We've concluded a deal - what to do with the profit?
We've concluded a deal - what to do with the profit?
A fifth post
We've concluded a deal - what to do with the profit?
After we conclude a transaction, you are left with the capital we invested and profit. The question that is always asked is - what do we do now?
Are you reinvesting everything?
Do you enjoy the profit and invest only the initial capital?
Divided between the two?
I am of the approach that if you do not have to (note - “must”, not “want”) to use profit - do not touch it, and continue to "roll" it into the next transaction.
And I mention - we have a “target return” on the way to our destination.
For that matter, if we have achieved the “target return” in the transaction, we have no “excess” at all to use as we have to invest everything back in the next transaction to advance to the target.
If we got less ... surgeons where we went wrong and what to do next ”
If we have achieved more - here is the deliberation.
Invest everything back and shorten the time period to the destination? Enjoy the "excess"?
And again, my opinion is clear: “If you don't need the money, you will reinvest. This way you can "insure" yourself of future returns that will not reach the target, or alternatively shorten the time span of the target.
And, of course, if you go according to plan and get higher returns - you will reach a higher number, and enjoy higher income than planned.
I know it's really tempting to use (or partially) profit to "celebrate" a little bit, but there has to be a focus on our investments, like everything else in life.
It is important for me to clarify that the money that investors invest is money destined for our future.
“Investment” is defined as a resource waiver today, to enjoy more resources in the future.
And so we have to look at it.
We are “investors” for the future.
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https://www.facebook.com/1885945295012997/posts/2239562536317936
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Excellent post, it all depends on the goals we set initially. If there is a goal to get to the target return faster, then everything should go back into the general pool for reinvestment. If you want to "enjoy" the fruit during the process, that's fine.
In the end, it's all about setting priorities and sticking to them.
Thanks Noam.
And if we are dealing with profits (especially short-term deals like Flip), I would elaborate on the tax implications.
??
There are also approaches that can be adopted as early as the initial planning stage, the divisional approach into quarters or thirds. For example, already define in the plan that one third of the profit goes to future investments, one third to current and one third to vacation. And of course any other division?
I think that in the end money is only money and you have to enjoy the successes. Always takes some of the profits into a family experience or buys something that wants but does not owe or contributes and actually everyone. That's my attitude.