It is super important to balance the pros and cons of liquidity and long term investing. The benefit of a liquid investment is easy access. The con is that people tend to make emotional decisions when they have easy access. Long term investments are the exact opposite. They're illiquid, you cannot get your money out as easily. For example if you invest in a syndication, and an exit could be projected to be somewhere between three to five, maybe even seven years.
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While both liquid investment and long term investment have their pros and cons, it’s essential to know their differences and their impact on your decisions. The wealthy are more attracted to the long term because they already know it's important to trust the process, and to be patient, because that's how true wealth is created. Investors in a long term investment are usually going to weather the volatile markets, because they're forced to be patient and wait out the process.
The cons is that it's not liquid, but in our opinion, and why we're recording this episode is that's actually a pro because then you leave your investment alone. Also, it's more typical for a long term investment, it's going to give you higher interest. And many times if it's in real estate, a lot of other benefits as well.
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Hey everybody! Flip and Dani here, founders of the Freedom Real Estate Group Family of Companies. Almost like the, was it the Greg Brady? No, it wasn't Greg Brady, it was Pete…Peter Brady going to go into puberty. Yes. That dated me right there. Hit the like button if you remember that episode. Okay, so this episode actually went to our podcasts and our podcast is called Freedom Through Passive Income. He almost forgot that. You guys all caught that. Right? You're witnessing to him, yup.
Good thing there is a title before this so people know. Yeah. Okay. Anyway, welcome to this episode. Hopefully we get into the episode eventually. This episode is entitled Balancing Liquidity And Long Term Investing. Yes, I think it's super important. There are two different things. Yeah. So liquid investments the pros are well, it's liquid, it's easy to access. The cons are that people, it allows people to do emotional, make emotional decisions and also, typically a lower interest.
Yes. Because the benefit of a liquid type investment is liquidity. Yeah. So it's not always the lowest of interest, it depends on the risk factor, right? And what you're putting that money in, if it can drop to zero tomorrow, well, you might be getting a high interest rate, because you're taking a big risk, right? So it really kind of depends, but liquid is really easy to access. That's why people want it right.
Long Term Investments, on the other hand, are the exact opposite. They're illiquid, you cannot get your money out if you invest in a syndication and it's apartment, and it's projected to be somewhere between three to five, maybe seven years, well, then your money's in there for three to five to seven years, you can't get it out, you could go to the sponsor and ask him to get it out. There's no obligation on anybody's part for it to get out. You went in knowing that this was an illiquid investment, right? So the pros for that is that it's not emotional, right? You're going to make a decision here, and you're making it for the next say, seven years. And so you can't take it out. If the market like shifts, and things are uncertain, you can't just go oh, I want my money back. Because it's there, you have to be patient and trust the process. So you're usually going to weather the volatile markets, because you're forced to be patient and wait out the process. The cons is that it's not liquid, but in our opinion, and why we're recording this episode is that that's actually a pro because then you leave your investment alone. Also, it's more typical for you to be in a long term investment, it's going to give you higher interest. And many times if it's in real estate, a lot of other benefits as well.
Yeah, and typically this is the unsophisticated investors. Yeah. They're the ones that are attracted to liquidity, because they got the, well it's not just unsophisticated investors. It's there's so many people now it's the I want it now mentality. Yeah, it's the Amazon I ordered in at 10 am. It's going to be delivered today at 2pm. Yeah, I joked about, I ordered something a couple of days ago, and it said, three to four weeks for delivery. I'm like, what if they don’t have to make it? So it just blew my mind. But it's that want it now mentality.
Yeah, and the wealthy are more attracted to the long term, because they already know, they've gotten to their position in life for a reason. So they know that it's important to trust the process, and to be patient, because that's how wealth, true wealth is created. Plus, the more and more you invest, if there's opportunities for cash flow, that builds up and gives you like, the liquidity that you might want, if you've got cash flow of 5000 a month, or 2000, whatever it is that you want for liquidity, it helps in those long term investments, depending on how you're making those decisions. So that you can do that.
So liquidity for liquidity sake, which means there's no purpose if you had if we had $500,000, us putting that into a liquidity fund or some type of liquid investment, just for the sake of wanting it to be liquid, and it has no purpose. That is, I think, somebody said, a fool's errand or something like that. But it's speculative, right? Because we really don't know depending on the type of investment, we put that money and we don't know exactly what's going to happen. And we are going to be emotional. And we're going to be watching and all the time to go, what is it doing? What is it doing? We didn't just use our wisdom and knowledge to evaluate an investment and put it in there and set it and forget it, which is what we typically like to do. That's why we love real estate so much.
So right and it's funny because you have it that's for speculators. Yes. But it's funny, because when I first read that I thought it said that it is for spectators ha ha ha.
Yeah, you never really want to be in the investing game doing speculative, right? You want to be looking at things that are proven and have the history of longevity and the ability to build wealth. So the illiquid investments are for the patient, the wealthy investors who are rewarded handsomely for a future point of date and time for investing in those types of things, right, so what we really wanted to bring across in this episode is the fact that the more knowledgeable that you get, the more you understand the importance of the balance, yes, it's important that some of your money is liquid, right? That you maybe have six months worth of expenses sitting in a savings account, right now in the inflationary environment, you're losing money in that savings account, right. But if that money provides you the peace of mind, and you don't have another liquid investment that feels as safe as that savings account, well, then maybe that's the right thing to do, is to put that there, but other money, maybe you want an extra pot of six months, that doesn't have to be in a savings account, and I honestly, I'm not a big fan of savings account, I would put me putting in something else. But everybody has to make their own decision, right? But if you had another six months, let's say you want an extra six months liquid, maybe you put that into an investment that might not get skyrocket returns.
But it's a pretty good investment that's going to outpace inflation, at the very least, and give you that liquidity. Now, anything beyond that, depending on who you are, and how you're dividing up your buckets, stick it in a long term investment, where you're getting the higher, returns where you're getting the tax benefits, where you're getting all kinds of different things, compound interest, there's so many different features on vehicles. And we're creating actually, we're partnering with someone who will talk about this on our live episode. But we're partnering with somebody who's invested with us for a very long time, we're building a liquidity fund, because we know exactly how to give people some decent interest rates that will help with the inflationary environment that we're in right now, certainly beat your savings account, and are very, very secure. So like you not getting this interest rate would just be like, Oh, the world like exploded or something. But so we're working on that type of thing. And it's in we're working on another fund for the long term investments that has a little bit of an equity piece, it's got both of them have compound interest piece, like we're creating these things, because it's what we want. And what we want translates into typically what other people want. And so we all do together, right? And it's just it's important to have that balance is really the point here. So keep getting educated, keep listening, keep doing your research.
I did want to note though, that we keep beating up the savings account, yeah, every time we but I will tell you right now that my savings account is beating my crypto account.Just letting you know that. I got you while you were drinking too, that was awesome. Yes, yes, yes. And that actually speaks to the depending on where you put your liquid investment. You could wake up and go eeeek. That's one of them. We have some liquidity, but we put it in crypto. Yep, it's going like this. I don't think it's…that would mean I'd have to go up. It's just yeah, it's just taking it from the second I put it in. Hey look, I lost 45 cents. Yeah, just like you're not taking it out right now. We're just we're going to ride the ride. Yep. It's what I call his entertainment app on my phone right now because it entertains me. In fact, I think you bought more you're like, oh, it's tanking I'm going to buy more. Yeah, I did. Yeah. And it's still tanking that's fine. Like listen to this pain point. I thought it was a good decision. Buy when it’s down. I'm teasing. It isn't a pain point. It's fun to me. It's funny. It's good. This money that we were going to burn anyway. We were going to light it on fire so we might as well light it on fire in the crypto. Well, we hope that you enjoyed this episode.
Make sure you're heading over to our website www.FreedomCapitalInvestments.com to join the Investor Club. But make sure you're also visiting us on our Facebook and LinkedIn groups and YouTubes and all those other things.
Make sure you hit the like button. You're going to hit the like button because that's so funny dump more money into crypto. You don't have to like that, just hit the like button.
But we like to end our episodes with Invest Smart. Live Happy. Bye everybody.
Disclaimer: Nothing on the show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate, financial or business professional for individualized advice. Opinions and information on the show are not guaranteed. All investment strategies have the potential for profit or loss.
Transcribed by https://otter.ai