Buy, Sell, Hold & Repeat

Three simple options, but which one is right for you? The internal conflict of each option can bring stress and double guessing. What if the cognitive dissonance is a good thing? What if it is the way our "gut" and logic learn to dance together so the best outcome wins? I believe that this mental struggle is not only necessary but it ushers in clarity and challenges the level of conviction necessary to stomach the adventures of investing.

In a previous post I discuss how the ultra rich skirt tax laws. The idea can be distilled down to a basic idea of buying, hold, barrow and repeat (BHBR). The idea behind BHBR is that assets are better served as a store of value to be used to loan against and/or generate cash flow which are taxed different than traditional forms of income. By understanding how the game works, we utilize the rules to build an investing framework which minimizes taxes, saves money and reinvest or exponential growth.

Buying the right asset at the right valuation is the single most important aspect of the BHBR framework. Buying overvalued assets can easily shift your portfolio into a position of negative equity. Buying assets that are priced well but will not hold value over time due to market turmoil, shifts or technology advancements can lead tot he same result. To mitigate these factors, start with tried and true asset classes that have a historic track record as well as future growth potential. Examples would be real estate, Oil & Gas investments and small businesses. Start with a safe asset that can allow you to execute the BHBR framework and as the portfolio grows, so can your investment vehicles. Asset classes that are more future forward can be added in slowly when price points are safe and reliable.

In the BHBR framework, selling is often seen as a last resort. Selling assets results in a larger taxable event and timing the sale of an asset, especially short-term is difficult to replicate. When the holding time horizon of an asset is lengthened the future profits realized from a sale are more likely to increase as long as the asset purchased follows the previously mentioned framework. Inflation alone will increase the value of an asset purchased properly not to mention future demand and leverage positions.

Decisions are made quicker than needed to be in the majority of cases. If the outcome of a decision is not life or death related, pause and take your time. Decisions made in hast often result in error. Take time, calculate the cost and decide on your own terms. Loans against assets is not income. Rental income has preferential tax treatment. Use the framework to your advantage.

The BHBR strategy is a practice of patience and taking a long-term view and approach. Making decisions for tomorrow will be short sited but making decisions for the next 10 years allows for compounding and life changing upside.