what matters more than net cash flow 

Investment properties are often referred to as investment ‘vehicles’.

I think there is something to that terminology.

Every vehicle is designed to take you from point A to B – just like every investment is made with the intention of making returns.

But this is not to say that the sole purpose of every vehicle is to travel the ‘fastest’ or for every investment to make the ‘most’ returns.

We’d be mistaken not to recognise that every vehicle is built to suit its own particular purpose, and that purpose should match the requirements of the driver.

Formula 1 drivers wouldn’t opt for family cars.

Farmers would not opt for Lamborghinis. They don’t belong on a farm.

It’s easy to be tempted into chasing a single metric like the highest ROI or yield.

But what precedes these metrics are the characteristics of the underlying asset and how it fits into the investor’s personal goals and lifestyle.

Things like;

  • Passive vs. active.
  • Volatile vs. stable.
  • Long term vs. short term.
  • Liquid vs. illiquid.

Optimizing for overall ‘net benefit’ to our lives would seem a better strategy than purely optimizing for ‘net cash flow’.

Stay epic and have a great weekend,

Sam Lee

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