Know When to Hold ‘em? - April 2024 (#13)

Hello again dear reader! This is the final installment of the three part series on what you should consider before investing. Your dude Brent want’s to talk about time.

Motivation

Money

Ok, so you got some spare money and want to make it grow. There’s a few things you need to have figured out before you start investing:

1. Getting your savings account squared away

2. Knowing your risk tolerance

3. Knowing your time horizon

Today, we’ll be talking about time. Specifically this question: How long will I be holding this thing? Your investment that is. As a general rule the longer you can hold something the better (up to a point, but we’ll get to that later), here’s a few reasons why:

• Generally, holding an asset longer gives it a better chance to go up

• Holding an asset longer lets inflation work for you on investments that involve debt. As an example I bought a property in 2020 that the debt has now been devalued by 24% via inflation :)

• Holding an asset longer than one year means you’ll pay capital gains tax instead of income tax, capital gains is only 15% (Unless your making BIG money, then it goes up to 20%). TLDR hold it at least a year, pay less taxes

• In general, having a longer hold period makes you a better investor as it keeps you from chasing the next shiny object

The next thing you have to consider is: WHEN AM I GOING TO NEED THIS MONEY??? Virtually everyone is investing with a goal to do something. So what’s yours? New house? Start a business? Buy a car? Pay off student loans? Bigger investment? Retire? If so when do you want/plan to do this? If the time horizon is too short it probably doesn’t make sense to invest at all.

Another thing to note is there are certain types of investments that if your not planning on long term, as in measuring your investment in multiple years, you probably shouldn’t even touch. Those include virtually all Real Estate and most anything involving a small business.

As well, you’ve got to know when to hold ‘em and fold ‘em. And for those of you with no love for the ol’ Kenny Rodgers I’m talking about when to hold on, and when to sell. Here’s a good rule for you. If you, and everyone else, is LOVING an investment it might be time to sell. Likewise if you, and everyone else, is HATING an investment it may be time to buy. Of course there’s more to it, but thats just a good general rule to consider.

To conclude this series, you’ve really got to have the following dialed in before you start throwing investments around. First, having your savings figured out. Second, really understanding your risk tolerance. Third, knowing how long your going to hold onto the thing. With these in place your ready to get started.

FINAL MEMES

That’s all folks!

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