Take What The Market Gives You

There is always a chance of unmet expectations. An investment might have done well in the past, but it does not guarantee a future result.

Climbing the Ladder of Investment Sophistication 

Developing a higher degree of sophistication in your investment field is the best way to know if an investment has merit. Now, not everyone has the time to do that nor should everybody do that depending on where they are in their life and career.

That's why most people just “buy the market”. In other words, they buy mutual funds, ETFs, and any other commonly sold investment products. And that's an okay place to start. But as you climb the ladder and start building more investment capital (taking chips off the table such as selling a dental practice or business), you’ll need to build more financial acumen as well.

Do you continue to steward your money, investing it in the same way you have in the past?

Do you put that money into a retirement account and give it to somebody else, some third-party “fiduciary” who's supposed to manage it for you? Or, do you take it upon yourself? 

The thought process goes, “Hey, I've done the work here. I've created this capital. I've saved through discipline and hard work, and I've taken equity off the table by selling certain assets or a business. Whose job is it now to take care of this capital from here?”

The answer is you. It's your job to manage your own money. It’s a job that you should be learning more about. It is your responsibility to educate yourself as you go along.

Ideally, over a period of time, you go from “buying the market” (the standard) to developing your ability to find and invest in those assets that provide you not just the best return, perhaps not even the highest return, but the most optimum return for where we are in the market cycle. This won’t always be the “slam dunk” to win it all, but it will be a realistic, smart, and safe play for yourself.

It takes a little bit of work to learn how to do that, but I learned how to do it. People in the Freedom Founders community learn how to do it all the time. What I mean to say is, you don't need to have a high finance degree or other expert experience in this. Neither I nor the people in Freedom Founders have that.

How to Fold Time to Be Where I Want to Be Faster 

How can I create passive cash flow based on good investments without spending so much time figuring it out myself?

The key to collapsing time, in my experience, is working with the right people. This requires being on the forefront with other people who are boots on the ground, doing what you want to do. In this case, it’s creating the passive cash flow or the recurring income that you need in order to no longer have to work. It’s surrounding yourself with people who have done it before that will allow you to glean from their experiences and learn much faster than you would doing it yourself.

Can you do this with the stock market? No. There is no opportunity to connect directly with the operators who are managing the assets you are invested in. Not only that, but the stock market is more of a growth play. Yes, there are some dividend stocks that provide a form of cash flow, but most of them don't pay out as much as we need. I prefer real estate, where you can have both growth and a priority of cash flow.

The Focus is on Passive Income and Cash Flow

I personally do want the opportunity for growth, especially when there’s growth in the marketplace, but I need to know what the cash flow looks like today. Cash flow is what provides security and the financial certainty needed to step away from other income streams (your practice) when the time comes. That’s my focus. And that’s where real estate comes into play, even if assets deflate in value for a period of time. The value of the asset can decrease during a recession but as long as it has the cash flow throughout, then the value doesn’t really matter to me. The growth is not my focus, it’s on cash flow.

What's the recurring cash flow? Will that cash flow be sustainable? If so, for how long?

Side Note: Based on history, real estate will eventually come back up, but that’s a longer-term growth play – A topic for another day.

If I need to take a lower return when the market is not in an upward high-velocity mode as we've seen in the last 10-12 years, then I will learn how to take what the market gives me.

Really the last 40 years, from 1980 with declining interest rates of 20% all the way down to zero in 2020, was the rare gift of a tremendous wealth-building opportunity to my generation. But the tide is turning.

Is it fair? I'm not saying it's fair. It is what it is. These are things that none of us can control. You have to take what the market gives you. You cannot base your plans on how you wish things were any more than you can base your plans on how things used to be. 

That's the key lesson here: Take what the market gives you. Don't try to look for or make the market give you something it can't give you. That's where people get into trouble.

It's the same discipline that other long-term investors have had for many years. We just never see the patience that they exuded early on in their investing careers.

Patience. Diligence. Always learning. That is what sophistication looks like. You can do it too. You don’t have to wait for an investment to go bad before you apply these attributes. There's never a better time than now.

To your freedom!

– David

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest. www.freedomfounders.com/schedule