Most people invest with a “buy and hold” mentality. Day traders place investment bets on the market’s movement in short-term periods — a risky endeavor that requires vigilance and expertise.
These approaches aren’t agile or liquid enough, but I’ve recently discovered an intriguing, entrepreneurial investment style: cashflow investing. I learned it through Justin Donald who, in the span of four years, has built a net worth in the decamillions with cashflow investing.
Justin is a voracious learner. He’s shared with me that over the past four years, he’s read 526 books and invested over $650,000 in professional groups. This approach supports his tenth commandment: “Every dollar gets a return.” Justin treats billable hours with professionals he hires as learning opportunities that provide new experiences, knowledge and capabilities for the future. As he sees it, if he were to lose everything tomorrow, he would still have his knowledge.
My takeaway: Investing in your education produces the highest returns. I invest more than $250,000 a year in business coaches, advisors and training to produce millions in income. Every high achiever I know does this. Start on a smaller scale right away by asking the service professionals you hire — lawyers, accountants, marketing specialists, etc. — to teach you as they perform their contracted work.
2. Structure
Justin is highly attuned to “deal structures.” Every deal he invests in must produce predictable, recurring cashflow; alternatively, his objective is to own 1% or greater of every deal he enters. He’d rather have less equity and be involved in multiple deals that return cash flow consistently. It’s all about avoiding the “stupid tax.” If he gets equity, he doesn’t want to pay for it. And he must earn his principal back quickly.
For example, Justin recently invested in a recognizable retail brand with over 850 nationwide storefronts and a strong online presence. He found an “invisible deal” in which he only acquired the online portion of the business, not the troubled physical locations.
As part of the deal terms, he receives payments of 20% a year with monthly distributions. The full investment will be repaid in one year, with equity that totaled 3% per million on a $5 million investment, plus a kicker: a balloon payment in one year with an option to extend the term or convert it into additional equity, quarterly dividends and bonus warrants. The bottom line: Justin can continue receiving 20% a year with monthly distributions, getting his principal back in one year. Even after his initial investment is returned, he has long-term equity in the brand.
My takeaway: By working with lots of clients in different industries, I’ve learned how to ask better questions about how their business deals work. I use this to restructure my own offerings. For example, I charge $250,000 per year to work with a client but in several cases, I have “skin in the game” by discounting my fees $100,000 in exchange for a percentage based upon earning our first million together. Both parties win but without a clear understanding of the business model, this wouldn’t work. How can you deconstruct new opportunities to craft better terms?
3. Filtering
How can you objectively tell a good deal from a bad one? For Justin, lifestyle determines a “yes” or “no” decision. He asks himself, “Will this investment create an unpaid job?” The key for him is to work on the business, not in them.
He also hunts for invisible deals — simple, but more sophisticated instruments outside the typical recommendations financial advisors provide. These opportunities often come as a result of building his network. For example, in one of Justin’s first years of investing, he found a unique opportunity that required a $2,000 investment and received 2% of gross sales paid monthly, resulting in around $10,000 per month initially, which doubled shortly thereafter as the company grew.
In lifestyle investing, less is more. Confusion and overwhelm are enemies.
My takeaway: I start with my gut reaction. How do I feel when I think about this opportunity? Will it “hurt” my brain and my spirit? Do I feel overwhelmed just thinking about the company’s challenges and people, or do I get energized? If it’s not a “hell yeah,” it’s a no — period.
4. Negotiation
Negotiation is a core element of Justin’s strategy — one he estimates has created at least $7,000,000 in additional net worth. He believes every deal can be negotiated. When he sees a term sheet, he asks himself: “Is there a way to reframe the conversation or opportunity to reduce the risk?” He may add a kicker that generates revenue share beyond the ordinary deal terms. Perhaps he’s paid as an advisor or gets a warrant that grants for additional interest or a percentage of gross sales. He may ask about collateral to sell if he needs to liquidate.
My takeaway: Reframe every opportunity you receive. Don’t assume the only way to do a deal is the way it’s presented. Find multiple ways to benefit, and respect the value of relationships. My client Tony Robbins once shared how proximity is power. For example, I invested early in Dave Asprey’s Bulletproof Coffee. Bulletproof later became a sponsor of my podcast, I connected with dozens of other investors and have returned my investment many times over through access and connections that relationship created — even though we haven’t had a liquidity event.The bottom line: All opportunities are negotiable. Your responsibility is to get the best deal you can without compromising your values. By documenting your principles upfront, you have a playbook with which to focus your decisions in the heat of the moment.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
