To even the newest investor the importance of positive cash flow seems obvious. Where most investors run into trouble though, is keeping details like positive cash flow in mind when faced with an exciting investment possibility. When an investor makes a decision based on excitement or sentimental value over true numbers and details, it’s known as “Emotional Investing”.
Let’s look for a moment at this term, “Emotional Investing”. Investing in any market can be driven by emotions. After all, the current “economic crisis” was in large part created by the reactions of every day people to the potential recession. The stock market is another great example of how investments can be affected by human emotions – in uncertain times people sell low 토토사이트 and lose all of their money out of fear!
Remember the movie The Wizard of Oz? The heroes Dorothy, Toto, The Scarecrow, Lion and Tin Man go to The Emerald City to see The Wizard, and they cower before the giant face, scared out of their wits. Yet, if our movie heroes were investors, who do you think would be the best at it? TOTO, of course! Why? Because the inquisitive little dog PEEKED BEHIND THE CURTAIN to see the man behind the smoke and flames and reveal the truth.
As savvy investors, it’s our duty to look behind the curtain, just as Toto did – pull it aside and reveal what is really there. How can we determine what’s really there? By taking a candid look at the POSITIVE CASH FLOW of a possible investment.
Think of it as your lighthouse in the fog, your compass in the woods, your TomTom while lost in Edmonton… your heart may be pounding, your blood rushing as you stare at that EXCITING investment opportunity, your brain screaming TAKE IT! DO IT! This is the time to take a step back, pull that curtain aside and look at the cash flow. It may FEEL like the best investment you’ve ever encountered, but unless the numbers yield you positive cash flow, as hard as it can be, you may need to walk away.
On the other hand, sometimes an investment doesn’t look great at first glance, but when the numbers yield positive cash flow in spite of the appearance of the opportunity, you’ve just found an investment others will pass by without giving a second glance.
Taking the emotion out of investing is not an easy thing to do, but by using positive cash flow as your gauge on each and every opportunity, you will peek behind the curtain every time and see not only the investments you should leave alone, but also the worthwhile investments others leave behind.