By Jenn LoConte
Everyone is talking about the current market cycle and when the next downturn will occur. Understanding how important cash flow is when it comes to making smart investment decisions is essential, no matter what the market is doing.
Having access to capital is critical. As the market shifts and the value of assets decline, the lack of cash flow from investors portfolios is, unfortunately, often what causes some to make the wrong decision.
“Everyone wants to invest in the stock market when things are great, but when the market goes down and the value of your portfolio declines, it’s difficult to not sell and instead be willing to wait it out until the market recovers,” says Don Wenner, CEO of DLP Capital Partners. “I believe the reason people struggle to wait it out is because of lack of cash flow.”
Cash flow allows you to weather the difficult times.
When things aren’t going well with your investments or your business, you’ll be struggling, as well. Having cash flow consistently coming in will allow you to weather any market inconsistency. Having a significant portion of your portfolio invested in assets that will continue to produce great cash flow in all market conditions is critical.
Cash flow, when consistently earned, creates massive long term growth.
At some point you may have seen examples of a yield earned consistently each year and how much more money you will have over the course of time. Wenner says, “For example, during the stock market’s last 30 year period, from about 1987 to 2017, the market grew at an average of 12.3%. But, if you took that same amount of money you invested at an 8% fixed return, you’d end up with 50% more money than at 12.3%, due to the ups and downs.” Consistency is critical.
Cash flow is power.
It puts you in a position to be confident that you’ll make the right decision, not a poor decision out of fear or an immediate need. Cash flow allows you to be confident to make new investments, even when things are more volatile. It’s a feeling of power, something everyone wants but is more often hard to come by when you’re in a recessionary environment. You have to plan for it today.
Some investors think of cash flow as taking a stock that produces great dividends but doesn’t generate as high of a growth, in terms of the value of that stock. Typically, people consider cash flow assets as those that generate better cash flow, but ultimately, they will have to give up some future return in exchange for higher level consistency and safety.
“At DLP, we’re willing to give up higher yields for less risk and more consistency in returns. We generate a good balance of great returns with consistency and safety,” states Wenner. “We’re confident that our investment strategies today and over the next several years, will continue to generate great cash flow.”
Learn how DLP Capital Partners can help YOU generate consistent cash flow!
Watch our on-demand webinar to learn why cash flow is the foundation of how we invest and how we operate — and how you can generate consistent cash flow of your own.