We are about to live through another recession. I don’t know when, you don’t know when, nobody knows when. We just know that recessions and downturns are inevitable.
I realized something after giving this some thought though. The people who are poised to have money to invest during these market cycles are the people who stacked when the market was rallying.
See, the reason why the market is in a down cycle is because at that moment there are more sellers than buyers, so sellers have to lower their prices until they can find the demand curve. (MBA level con baby). Most people think they can just buy when a recession hits but if you aren’t stacking when everyone is spending, you will be watching when those of us who knew better are scooping up deals.
I was looking at Googles numbers yesterday and realized that the company STILL doesn’t pay a dividend. This is amazing to me because they are a nearly trillion dollar company yet pay no dividends. I begun to think, hmm, what is in it for the investors if there is no dividend? I realized that by not paying dividends and instead reinvesting everything the company grows and as the company grows so does your equity and ownership stake.
This is important because I am constantly asked about real estate distributions and stock market distributions. While the question is warranted, it is misguided. Instead of worrying about the small drips you have to keep cash in the business knowing that as the business grows your wealth grows. Here is an example:
Say you own a home that you buy for 20k, the home generates 10k in year one and you use that money to buy another home. Now you have a stake in two homes. Then year two you generate 20k and you buy two homes and now you have a stake in four homes then in year four you generate 40k and you buy another four homes. You now have a stake in eight homes on the same dollar. If you were smart and continued to invest along side your gains the sky is the limit.
The win is in the action not in the cash. The win is in the equity not in the money. By staying invested and keeping your money in the deal you allow your business to be the person with money when no one has money. You allow yourself to do the things that most people are trying to do by staying liquid and guessing.
Your goal should be to have money in not to pull money out. All money in. The Marathon Continues.
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Be great, invest well,