When I was a financial adviser years ago, we stressed the importance of having a strategy to our clients. The goal for most investors is capital gains, which is to buy low and sell high, or make a profit. But what do you do with those profits? This is a great question for those who invest in bitcoin and have seen big gains in the stock market.
J.P. Morgan recently announced that bitcoin could go up to $146,000 per bitcoin. That’s a lot of money for ONE bitcoin. Some analysts have said it will go even higher. Will it get to that level? No one knows for sure, but what if it does? If it gets that high, what would you do? Do you have an exit strategy? What would you do with the profits?
Bitcoin can be quite volatile. In January 2020, it was trading at $7k per bitcoin. This means it could go down as fast as it goes up. While there are some who never plan on selling their cryptocurrency, taking profits may be a wise decision at some point.
The Importance of Accumulating Assets
We are living in unprecedented times. We are looking at a potential currency reset, and bitcoin is rumored to be part of that change. Others believe we will return to a gold standard. This is what makes taking profits interesting. Instead of simply leaving profits in cash or investing in stocks, another option is to invest those monies into physical assets.
There are several definitions of the word “asset.” In one definition, an asset is defined as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”
If you sell some of your bitcoin, consider doing either of the below (if not both) with some of those proceeds:
- Accumulate items that retain their value. This will be critical as time goes on. On average, people purchase items that lose value, such as cars, clothes, shoes, fancy dinners, vacations, etc. While there’s nothing wrong with these things, only a small portion of them should be spent in this manner. The bulk of your money should be invested in items that hold their value. This is done to protect yourself from the effects of inflation.
- Purchase assets that generate revenue. Use the proceeds from bitcoin to buy assets that generate revenue, preferably monthly or even more frequently. These assets should be tangible, or physical assets. This offers the ultimate protection against stock market crashes or big price drops in bitcoin.
Many people believe their house is an asset, but ask yourself the following question: does your home put money in your pocket every month, or take money out of your pocket? For most people, home ownership means paying a mortgage and other assorted bills in order to keep the house. If a person loses their job, they’d have to figure out how to pay the mortgage or face foreclosure. That house is now a liability. If the house were an actual asset, they could not work and that house would be able to pay for itself. Here’s more info on your house not being an asset:
Under “normal” circumstances, taking profits would simply mean putting the money in cash and waiting on the next investment opportunity to arise. However, this time is different, partly because people are investing in bitcoin to get out of the current monetary system. Thanks to a weakening dollar and the potential for a new currency on the horizon, staying in cash for long may not be the best option. With that said, here are a few investment worthy assets:
Precious metals. Gold and silver have been used as money for 5000 years and are great hedges against inflation. If the stock market crashes, these two tend to retain their value.
Rental property. Buying rental property with your bitcoin proceeds in a well-placed area is an excellent way to generate a monthly income stream. Rental property is totally separate from bitcoin. Even if the cryptocurrency loses value, you still have your rental property and monthly income stream.
Franchises. A popular franchise can be a great revenue generating asset. Instead of starting from scratch, you will own a business that is already established and has a solid business plan. Top franchises for 2021 include the following:
- Two Men and a Truck
- Checkers and Rally’s
- Tint World
- Fast Signs
- NaturaLawn of America
- Dunkin Donuts
- Sonic Drive-In
- HomeVestors of America
Vending machines. Vending machines can be placed anywhere and can sell practically anything. One vending machine can generate $7k annually. While that may not sound like much, if you own or lease 10 vending machines, that’s $70,000 received annually from selling diet soda, chocolates and microwave popcorn. For more info on vending machines click HERE.
What’s Your Plan?
As the world changes, we must change with it. Covid has been the catalyst for government shutdowns and countless business closings around the world. As we approach an uncertain future, people must have a strategy. Having multiple streams of income may be more important then ever. If you lose your job, you don’t want to rely on a stimulus check or government handout to survive. It’s time to create a strategy. Instead of working for money, learn how to make money work for you.
Many of the best life lessons are not taught in school. It’s critical you don’t rest on your laurels and continue learning. Get more great tips in my book Invest For Success: Winning Wealth Strategies Not Taught in School. Available on Amazon.
Teach your kids about business as well. Many of the most important topics on business and entrepreneurship are not taught in school. Pick up a copy of Planting Seeds: The Children’s Guide to Entrepreneurship today. Available on Amazon in English, French and Spanish.