A Case For Cash Flow Over Capital Gains

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avatar of @travelwritemoney
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7 months ago - 3 minutes read

It is a constant dilemma deciding how to invest your savings. Invest in growth stocks? Or, invest in dividend-paying stocks? Do you buy a property for cash flow? Or, do you buy a property for equity? The general thinking is that you invest in cash flow to get out of the rat race. And, you invest in capital gains to generate wealth.

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Cryptos have an asymmetric gain potential. You can invest a little, which has the potential to win big. If you lose money, it hurts a bit. But, crypto and stocks are unpredictable. We see this now after the bull market has become a breathtakingly bad bear market.

Income investing has a somewhat linear growth. Of course, when you are still making deposits, the growth curve is going to have some kinks. But, for the most part, you can more or less predict how much money you will have in so many years at a given interest rate. And, that growth is faster depending on reinvested dividends or interest, which is compounding.

I'm going to buy income. I am not at the point where I need to worry about building wealth. First, I need to get out of the rat race. I'm going to do this by investing in HBD while it is paying out 20% interest. There is no telling how long the interest rate will remain at that level. For now, it is best to take advantage.

But, why invest in income rather than capital gains? With income, I could buy the asymmetric gains. This is the simplest answer. The interest payments can be used to buy other cryptos. In a tiered system, I would invest my savings into HBD Savings. Then HBD savings pays out interest. I could take the interest to buy other cryptos. This way, if I should ever stop depositing into savings for some reason, I would continue to earn interest that would buy crypto. It would work independently of my ability to continue investing.

Besides the practical reason for buying income, I work on salary, which has seen very meager increases over the years. Certainly, my salary has not kept up with inflation. Especially these days with inflation officially between 7-9%. Although, we all know that inflation is much higher than that. My best bet is to supplement my income with cash flow from savings to make up for that loss of purchasing power.

Perhaps one day the cash flow will surpass my salary. That would be great. At that point, I could invest my entire paycheck every month while drawing on interest payments.

As much as I want to invest in BTC and a ton more HIVE, I need cash flow to be able to do the things I want. My earnings from posting to Hive will simply be reinvested. For me, my blogging rewards are lifetime savings. I cold pass on my HP and HBD Savings to my family when I am gone. They can continue to blog with enough HP to not struggle as much as I did when I got started.

How much cash flow do I need? An extra $200 in HBD per month would be a tremendous help. An extra $350 per month would pay my student loans. An extra $500 in HBD per month could be a car payment.

To earn $500 per month requires $30,000 in HBD Savings. This is no small quantity of cash. But, it is achievable. This is the price of a new car, which many people don't seem to have trouble paying in 5 years.

If all I need is an extra $200, then how achievable is that? That's only $12,000 in HBD savings. It's not pocket money. But, it's not a crazy amount of savings to accumulate. So, if I have an extra $200 per month from HBD Savings to buy BTC, ETH, or HIVE, then that starts a transition to wealth building. I could turn fixed income into asymmetric gains.

This is a case in which you want to turn your focus from speculating on cryptos to buying cash flowing assets like HBD Savings, which can help you buy those speculative cryptos. You pile your wage savings into HBD Savings. The HBD Savings interest buys your cryptos reliably, consistently, and in a scalable manner. The only risk here is if the HBD interest rate changes from 20%. But, for the moment, it seems like a remote possibility. When the day comes that HBD does not pay 20% interest, then you'll have your HBD and your cryptos too.

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