We constantly discuss the importance of acquiring cashflowing assets in today’s crazy Canadian economy, but one question that we get asked all the time is “when should you sell an asset?”
The answer: NEVER!!!
Ok, maybe not never, but very very rarely should you sell an asset. I’ll explain.
In today’s Canadian economy, there are so many factors that lead to asset inflation. Money printing leading to more dollars in circulation, high government debts, high immigration, low interest rates, and so on.
The bigger problem is that incomes tend to not keep up with the asset inflation.
To give you an idea, from 2008 to 2020, home prices in Canada have risen by about 84% and the S&P 500 rose by about 100%.
In contrast, during that same time period, average family incomes in Canada rose by just over 28%.
This means that the average Canadian became about 56% poorer in the real estate market and 72% poorer in the stock market.
The age old advice of “go to school and get a good job” really hurt Canadians over the last decade, and to no fault of their own.
Meanwhile, those that learned how to acquire, manage, and retain assets got way ahead.
Those that acquired assets and sold got slightly ahead.
So when is the odd time you should sell an asset? We see it as only 2 situations where you can sell:
1. To buy a better asset
2. When you live in the Position of FU, where you can now enjoy the freedom you’ve earned.
Remember, we consider the position of FU as cashflow equal to at least twice your living expenses and being debt free.
Now, there are situations where you want or need to cash in. For example, there are a lot of baby boomers out there, who have retired and have to cash in their mutual funds. Simply because they have no income or very little.
Sadly, as they sell their assets, they will fall behind and cost of living will get tougher for them ☹.
Or how about pensioners with defined benefit plans? They have steady incomes right? Well, in 2021, OMERS, which is a defined benefit pension plan for Muicipality workers across Ontario, just announced a 0.94% increase for their pensioners.
Hmmm. Inflation seemed to be a lot higher than 0.94% over the past year, don’t you agree?
Meanwhile, guys like our old friend Rob Minton, will keep their assets and live off of the cashflow for life, all the while, the asset keeps up with inflation. Those same assets will also demand more income during inflationary times. When they pass, they will leave these money machines to their children.
If their children are smart, they will keep these cashflowing assets and continue to pass down.
As you probably know, we love assets that produce cashflow, for so many reasons.
Assets like Tesla and Google stocks have performed so well for people over the last decade. But it really is hard to pick these performers. For every one of these stocks, there were a hundred duds. And sadly, average people will eventually have to sell these to enjoy them.
But Cashflownaires don’t need to sell. They enjoy their assets for a lifetime, because they produce cashflow.
Unfortunately, this is never really taught in school. Instead, we are taught to go to school, get a good job, and save your money.
This is the same reason that Robert Kiyosaki says employees and savers are losers.
If you want to learn more about cashflowing assets, check out our past article, 7 Cashflow Investments for Canadians.
These are 7 assets that we have tried in the past to build cashflow in our lives. You will notice that most of these assets in this list not only produce cashflow, but also appreciate in value.
The average Canadian values an asset by how much it appreciates. But appreciation alone needs to be sold to reap the rewards.
And selling an asset doesn’t help you keep up with the inflation we are seeing today in Canada.
Instead, we suggest investing in assets for cashflow.
Cashflow puts food on the table. Cashflow pays the bills. Cashflow weathers the storm of market crashes.
An income-producing asset is one you are rarely forced to sell.
When you have a cashflowing asset, the answer is pretty simple. The time to sell is almost never!
If you have no cashflowing assets to sell, we strongly encourage you to start acquiring if you ever want to live in that glorious Position of FU.
Vince & Mike
P.S. As always, if you want to learn more about some of our cashflow systems, how we are earning cashflow, our outlooks on the economy, and things we do to improve ourselves physically, mentally, and spiritually, consider joining our Canadian Cashflownaire Membership.