28 March 2011

Cash Flow - 'Blood' in Your Investment Journey

A successful investor is an investor who can control his cash flow well.

If you are a businessman, you will try to control the cash outflow tightly by increasing or delaying payable amount while reducing or collect the receivables faster. Reasons being are due to cash is the important items in working capital especially during the recession period. A lot of banks refuse to lent out money to people in need or they will impose a high interest to reflect the poor credit rating the borrowers get.

If you are a stocks investor, try not to borrow margin money to invest. It's well known that margin rate is always significantly high. You will need to have extraordinary good return to cover the margin rate while having excess cash to avoid force sell in margin calls.
No doubt there are few can earn more during decent time but who knows the systematic risk?

Try to find a good asset allocation strategy by putting some cash besides you while you are fully investing. Although you will see a lower return during uptrend, but it will give some protection during hard time and you will be able to have excess cash to invest in during it.

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