07/12/2022
CAPITAL INVESTMENT GAME 101
This is a business of money, read till the end, you will never see money and investment the same way again.
Every business venture out there and Investor has one objective of making gains either now or in the future.
And there are two types of gains businesses and investors make from their ventures and investment.
✅ CAPITAL GAIN
✅ CASH FLOW
I will break them down using relatable industry day-to-day practices, so follow carefully till the end.
This is the best piece of content you will ever read today if you are thinking of putting your money into any investment vehicle.
CAPITAL GAIN is the profit you make when you SELL (sell is in the upper case because you must sell to realise capital gains) the assets you acquire or build with your capital.
CASH FLOW is a profit you make without selling the ownership of the assets you have acquired. It's usually the most profitable as it is the combination of both and your gains don't only depend solely on the appreciation of the market value of the asset you have acquired.
DIGITAL MARKETING EXAMPLE
WEBSITE AND DOMAIN FLIPPING
🎯 When you buy a GOOD domain name, it's an asset that can be sold for Capital Gain by selling for a higher price and transferring the ownership.
🎯 When you buy a GOOD domain name, and you build a blog or an e-commerce store that generates daily, weekly, or monthly revenue, that's Cash Flow. At any point, you can decide to sell the website or blog in future for a Capital Gain.
TRAFFIC ARBITRAGE
Traffic is a flow of people's attention online. There are basically two ways of getting attention online which are Paid and Free. I'm going with paid traffic which is also known as an advert/ad.
Your ad budget is your capital here.
You may want to ask: Sunday, how does this connect with Capital Gain and Cash Flow?
Here is how;
🎯 When you spend 100k on your DIRECT ad campaign and you generate 500k revenue sales at the end of the campaign that is CAPITAL GAIN because you will need another 100k capital to generate another 500k revenue which is not guaranteed.
🎯 When you spend 100k on a lead Campaign and you generate 300k at the end of the campaign, that is CASH FLOW because you now own the leads as an asset and you can sell their attention for a reward or make them an offer to generate more revenue without a new capital budget.
FINANCIAL MARKET EXAMPLES
STOCKS:
🎯 When you invest 100k in stock and the market value rises to 150k and you sell the stock, that is Capital Gain.
🎯 When you invest 100k in stock and the market value rises to 150k and you are paid dividends every quarter, that is CASH FLOW. Because in the long run, you will realize your initial capital, and make a profit while still retaining the same quantity of stock at the current market value.
CRYPTO CURRENCY
When you buy a currency at a low price and wait to sell it at a high price, that's a CAPITAL GAIN. Unfortunately, it is a highly volatile market and doesn't have a CASH FLOW option for people who can't actively engage in other technical and profitable options.
REAL ESTATE EXAMPLE
Real Estate investing is beyond the acquisition of properties with what many consider to be great titles.
LAND BANKING
🎯 When you buy a piece of land at a low price and sell it at a higher price, that is CAPITAL GAIN
🎯 When you buy land at a low price and while waiting for the land to appreciate in value, you lease or rent the land or personally use it for other temporary activities that generate you income, that is CASH FLOW pending when you decide whether to sell for capital gain or developed for higher cash flow income.
PROPERTY DEVELOPMENT
🎯 When you develop a property and you sell it off, that is CAPITAL GAIN income.
🎯 When you develop a property and leave it up for rental, that is a CASH FLOW income asset.
AGRICULTURE
CROPS FARMING
🎯 When farmers plant crops like Yams, Cassava, Maize, Potatoes, Beans, Rice and other cash crops, any profit realized is Capital Gain because they have to harvest and end the circle of the crop before they realize their profit.
🎯 When farmers plant crops like cashews, Mangoes, Cocoa, apples, cherries, Palms, Coconuts and the like, they generate fruits yearly with a lifespan of many decades. That is Cash Flow as they require only maintenance and not new capital to start cultivation.
ANIMALS REARING
If you look at animal rearing well, you will realise that there are two dimensions of profit-making. Capital Gain and Cash Flow.
🎯 When a farmer decides to rear male animals, it's usually for consumption and the profit realized is Capital Gain as you have to sell off to final consumers to realize your profit.
🎯 When a farmer decides to rear female animals, it's usually for reproduction and multiplication of its kind. Which can be self-sustaining as it generates Cash Flow. Eg: poultry farming for daily egg production, Cow rearing for milk production, Fish farming for fingerling production, etc.
SUMMARY,
🎯 CAPITAL GAIN is buying or building an asset or product at a lower cost and selling at a higher cost. To realize a capital gain, you must sell off your assets or product. Eg: male cow. (sold for meat consumption once for Capital Gain)
Most Capital Gain opportunities require little to no active participation or maintenance.
🎯 CASH FLOW is owning an asset or product that produces a consistent and predictable recurring income without losing ownership. Eg: Female cow. (Milk for Cash Flow + meat for Capital Gain)
All Cash Flow assets and systems require active participation and regular maintenance.
QUESTION: Which of these two profit systems tickles your fancy the most and why?
PS: If you are thinking of leveraging real estate as an asset class to create wealth, preserve your wealth against inflation or multiply your wealth, shoot me a DM NOW. I have amazing offers for you right now that you wouldn't want to miss.
©Sunday Oko
