Should I Sell?

I was just on a phone call this week reviewing a client’s portfolio and the question they asked was, “Should I sell?”

Considering all of the craziness of 2020, most accounts ended up with a gain at the end of the year. Even with the crazy downturn in the stock market in March, we saw a quick recovery, and most accounts that were in any type of growth ended the year with a gain.


Should I Sell or Rebalance Now?

Looking at that growth, the question becomes, should I sell some of my gains or rebalance my portfolio?

Investment Quote - Sell Investments - Bertram FinancialThe short answer is, it depends on your unique situation. Yes, the market is high, so it is not a bad time to take some of those gains off the table.

In a previous blog post, we talked about Buy Low, Sell High. Very few people do it because when the market’s good, nobody wants to make any changes.

I think the difference is people are worried about what might happen in 2021. We’ll be doing a call and a couple of weeks with our portfolio manager to talk about the outlook for the market for 2021, so make sure you RSVP for that First Friday on Facebook so that you don’t miss out!

Getting back to answering the question of “Should I Sell?” I am reminded of another client I worked with in the past. This scenario was interesting because they wanted to make sure that they were a bit more secure. They didn’t want their investment to be in the market anymore, but they were stuck because the market was up and they didn’t want to sell. 

We waited a little bit, the market corrected, and then we were waiting for the best time to sell before the market shifted too much because then you wouldn’t want to sell.

Because of this cautious approach, they were stuck in this endless cycle of not selling low because they wouldn’t get the gain back, but also not selling high because the market is performing well and they were in a good position.

Investment Options

I want to give you some things to think about when it comes to your portfolio and how it is balanced. One thing that is extremely important is that your investment portfolio is coordinated with all other areas of your financial life, including tax planning, cash flow, retirement, investment positioning, and estate preservation. We need to make sure that your portfolio is managed in a way that it creates retirement income for you. 

The closer we get to retirement or while we’re in retirement, the less aggressive we will be with investments. We’ll be looking more at keeping what we have and growing it at a more moderate rate.

To put it into baseball terms, we’re not looking for a home run. We’re looking for those singles, doubles, and triples consistently. We don’t want to strike out either.

One of the things we use as a tool to help you is money. 

There are three things that you can get from any investment. It is liquidity, safety, and growth. 

There is no investment that has all three of these pieces working perfectly. That would be like the silver bullet. It doesn’t exist. 

How Should My Investments Be Allocated?

To share with you what we do at Bertram Financial is we think of the colors of money. To start, let’s talk about yellow money. 

Yellow money is money at the bank. It’s in guaranteed accounts. It’s safe and it’s liquid. We can go get it at any time. However, one thing that we cannot get from yellow money is growth.

Especially with interest rates the way they are, people know we can’t have too much there because that’s giving up all the upside potential. A person can’t even keep up with inflation doing that. So there’s yellow money. 

Next, we look at red money. Red money is any money that’s at risk in the market. We could have investments that are very aggressive and those that are more conservative. However, it is all red money because it can go up and down in the market.

We have the growth potential with red money and if it is set up properly, we have access to the money through the liquidity of the investments. However, we don’t have anything for protection. 

Financial World - Green Money - Michelle BertramThen we have what I call the best-kept secret in the financial world, which is the middle. This is what we call green money.

Green money is the protected growth money. We have all the guarantees and protection the same as we would with yellow money. 

With green money, you can’t go backward and lose money after a gain. To top it off, we have rates that are linked to the performance of the index, which is something you’d have in red money. The rates are also higher than that of yellow money.

This means that if the index goes up, we get a percentage of those gains. Maybe not all of the gains, but we do get a portion. In exchange for taking a portion of the upside, if the index goes down, we don’t suffer from a downturn.

Now green money does have a bit of a downside and that is with the liquidity. Green money isn’t fully liquid. Usually in the first few years, about ten years or so depending on how you’re set-up, you can take around 10% per year or you can take a guaranteed income, but you can’t take all of it out without a penalty (but I can show you how that can be a good thing, stay tuned next week).

There are really two ways to make money in this world. You commit to the time or you take a risk.

When we’re using green money, we’re committing to a time. This doesn’t mean that you don’t have any success during that time. It just means that it’s a little bit more limited. 

However, if you’re coordinating everything and you do need some retirement income, green money is a great way to guarantee some retirement income.

What I want you to do right now is take a minute and stop to think. Pretend that all of your money is on the table and you have to allocate yellow, green, and red without knowing much else but the rules. 

Yellow is safe, liquid, and doesn’t make much money. Red can make a lot, but it can lose. This money is not guaranteed. Green you’re giving up some liquidity and some gains but you are protected. You can’t protect your principal, retain your gains, and guarantee interest or income if and when you need it.

Where would you put it? How would you allocate your money? What amounts, portion, or percentage would you put into each of those colors?

If you want to learn more about this and think through the process or see more examples, you can download our book, The Four Steps To A Dream Retirement. In our video course, we walk through this and there are chapters of the book that go through and explain it. 

If you have any questions, you can schedule a call with us here.

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