1 million in cashflow hits different than 1 million in asset worth

Cashflow, and not cash, and not a million's worth in Magnificent 7, is king

Investing is a process of enlightenment for me.

When I was younger, reaching 1 million in assets was the go-to goal.

However, as I grow older, I realize that nothing much will change when I eventually hit the 1 million mark in asset worth.

For long-term investing practitioners, we invest our hard-earned money into stocks that can compound and grow over a long time frame.

This means, that despite having 1 million dollars worth of NVDA 0.00%↑, we would most likely still require to work and to go through the rat race.

NVDA does not pay a significant dividend (cash flow) for us to not worry about expenses and commitments.

What the common successful small businesses win against the Mag 7

I count myself a lucky investor of most of the Magnificent 7 stock components. I am lucky to have seen them grow a fair bit throughout my holding period.

And even though my total net worth has increased due to their appreciation over the years, I still don’t see myself having more financial prowess.

On the flip side, I observe that owners of successful smaller businesses, the unlisted private limited or sole proprietors, seem to have bigger financial and spending power as their business thrives.

These businesses might not be raking in an additional few million compared to Mag 7. They might be just comfortably doing low 7-digit sales per annum.

How can an owner of the Mag 7 (albeit a small one), not have the financial prowess of a small biz owner who probably knows much less about investing?

It’s in the cash flow

For a successful influencer or a small business, what is earned goes back mostly to their pocket. Even after netting off all expenses and overheads if any, a great small business would still have at least 20% of net profit margin that goes back wholly to the owner.

It is then up to the discretion of the owner to use or spend these net profits. Since there are no other shareholders, they can choose to splurge on luxuries, vacations, and fine dining.

These small businesses may be minuscule when compared to listed companies, let alone Mag 7, but due to the scalability nature or certain economic moat, could easily pull in more cashflow than your normal listed companies can offer.

And even if listed companies do increase their dividend payouts, their share price would also be adjusted upwards, making the yield less enticing.

My realization

Unless you are really into passive income investing, going deep and heavy into growth investing, would still see you required to work your asses off even if you achieve a net asset value of $ 1 million.

Even if you have an AUM of $ 5 million in tech stocks with an average dividend yield of 1%, you would probably not have enough to lead a comfortable “retirement” life.

$ 1 million of cashflow, does hits harder, even than $ 5 million of assets with little dividend yield.

I think it is time, to seek out a new challenge of starting a profitable business venture.

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