Why Cash is King in this Economy

Once upon a time, not so long ago, we lived in a world where Equity was King and ‘Buy and Hold’ was the way to make a lot of money.  We were encouraged to use our equity to buy more appreciating assets, such as property that would, if selected correctly, double in value every 7 to 10 years.  We could then refinance against the new value and use the equity to repeat the process.  That worked for me, my friends, my family and many people around the world for the last 12 years or so, while property prices were increasing and lenders were handing out loans, especially non-conforming lenders, to almost anyone who applied.  In fact you had to do something horribly wrong not to make money in property over the last 12 years.

But what happens when the market shifts gears from an increasing market to a flat or decreasing market? What happens when lenders tighten their reins and finance is no longer as accessible or as cheap as it used to be?  What happens when some very smart people start suggesting that property values may go seriously backwards at some stage in the next 5 years? Then it’s time for a new, smarter money-making strategy.  If you use the buy and hold property investment strategy in a down trending market you may be left with a bad taste in your mouth.  While some may refute the above and say that ‘time in the market’ is more important than ‘timing the market’, that is an old way of thinking and needs to be reconsidered in these changing times.

Many people got caught out when the Global Financial Crisis hit because they have only ever used one strategy and were either unaware that there was going to be such a dramatic change in the economy or they were just not equipped to deal with it. 

Where equity is King in an increasing market, cash is King in a flat or decreasing market.  Cash is more important now than ever before because it will a. keep you afloat and help you ride through the tough times and b. it will allow those that are prepared to take advantage of many great opportunities we will be seeing over the next few years.

And the good news is that there is still time to make a change.  To learn how to take get started in creating more cash in your life, register for Money Tree 101 on the right hand side of the page.

Stay tuned for more blogs!

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