Becoming a successful investor doesn’t happen overnight, but with a little knowledge and strategy, you can create a sustainable income from your portfolio.
One of the best ways to do this is through cash flow investing.
Cash flow investing isn’t necessarily better than other types of investments, but it will help you build steady and livable wealth, which makes it a great choice for a number of reasons.
1. Immediate ROI
Cash flow investing allows you to purchase an asset and hold onto it with an expectation that you’re going to receive a constant yield on a monthly, quarterly, or even annual basis.
The key word here is “constant” – as in you won’t have to wait for retirement or a later period to see results. You will see income for certain investments (like dividends for equities, option premiums, or real estate rent) soon after you begin investing.
If you want to invest long-term but also need passive income, you can do that. If you want to receive a yearly check for a vacation, or to invest in another opportunity, you can. And because you receive your income in intervals, it’s also a great way to build capital over time.
2. Less Market Focus
If there’s one thing that discourages investors, it’s constant shifts in the market. With cash flow investing, there’s less risk of over or underestimating the market and losing big.
You won’t have to spend your time focusing on short-term or time sensitive market movements. Instead, you will be building steady income from more predictable sources, so there’s more room to develop a solid investment strategy.
3. Reliable Investments
When you invest with a cash flow strategy, you will be looking for long-term, reliable, income-generating assets that won’t fluctuate heavily over time.
There are generally three major areas you will invest in: stocks, bonds, and real estate (though there are other ways, too).
With these options, you’ll invest in companies and properties that have a track record of success with potential to grow over many years. For example, your property’s value may go up and down over time, but the rental income you receive will remain fixed.
You won’t be at the whim of the latest fads and trends or worry about whether or not a company will exist in the next five years. This way, if the market slumps, the effects on your portfolio are minimum.
4. No Fortune-Telling
With cash flow investing, you’re less concerned about what will happen in the future than what has happened in the past.
It’s more of a lesson in history. You’ll ask: what has already performed well in varying market conditions that will continue to do well?
You’ll research the history of a company to determine the strength of its balance sheet, income statement, and cash flows. You can pick strong companies that have performed well in order to improve its reliability.
You won’t have to spend time focusing on what will happen next, because your options have already proven themselves over time to be worthwhile.
5. Greater Flexibility
Cash flow investing also lets you use new cash flow to add to your portfolio or reallocate cash to other investments. You’re not pigeonholed into anything. You have a choice in what you invest in and when you invest it.
There is also an added benefit of being free from making rash decisions or feeling pressure to “invest now!” – you are continually earning money, so there’s time to develop a solid strategy that works in your favor.
6. Better Diversification
Another benefit of cash flow investing is the ability to diversify your portfolio.
Bond and real estate investments, for example, have a low or even negative correlation with other assets. Meaning that including these investments in your portfolio will lower your volatility and provide a better rate of return over time.
You won’t have to worry about conflicting assets or having one bad investment ruin your whole portfolio. You’ll have peace of mind and protection for your whole investment strategy.
7. Do It Yourself Options
Perhaps one of the best reasons to choose cash flow investing is the ability to manage your own portfolio (should you choose to). In many investment situations, you’re handing over your money to a third-party and trusting that they have the best instincts to make you a profit.
The trouble with this is that in some cases, those third-party advisors aren’t being transparent, giving you bad advice, investing your money poorly or in areas you don’t want, or simply not making you as much as you expected.
For some, the do-it-yourself approach is a much better option: you know exactly where your money is going and why. The Do It Yourself approach also lets you save money on costly fees that come with traditional investments.
Of course, you don’t have to have a Do It Yourself portfolio when you’re a cash flow investor, but the option is there should you wish to retain more control.
8. Higher Retirement Funds
Finally, cash flow investing is the ticket to better living during retirement.
Traditional investing is based on the concept of capital appreciation, where you “buy low sell high” and hope that your stocks appreciate enough over time to make you a profit when you’re ready to sell them. Unfortunately, this doesn’t leave much of a safety net for you and your family in retirement. What happens if you invested in the wrong stocks all those years ago?
With cash flow investing, you can live off of your portfolio, so you won’t outlast your money in retirement. You will transition all of those assets you’ve managed during your working years into real income. Cash Flow investors live off the proceeds of owning assets rather than needing to sell them for gains.
This means having a financially secure retirement, receiving more consistent (and bigger) paychecks from your portfolio.
Final Thoughts
We know that investing can be complicated, but one way to make it easier is to switch to cash flow investing. Not only will you build steady wealth over time, but you will also see reliable yields in the here and now.
Not only that, but you will have a variety of investment options to choose from. You will also have more predictable assets that have already proven themselves secure over time. You won’t have to waste time trying to time the market or predict the future.
Cash flow investing also gives you more control over your portfolio if you want it, and you can save for retirement without worrying about whether or not your stocks will cash out the way you expect. You’ll see the fruits of your labor sooner and you’ll be able to live off of your investments well into your golden years.
