The Importance of Having Access to Your Money

The most important thing for your finances when things go south is to have access to your money. Needing access to your investment accounts in an emergency creates enough of a logistical hurdle but holding investments that may take weeks or months to sell can really cause a problem.

History is filled with people who thought they had access to their money and then, because of some sort of financial “optimization,” didn’t. If you can’t access your wealth in a timely fashion, does it really even exist?

Simple Portfolios Matter

When constructing investment portfolios, I only recommend securities that trade daily, have survived several crises in the past, and are traded with simple instruction. There is no need to get complex and certainly no need to buy financial products to invest successfully. This means my client’s wealth is accessible whenever needed.

In order to have liquidity, we must invest in things that trade on a daily basis. Prices move from day to day, only reflecting the opinions of whomever showed up that day to trade. This is a down-side to liquidity – we will see other’s opinions of our portfolio on a day-to-day basis.

Have a Plan

So, if on a particular day our investments receive some bad “news” that causes some investors to panic and sell, prices may drop well below what may reasonably be deemed fair value in the long run. That’s ok if you have a plan in place that gets you to the long run – remember, we don’t ever want to invest funds that we will need in the next five years.

So, what do you think? Are your investments fully liquid? If not, are you certain you are being paid a higher return for locking yourself in? Do you watch your investments daily? Have you seen them swing around wildly when important “news” hits? How did that make you feel?

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