Income Statement or Balance Sheet???

Understanding your natural slant on investing is important as it will drive you to make decisions.  So you need to ask yourself this question.

What type of investor are you?  

Option A:

Do you like to talk about the value of your portfolio?  Do you like to talk about your Net Worth?  Or maybe you like to read stories about others and dream about having the Net Worth or the Portfolio they have built?

Or

Option B:

Do you like to talk about how much Rent you are collecting or Salary you are making every month or year? Or maybe you just love to read about all the big salaries of professional athletes, actors and CEO’s???

If you like option A that means you see the world or at least the investment world through the Balance Sheet.  The Balance Sheet is where you collect all the Assets subtract the Liabilities and come up with a hopefully positive number.  Truth be told most folks with this slant simply discuss the Asset side and ignore the liabilities.

If you like option B that means you see the world or at least the investment world through the eyes of the Income Statement.  The Income Statement is where you total all the income and subtract all the expenses leaving you with hopefully a positive number.  However, most Income Statement investors I have met like to simply talk about the top line and all the income and always forget or ignore the expense side.

I bring up the topic of Balance Sheet and Income Statements because it is important to understand how you see your business and evaluate your deals. Knowing this can help create goals, shild away from bad deals and help you grow as an investor.

For the record I look at my business through a often over looked financial statement called the Cash Flow Statement.  This tells me very quickly where the money is coming from and where it is going every month. For my money the Cash Flow Statement is key but it is often over looked because it is not as sexy as the Balance Sheet or Income Statement.

Good Investing