2008,you bought an apartment directly from a well-known developer. 2010, you sold the apartment and make RM100,000. It was a handsome profit!

2007, you subscribe for a new company IPO (initial public offering). You successfully purchase a few thousand units. 2009, you liquidate all your holding of the shares and make RM50,000 net gain. It was a successful trade!

1st of May, 2009, the domain name Ad.com was sold for the hefty sum of $1.4 million, ranking it among some of the year’s top-selling premium names. Its cost is just a few dollars to the first owner who registered it.

Undoubtedly, you can make a lot of money by flipping – buying something at a lower price and then sell it for a higher price, provided that you can find the willing buyer. This is called “investing for capital gain”.

This breed of investors makes lots of money. But there is another style of investing, besides investing for capital gain.

Different style of investing (not for capital gain)

Case #1
Mr. Tan bought an existing three-storey shop in 2004. The commercial building is rented to a restaurant at the ground floor, an insurance agency on the second floor, and a tuition centre on the third floor. He has a positive cash flow of RM2000 per month and keeps increasing year after year due to rental inflation.

Case #2
John bought a blue chip share during the economy crisis back in 1997. The public company is a manufacturer of daily products and pay handsome dividend annually. John never thought of selling the shares. He is very satisfied with the dividend payment cheque he receives every year.

Case #3
Fannie bought an existing blog in 2008. She changed a couple of things on the website and poured her hard work into marketing it. She is now making a few thousand dollars from the blog every month, even though she had retired from the active role of managing the website by the way of outsourcing.

Now, you can see that these cases are different from the flipping strategy we discussed earlier. Mr. Tan, John and Fannie make money by “investing for cash flow”. Although they do not consider selling their investment possessions, I believe that the value of their investment had increased. The capital gain is just a bonus if they choose to liquidate the investment.

Which investing style do you prefer?

Which style do you prefer? Which style of investing is safer, in your opinion? and WHY?
Tell us in the comment section below. And also please make your vote.



Personal finance author and trainer

    30 replies to "Investing for Cash Flow vs. Capital Gain"

    • Netmask8

      Stage # 1
      For me, i prefer to invest in USA / S’pore Gaming/Banking Stocks in short-term 6-8 years timeframe with my own extra cash. Why USA / S’pore Gaming /BankingStocks? Because, any stock price increase, it will be multiple with the higher USA / S’pore currency exchange rate. No monthly commitment payout / salary deduction from monthly salary slip to pay off mortgage loans (capital gain) .Unless you are able gain to get “good surplus” tenant rental to pay off your real estate property mortgage loan monthly. Unit / Mutual Trust is steady return of investment(ROI) in term of percentage in longer periods. As long as you hold and did not sell your unit/stock, you does not make gain/loss your capital. Stock Market/Unit Trust Investment need strong determination patience, as it fruits will be seen ( due to risk accessment / mgmt ) at later stage.
      Stage # 2
      After 6-8 years of holding the stocks/unit trust, you might intend to sell partial yr stock/unit trust gradually and have a sight-seeing for any good bargain discount property for capital investment(capital gain). Perhaps, 6-8 years from now, it will be another economy /financial crisis, deflation, Asset/Property/Commodities Bubbles, Collapse of Country Financial Credit …etc.. Definitely, property prices will be a good bargain to buy cash ( no mortgage loan) or minimum mortgage loan ..

      Note :- USA Stocks market has been steadily uptrend since March 2009 ( Recession in USA starts on Dec 2007 and ended on June 2009 ) .. Many friends of mine have made stock markets paper gain more than 8000 % after calculation the currency exchange rate ..If u buy local stock market, the loss / gain from currency exchange rate
      ratio = 1 : 1 .. Many of my friends , also pouring own cash/EPF saving in Unit Trust too.. It’s depends on the risk appetite you able to eat..

      Just a little input for knowledge sharing purpose..

      • Netmask8

        E.g of USA / S’pore Gaming / Banking Stocks for info only.
        March 2009
        Las Vegas Sands ( LVS ) usd 1.50 – 1.60 As today, price usd 36 ++
        Citigroup ( C ) usd 1.20 As today, price usd 3.80 – usd 4
        MGM Resorts Intls (MGM) usd 2.50 As today, price usd 11.30
        Genting S’pore ( G13 ) sgd 60 cents As today , price sgd 2.05
        Other like :
        Sands China Ltd ( HK ) 1928 hkd 10 As today, price HKD 14.80
        XL Group ( XL ) usd 3 As today, price usd 21.50
        Beazer Homes USA ( BZH ) usd 1.50 As today, price usd 4.20
        LLoyds Banks ( UK ) LYG
        Bank of Ireland ( IRE )
        Bank Of America ( BAC ) …etc .. etc

        For info only.. Not asking you to buy / sell here.. Own Decision Own Action..
        Have a wonderful day. TQ

    • TW

      Option 1 and Option 2

      We definitely needs to gain capital(no matter how small) first before you diversifying to cash flow while maintaining investment for cash flow. This will offer both stability as well as some quick bucks. It is somehow a compromise of risk.

      Anyone have a simple calculation for intrinsic value of a share/stock? Do Share.

    • ida

      I like both.. I first buy the unit with positive cashflow, and when the time is right and the appreciation is 50% or more, I make capital gain. The good of both worlds. If chosen carefully, these are not impossible…

    • Sayeed

      I am practicing both.

      Firstly, being alert for the coming opportunities are sensual if you are in investment. Example, there are properties being sold that can fall into the either cash flow or capital gain.

      Secondly, investments is a business concept, so the flexibility and grabbing of opportunities are critical. Example, if you are a cash flow investor but know that there are new launch property selling at reasonable price and the price will shoot up once completion, would you not go into it? Grab it!

      Finally, you don’t loose picking both as both give you profits…i am talking on behalf of properties if you choose wisely, not a real expert in stock markets !!.

      Have Fun,

    • wong

      For a beginner investor, i rather go for investing capital gain in order to accumalte cash.After that, you feel comfortable with your cash accumalation, then i will go for investing cash flow.Investing cash flow always make you retire earlier

    • TLHeng

      I do believe in investing for “CASH FLOW” , as time goes by, my income won’t be influence by market uncertaintees.

      My choice is invest in so call long term guaranteed income plan, manage by insurance company.

      • DasenDru @ Lynn


        Does this really work? which insurance firm are you taking it from?
        I was contemplating a few years back over this, but is it really profitable?
        My fren just invested in CIMB MaxInvest. Isnt this the same with Unit Trust?
        Maybank has a Guaranteed Income product, but if I am not worng, the return is about 3% or so…

        • KCLau

          Insurance saving plan is meant for saving. Although there are some plans that have very low charges and provide compatible return to unit trust, but insurance agents seldom sell those plans due to low commission.

        • TLHeng

          Hi DasenDru @ Lynn,

          Base on some personal characteristic (preferable secure & hassle free) investment tools, I had benefited from my insuarance income plan.

          If you like to study about constant income from my elaboration above, do email me..

    • Minn

      I prefer both and i am doing both in mutual fund,
      Because i am still young, and i have plenty of time to make more money through my current job&business,
      So i am ok with risk in order for me to make lots of profit through my investment for capital gain.
      But at the same time i must also put aside some portion of investment for my cash flow for my retirement day,,, so i am not taking the income yet,,, i juz let the units to accumulate at 8.85% p.annum.
      What ever profit i make from my capital gain, i will top up into my investment for cash flow,,,
      and i am very happy seeing my units growing every year through out the dividends and bonus units. My units are my “assets” that are going to provide me with steady income (dividends & bonus) during my retirement day.

      Many people ask me: “Why Mutual Fund?”,,, my answer is very simple,,,because it is affordable and easy to manage. I am very happy with it and i do it since 2005.
      I am on my way to generate my passive income,,, and i am planning to Retire Young Retire Rich :)

      Thank you KC Lau for your great sharing!

      • KCLau

        Unit trust is always a good starting point.
        Thanks for commenting here.

      • DasenDru @ Lynn

        Hi Minn,

        the unit accumulation is firmed at 8.85% per annum?
        I do invest in Public Mutual unit trust (but not mutual fund)…none that has given a very constant bonus and dividend.

        • Minn

          Hye Lynn,,,
          So far my unit accumulation is at 8.85% per annum, averagely from a combination of 6 recommended funds. I alwiz believe in diversification, that’s why i put my money into few funds. These combination of 6 funds is for me to grow my Money TREE for my retirement.

          While growing my Money TREE, i also do active investment thru unit trust and aim for capital gain. But only for the money i dare to take high risk for high return…Applying investment discipline and right investment strategy, i manage to make sometimes 20%, 40% and even 60% net profit! And then, i will put my profit into my Money TREE funds so the units will accumulate safely there for my retirement:). I will then again repeat the active investment for the capital gain with the same capital to generate more profit in the future. That is how i do it.

          Perhaps you can have it too, Lynn.
          All d best:)

          • KCLau

            Thanks for sharing your tactics here.

        • KCLau

          Unit trust don’t give bonus or dividend. They only distribute units. Before or after, your investment value is still the same, unlike stocks.

          • Minn

            Yes KCLau, that is true.
            That is why we hold d units for long term. As long as we dont liquidate ALL the units as soon as we receive the dividends or bonuses, we can keep them as our assets :) or, we can juz take out the unit split/dividends and leave the capital unit to provide us with unit split/dividends in the future. But we can also compound the units. Compounding units is so interesting, bigger units will provide bigger unit splits/dividens :)

            • Lynn

              Hi Minn (again),

              So far Mr Google only showed me unit trust when I searched for Mutual Fund… Care to elaborate more on this Mutual Fund..which company offers them….I feel a bit blur….

            • KCLau

              Hi Lynn,

              In Malaysia we called it unit trust because in this investment arrangement, there are three parties involved.
              1st – we as investors
              2nd – the investment company who manage the money
              3rd – the trustee who hold our money at trust (normally they are banks)

              It is not called mutual fund here. (It is called Mutual Fund in US). Basically, they are the same thing.

            • Minn

              Hye Lynn,
              this is my email address m_innme@yahoo.com.
              i may share the info with you:)

    • sabree hussin

      The emergence of internet has made the environment of investment has totally changed. Now we can invest physically, and at the same time we could also invest virtually.

    • DasenDru @ Lynn

      I would prefer the cash flow method. It might come with a headache (have to manage your tenants etc), but if it workss well, it will provide a steady flow of income. When the price indicates that it is good to sell, during economy boom or when other people has come to their senses, (hehehehe..people like me), we can let it go for a handsome profit (hopefully!). Tenants will be paying for the housing loan anyway. So, at the end of the day, we will get Monthly Positve Cash Flow + Profit. And the profit also is a higher profit, as compared to when we do flipping at the earlier stage.

    • Woon Lip Fuey

      If the trade is profitable, invest for capital gain really exciting.
      However, invest in cash flow is stable and safe for me, I truly believe this, and this is also fully encouraged by Robert Kiyosaki.

    • Mrcoolku

      For time being, I invest for capital gain. It is faster way to generate money and then invest in higher investment, such as property. I need to make my snowball bigger first before investing for cashflow.

    • Lai Seng Choy

      I have been investing for cash flow. I treat it as a kind of passive income and so far so good. I will be able to achieve financial freedom if my passive income is greater than active income and I know this day is coming.

    • RingitMatter

      Which style do you prefer?
      Mine will be option No 1 :-)

      Which style of investing is safer, in your opinion?
      Option 1 will be my best choice of investing.

      and WHY?
      Option 1 is more safer then the rest since personal controlling power is more higher then the rest 2 options. EPO & Domain involved more external factors. Since we know they already existing tenants it shows that the location is at right place and demanding. so why we should stress our self? steady ok


      • KCLau

        In fact, investing for cash flow is safer because when you choose this type of investment, you make the profit at the time you buy.
        For the investor who invests for capital gain, the profit is only made when the investment is successfully sold.

    • thinkerich

      Good article…Nice example :)

    • saravanan

      I like the investing for cash flow, for a small investor like me receiving a constant amount of money annually / quartely or monthly is the most prefered. Investing for capital gain maybe suitable for those who have a lot of $$ in thier pocket. :-)

      • KCLau

        you made a point here. There are really a lot of opportunities for the wealthy person.

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