you financial nerds like me looks like this: Buy Quality, Build Cash, Buy more Quality.
If you need a little reminder, call me or one of my colleagues @ CORDA: 855.439.0665.