During the 2008 crash I owned real estate and one of my homes dropped to about 45% of its previous valuations.
Mentally it was a bit of a struggle to come to that realization but to be honest it didn’t cause too much emotional turmoil.
I lived in that property for a while and then rented it out. Now I still own that home and it’s not only creating cash flow but if I sold it today it would also create capital gains.
So my question to you is… are your assets productive?
Somehow and in some weird way most Americans have been trained to think that the only way you save for retirement is by taking money out of each paycheck and putting it into a company sponsored qualified retirement plan, like a 401(k).
If you were to look at the performance of that bucket of money so far in 2022, you probably would get a bit of heartburn. The market has been trending downward and violently volatile.
Knowing that, are these types of assets being productive?
Do you still get paid even when the market goes down…maybe if you have some funds invested in dividend paying stocks, otherwise probably not very much.
So am I saying only buy real estate?
Depending on what market you are in, if you had put all your real estate equity into the S&P 500 and just let it sit from Jan-Dec 2021 you most likely would have made more than letting a property appreciate.
So what is the answer?
Most of the time when you hear the word diversification, what is the first thing you think about?
Probably your allocation between stocks, mutual funds, ETFs and bonds, right?
Why is that?
Because those are all Wall Street products and their marketing dollars go to train you to think that as long as you spread your dollars over all their products they can make money off of you wherever you go. Pretty genius, right?
When we work with our clients through real diversification here are some things we are considering:
- Are these assets going for the purpose of cash flow or accumulation? (or both)
- How much of the portfolio has already been taxed and how much still is going to be taxed?
- Is the cash flow from the assets stable or in a down market could the dividends, rent etc. fail to be paid or paid timely?
- Do the assets outpace inflation?
- Is any of the cash flow generated guaranteed for the rest of my life?
- What do you do in an emergency type of situation?
- Do we need to plan for rising health costs?
- How will my wealth be taxed to the next generation?
- And much more but don’t want to overwhelm
The more deliberate in the planning phase with our clients the easier it is to be successful and prepared.
That’s why we created the Continuous Cash Flow method so we can help our clients tackle these tough problems.
If we can assist you in this process please reach out and let us know.
Remember — It’s Your Time…