Cash Flow is King

Cash Flow is King, by John Nicola and James McCarthy

Most investors are aware of the market value of major assets they own such as stocks, bonds, real estate or private assets but are often much less cognizant of the cash being generated by these assets. Investors today seem to use the terms “price” and “value” interchangeably. Upon closer examination, however, the difference between the two terms becomes clearer and more significant. Moreover, investors can save themselves a lot of worry by paying more attention to value and less to price. And there’s no better gauge of value than an investment’s ability to generate cash flow.

In this COMPASS Newsletter, Nicola Wealth Chief Executive Officer & Chairman, John Nicola, along with Senior Financial Planning Associate, James McCarthy, make the case that it is cash flow, not price, that drives real value for investors. Click the button below to read our COMPASS Newsletter Cash Flow is King.

Key Takeaways

  1. Prices almost always fluctuate more than income. That is especially true of publicly traded markets.
  2. In order to buy well – that is, at a favourable entry point – you need the assets you want to acquire to drop in price, at least for a while. Volatility can be your friend.
  3. In order to acquire those distressed assets, it helps to have the cash flow generated from a well-diversified portfolio. This is achieved through regular portfolio rebalancing.