Principles of Investing Aren’t Always What They Seem


Ok, this is about time and money, and how they affect each other. But the real lesson to learn is not how this property or that note is worth more or less now than five years from now. It’s about understanding the physics used in planning, as we incorporate various strategies. Nothing is immune to time. As a concept, time will not be mocked. Just when you think you’ve pulled one over on life’s investment wall clock, it comes back to crush your spirit.

Time also has velocity. Does something happen sooner? Or, does it happen later? ‘Course, the million dollar question is — whenever it happened, was it planned? When investing in real estate understanding precisely when you want an event to happen is often crucial to the successful execution of your overall Plan. An example is cash flow vs capital growth, a subject about which I’ve written extensively here. Your timing for either one might be pure poison to the next guy over, who’s sportin’ a 20 year age difference.

I understand we’re talkin’ broad strokes here, but the concepts of sooner/latermore/less are key to any Plan’s success. Then there’s the wrench in the whole discussion, which is, in a nutshell, that sometimes less is preferred, and later it makes better sense to have more. Trust me here — when you have context, it all makes sense in the end.

Capital Growth

When talkin’ about turning a buck into more than a buck, we universally prefer sooner over later, and more rather than less, right? Right. Setting safety aside for the moment, the faster our capital grows, the better we like it. The bigger piles of cash we create are better than smaller piles. None of this is E = mc2. We generally do better as investors when things grow more quickly, and returns are better when they grow to larger amounts. Captain Obvious lives.

Sooner or Later

We must ensure our understanding of time, money, growth, and strategy aren’t convoluted when it comes to planning. It’s one thing to understand the time value of money, so to speak. It’s quite another to use that knowledge in a coherent strategy or strategies. Clear as mud? Yeah, it was for the longest time to me too.

Here’s the general principle:

More is better than less.

Sooner is better than later. 

Mo’ sooner is much mo’ betta.

That’s a universal truth in investing.

Yet paradoxically, younger folks will delay receiving gobs of cash flow in favor of growing their capital as quickly, but safely as they can. Meanwhile, older investors will eschew further capital growth in favor of achieving maximum cash flow. But the above mentioned principle applies to both. The difference is, you, as the investor, must provide the strategic timing by way of the choices you make in tactics along the way. 

In other words, know in advance exactly what you want more of, sooner. Very seldom do bad things happen when investors are goin’ about their long term business with a clearly defined Plan — executed on Purpose.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


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