With the S&P 500 index effectively doubling in the past 12 months, is it time to sell?  If so, where do the cash proceeds go?  How long do you hold cash before moving it?  Where do you move it to?  How much cash should be held back if any?  What are you missing or gaining by selling what you own?  Five years from now how confident are you that selling was the right decision?

What’s described above may be the voices inside your head asking you to rationale the current market values of the largest and best companies in America.  Who could have ever predicted they would have bounced back as strongly as they have after last year’s contraction?  Attempting to understand how the market moves and where it’s going next is not a good use of time.  What matters is accepting the truth that the market always recovers from temporary contractions and will at some point continue its forward progress.  It has always worked this way as there is a relationship between growth and contractions for gains to take place.  The question worth raising now is what are you doing systematically to capture future expansions alongside the temporary contractions?  What habits are in place today that allow you to participate in long term price expansion?

We’re all busy and when it comes to selecting investments it’s easy to take the path of least resistance.  Reviewing star ratings or recent returns is our brain’s way of rationalizing where to invest our monies now.  Fortunately, a better solution exists which includes a repeatable process that benchmarks your plan each year.  Not benchmarking your investments or returns(outputs) but focusing on the inputs you control which become the basis of your plan.  Leading with goals, planning, and then your portfolio becomes the framework of your plan.  The portfolio being last as it reports to and serves your plan.  Your plan does its best when you have raised awareness on your inputs and decisions around spending and investing.

Having this structure in place allows you to avoid the mistakes investors have been making since I entered the financial services industry in the mid-1990s.  Some of these mistakes are obvious, some less so.  They include investing in fixed income for return or current yield, selecting equities and fixed income without an investment policy statement.  Thinking a financial plan is only applicable to the wealthy.  Believing the next market contraction is around the corner while sitting in cash.  Over-focusing efforts to miss the next market contraction only to give up permanent returns as the market expands to new highs.  Speculating on the latest trends, today that’s SPACs and digital currency/exchanges, and rationalizing that this is investing.  It’s not, it’s guessing and gambling.  These are just a handful of mistakes that a plan and process may allow you to avoid.

To answer the above question, “sell now?”, it’s important to have a conversation that begins with quantifying exactly what you want.  That’s more difficult than it sounds as we’re overwhelmed with choices today.  To make sense of all your choices, reflect on the following investing principles.

  • When your money serves a purpose, your money serves you. This is very simple and powerful when understood and implemented into your financial house.  Giving all your accounts a job description and time horizon matters.  It’s too easy to become distracted and mistakenly take the wrong money from the wrong account.  Our brains crave structure and a repeatable process.  Start by assigning a purpose to your accounts based on what’s important to you.


  • Before you invest, ensure you have enough cash reserves to weather the next inevitable market contraction. It’s coming so don’t be surprised or spend energy and time attempting to forecast it.  In the results-based world that we live in, it’s difficult to set time aside in advance and ensure your safety net and liquidity needs are met before investing.  As more investors jump into the market to “trade” and “make money”, how much time have they spent factoring in cash reserves should things go sideways?  Rarely is this question asked until it’s too late.


  • Avoid leverage as it’s dangerous. Borrowing against your current investments to super-size your future potential gains is unnecessary if you have a plan.  Look no further then the recent collapse of Archegos Capital Management for a large-scale example of too much leverage and bad decision making.  At the individual investor level, leverage can be just as dangerous.  Often disguised by low financing costs, low interest rates, or a lower entry point, leverage may get you into trouble.  Also known as debt, it controls you and restricts your ability to invest for tomorrow as you must pay the carry costs today.  Slow down and think twice with your plan in mind before making a big-ticket purchase that requires debt financing.


  • Time, a great resource to all investors. It’s your best friend when you have a goal-based plan that focuses your attention on the big picture.  A fifty-year-old couple is staring at five decades to stretch their investments for income and living.  A twenty- or thirty-year-old investor has their best years in front of them if they have a plan and process in place.  My childhood (and present day) hero, Ferris Bueller said it best, “Life moves pretty fast.  If you don’t stop and look around once in a while, you could miss it.”  Embrace time for what it offers and make the most of it.

If you have a question on your investments or would like to better understand timing and the planning process, please reach out.



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