GROWTH (noun | \ˈgrōth\):
c) Progressive development
Want to know the truth about investments? They are not all vehicles of growth, however, sadly they are marketed as so. Before we get into the finances of it all, it’s important to first start with the meaning of growth. When looking up the definition of growth it’s interesting to see that the first two definitions include the use of the word itself (i.e. growing). The third definition, progressive development, provides the most meaningful definition of the word.
When I think of progressive development, I think of the various stages that any healthy living thing goes through. For example, think of a newborn baby, progressively developing, into an infant, then toddler, preschooler, child, preadolescent, adolescent, adult, etc. The growth is one directional, for instance, not one day the baby is taller or more developed in some way and in the future shorter or somehow less developed. There are many other examples around us of progressive development like trees, animals, or any healthy life.
- a) A stage in the process of growing
c) Progressive development
Want to know the truth about investments? They are not all vehicles of growth, however, sadly they are marketed as so. Before we get into the finances of it all, it’s important to first start with the meaning of growth. When looking up the definition of growth it’s interesting to see that the first two definitions include the use of the word itself (i.e. growing). The third definition, progressive development, provides the most meaningful definition of the word.
When I think of progressive development, I think of the various stages that any healthy living thing goes through. For example, think of a newborn baby, progressively developing, into an infant, then toddler, preschooler, child, preadolescent, adolescent, adult, etc. The growth is one directional, for instance, not one day the baby is taller or more developed in some way and in the future shorter or somehow less developed. There are many other examples around us of progressive development like trees, animals, or any healthy life.
It’s hard to imagine that some believe that an asset that can crash or better yet is expected to crash at least cyclically is a growth asset. Consider the stock market as a whole. Is it really a growth investment? When the stock market has a violent crash it violates the very definition of growth; progressive development. Many areas of real estate also violate the definition of growth, most recently, think of the collapse of the housing bubble around 2007. Ironically, when the housing market was booming during 2004 to 2006, the commercial real estate rental market (e.g. apartment buildings) was crashing. After all, who would willingly rent when virtually everyone including those with no income and no assets (NINA) could get a loan to purchase a home? Let’s look at it another way during the collapse of the housing bubble between 2007 to 2009 most believe that real estate had completely collapsed, but most didn’t realize that anyone owning apartment buildings were experiencing a boom; with so many people losing their homes and looking for a place to rent, rents skyrocketed. The point is when real estate is supposedly booming, there may be an area of real estate that is crashing and vice versa. So is real estate truly a growth asset?
There is one type of real estate where, like a child, the growth is one directional. Contemplate, that all of your life you have seen cities all around you grow and/or progressively develop. High growth cities usually start off with a lot of land, then come the single story buildings, then high-rises, etc. When is the last time you’ve seen a city go from being land, to fully developed, back to land? The likelihood of this happening is extremely rare. Even areas that have suffered catastrophic unexpected damage (e.g. New Orleans’ Hurricane Katrina) are usually immediately rebuilt and improved. The supply of land is always shrinking in high-growth areas even during economic recessions (although the supply might shrink slower in economic downturns). Have you ever heard of the land crash of the 1920’s…no, but you’ve heard of the stock market crash of 1929. To be clear, in high-growth areas, land is always progressively developing; land is truly a growth asset.
It’s unfortunate that the masses have entrusted their retirement savings to plans that don’t perform all that well in good economic times and perform very poorly during economic downturns. So many people invest in mutual funds, stocks, and other highly volatile instruments and have been sold on the idea that if they keep investing that over the “long-haul” they will come out on top. Sadly the truth is the only way to come out on top over the long-haul is to invest in a proper growth asset like development-ready land in a high-growth area.
To learn more about how to secure your financial future with no-brainer growth assets be sure to attend our next event.
To learn more about how to secure your financial future with no-brainer growth assets be sure to attend our next event.
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