How To Find A Good Investment: The Difference Between Capital Gains And Cash Flow

Part of being an entrepreneur and generating profit is knowing what to do with that profit. I believe everyone should have the goal of financial independence. I also believe the world would be a much better place, and our “advancement” (whatever that means to you) would increase if people weren’t worrying about paying their bills all the time.

When you get to the point where you’re making more money than you’re spending, what should you do with it? My first piece of advice comes from my mentor Bill: He told me “don’t let the amount of money you make dictate your lifestyle. Instead, decide how you want to live, and then find a way to support it.

Here are the places your money could go:

  • Give it to charity
  • Spend it on a new toy
  • Invest it

All three of these have a place. If you want to focus on long-term wealth growth, though, let’s talk about investing it:

With more “investment opportunities” out there than you could count, which should you choose? To simplify things, I distinguish between two main types of investments:

  1. Capital Gains – These occur when you buy something for $100 today and sell it for $200 tomorrow. That’s a great investment, doubling your money in one day, but the transaction is over.
  2. Cash Flow – These occur when you buy something that earns you money on a continuing basis, and you continue to own the underlying asset.

Again, both of these have their place, but I’m a bigger fan of #2. The work you put in up-front may pay off for the rest of your life. Plus, our tax code generally gives passive income preferential treatment.

Watch the video for a specific investment opportunity that a partner and I just looked at. We didn’t invest, for different reasons, but this opportunity is by no means unique.

Look, and ye shall find!

By the way, I would say that the hardest investment to value is knowledge. We know education should benefit us in the long run, but how do we measure it exactly, and how do we know how much to attribute to each school, teacher, or course?

Because it’s difficult, I’ll just give you the answer: Investing in yourself is always worth it. If you want to do something, find someone who has already done it, and model after them. If they’ll show you how, that investment is probably worth whatever they’re asking.

That’s what our membership does. It takes a proven formula, and models it for our members to create their own online businesses. Come see for yourself!