One of my favorite questions I always ask new investors is, “What is the intention behind your investing?”. It often boils down to one of two things: 1. Building wealth and/or 2. Generating income to replace or supplement earnings. The ultimate aspiration is often characterized as the quintessential American dream–attaining financial freedom. However, the paths to reach financial freedom can be dramatically different based on the goals and intentions of the investor. Let’s look at these two main goals and their unique investment paths.

If an investor’s current main goal is to create consistent monthly cash flow, there’s a bucket of investment options that are likely better suited to their risk tolerance and can help them achieve their cash flow goals. On the other hand, if the primary focus is on wealth creation, they should look at a completely different set of opportunities. While it is important to note that every investment is nuanced, the example investment chart below demonstrates that while an investment may promise potential upside, it may not align with an investor’s particular intentions or risk profiles.  

The key here is recognizing that different investment vehicles are engineered to achieve distinct objectives. So, the first step for any investor is to evaluate their personal portfolios and risk tolerance and identify their goal with each investment. Wanting to stay in one’s career and being satisfied with one’s current income could be indicators that an investor should prioritize wealth generation investments, while deep job dissatisfaction and the need for supplemental income should steer an investor toward investment opportunities that advertise cash flow. Once their objective is clear, investors should set an honest risk tolerance. Then, with a clear objective and a set risk tolerance, the framework for evaluating investments can guide them to the best opportunities for their portfolio goals.

Lastly, an important point to remember is that objectives will most likely change throughout an investor’s lifetime, so even seasoned investors should regularly refer to this exercise. Ideally, as an investor’s portfolio grows over time, they will have investments that fit into both categories with different risk profiles. A perfect collection of intention-based diversified investments.

The information provided herein is for informational purposes only and should not be construed as financial advice. The content is provided “as is” without any representations or warranties, express or implied. It is not intended to be a substitute for professional financial advice, consultation, or guidance. Before making any financial decisions or investments, it is strongly recommended that you seek the counsel of a qualified financial advisor or conduct your own research and due diligence.

Jeremy Long

Jeremy Long

Managing Partner

Jeremy’s participation in building prosperous organizations from the ground up has few rivals. A superb operator and curator of organizational culture, Jeremy was the first sales professional and later VP of Sales for Vivint Solar, helping guide the company to a $1.6bn IPO and later $3.2bn merger. As an entrepreneur, Jeremy is a founder of an innovative school, record-label, and real estate marketing platform.