Often times investors approach us, seeking to grow their wealth. While building on a Vision together, we take our time to share the key essential tools that could help us create a self-sustaining portfolio of passive income producing investments. While the list of what contributes to financial success through investing is endless, our experience points to 4 key essentials that can help an investor maximise their investment growth potential.
The Essentials: In our experience there are 4 core essentials, without which the sustainability of a passive income portfolio remains questionable.
- Focus on Cash Flow
- A Power Team
- Application of Leverage
Capital: Save as much as possible. Savings act as our working capital and while saving up it is important to bear in mind that your savings are liquid-able. Liquid-able assets are those where funds can made available in a short notice while keeping all your costs under check. Investment vehicles such as fixed deposits and open-ended mutual funds can be qualified under this category; insurance and real estate will not make the cut.
Focus on Cash Flow: The focus should be on realising passive income in the shortest time feasible so that we can measure the progress in order to make timely changes, and should there be variation from the anticipated long-term income expectations of the investor. Investment strategies in which the benefits and timelines for income generation are not established or are often deferred until the need arises would not qualify the condition. This scenario can be explained with the following example: You are saving up for a car that you are not able to test drive until the day you own it. This could lead to disappointment as the final product may or may not be gratifying and or may not be suitable for your onward journey.
A Power Team: An investor’s top focus should remain on building and retaining their Power Team of professional advisers. No successful investor has made it all alone, there is a constant need for quality information and advice. While there are many consultants and firms ready to offer advice, from an investor’s perspective to assemble his team of professionals with matching Vision and Mission could take a while. It could take sometimes years and a lot of trial and error to find and stick to the right team. Once you have a strong Power Team, it is important you stick with them as a good adviser also commands a good client. Remember, the growth and success is going to be mutual.
Application of Leverage: Consider your wealth as working capital and investing is your business. The possibilities of amplifying this wealth is possible by applying Leverage. If you are good at what you do, an infusion of funds can help magnify the success. Entering this territory without specialist knowledge and a strong back up could prove hazardous to your wealth, however, successful application of leverage could amplify the results with tremendous speed. It is similar to modifying the engine of a car to provide it the additional boost of power. But, overdoing it could also lead to disastrous results. Again this is where your specialised power team with sufficient experience with risk management techniques can come in handy.
Interested in knowing more about building a robust financial plan? We would love to have a word with you.
Written by Prashanth Prabhu
Founder – 29k Group