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Underappreciated Valuation - Time



June 13, 2013 – Comments (0)

I have been giving a fair amount of thought to how valuable time is from an investment perspective. I think looking at a couple examples helps to illustrate this point.

One example is flipping or renting real estate. There is time spent on paying bills, insurance,  taxes on the property, mantaining and repairing it. Then there may be advertising, commissions, market research, background checks, lawyers,contractors, property managers, and contracts.  Then there may be the frightening cost of having the property go unrented or unsold.

Another example is farming. The farmer may be out in the field from dusk to dawn each day doing backbreaking work, or pay some farmhands to help, and may only scrape buy to feed and cloth his/her family. It may help if the family is working the farm together but this becomes a large drain on time as well. The farmer may have to invest heaviliy in equipment to work the land; gas, feed, water and other resources to keep the tractor running and the livestock fed.

In both scenarios people are holding physical assets which may or may not be liquid based on market conditions. (recession, drought) They also have consistently high running costs.

It makes me wonder if the landlord or the farmer would be better served carving out some of their time to find an endeavor that gives them a higher return for a smaller amount of time spent.

I think investing is the solution to this time crunch.The landlord or the farmer should take ownership in companies that create profits from time spent by other people. Investments are liquid and can be bought and sold in a few minutes time. An investor need only answer to his/herself and only needs a brokerage account, internet connection, and money to fund this pursuit. 

It seems to me that if the average landlord or farmer can invest alongside amazing CEOs and great companies over the long term, that this time spent should result in a higher ROITS. Return on Investment for Time Spent.

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