The economy cannot be forecasted, and the investment market cannot be timed. I feel compelled to write more, but the first sentence pretty much sums it all up. It really is that simple.

The challenge remaining for all investors is controlling your actions through up and down markets.  Rarely is it the companies that are owned, instead it’s investor behavior that ultimately influences essential and fun spending. Our brains are wired to look for more and define our relationship with cash and investments in terms of volume. That’s human nature and unavoidable.

One answer to gain financial clarity is providing job descriptions to all accounts and syncing them to your timeline. Understanding how cashflow integrates with your accounts helps outline liquidity.  

For example, two of our three boys will be in college this fall. The key for us, and a lot of other families, is simply having a plan before the invoices arrive. Loans, cash flow, investments, gifts from family, or a combination of the above, it’s really a personal choice on how you pay. What matters is figuring it out early.

For our family, it was and continues to be owning companies as opposed to lending to them. Why? Education costs are dynamic and never static. Selecting investments, specifically diverse companies that are run by smart men and women and accountable to a board of directors makes sense to us. This will create the necessary capital if we give it enough time.

When, not if, the next recession arrives, we’ll lean on cash reserves and cash flow to continue covering costs. This can take the sting out of liquidating companies at shrinking prices. Life doesn’t always play out as planned, so we’ll continue updating our approach to keep ourselves from reacting.

We know exactly what we own and because of this can stay the course when the waters get rough. We accept volatility as the up/down price movements that are inherent in owning equities. Ultimately, it’s our ability to sit still in difficult times which we view as the admission price to building wealth long term.  This wealth will provide cashflow as necessary for education costs and other spending down the road.   

In its simplest terms, I like to think of our portfolio as an apple orchard.  There are thousands of trees including a wide variety of apples. Some will fall to the ground and rot. Most apples will be ready for harvest when the time is right. The best part is the apples will regrow each year, as the trees mature and get stronger with time.  

Some seasons will be a bust, weather and insects affecting the apples we harvest.  This is out of our control, and we accept that. What we won’t do is cut down the trees when fewer apples arrive. We’ll prune the orchard as necessary and continue to carry on despite the smaller crop.

From my perspective, investing is a lot like growing apples. Both require faith in the future and knowing the exact outcome is uncertain. It doesn’t need to be more complicated than that.   

Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.

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