The primary objective of our Harvesting Strategy is to allow you to live the life you want, irrespective of market fluctuations.
We believe that owning a diversified portfolio of high-quality, dividend-paying stocks and index funds is one of the most effective ways to achieve this goal. These are the growth engines of your portfolio—designed to increase both asset values and income over time.
The challenge, of course, is that even the most well-curated portfolios can suffer during periods of volatility. Just as greed can often lead to imprudent risk-taking when markets are rising, fear can contribute to poor decision-making when markets are falling. Managing the emotions that surround market volatility is essential to achieving better long-term results.
We have found that a clear understanding of your goals helps you construct a more resilient portfolio. Likewise, we have found that a clear understanding of the role each component plays will help you become a more resilient investor.
By balancing income, liquidity, short-term stability, and long-term growth, we aim to help you avoid the urge— and the need —to sell quality investments during times of volatility, thereby providing peace of mind when markets turn turbulent.
The most recent stress test presented to investors was the post “Liberation Day” market meltdown. Although markets have largely recovered, the uncertainties that triggered the decline remain unresolved. While we can easily measure how your portfolio held up during this volatile stretch, we cannot easily measure how you felt throughout the experience.
While we, too, share similar feelings, our resolve as your financial advisors is informed by our faith in a process that we have refined over the course of decades. Conceived during the bear market of 2000–2003, sharpened during the Great Recession of 2007-2009, and enhanced during each market pullback ever since, this bear market playbook is an integral component of the Harvesting Strategy. It measures plan resiliency by examining “The Three Cs of Sustainability.”
- Cash Flow: This represents the recurring income that supports your lifestyle, including salary, bonuses, and equity compensation if you are still working, or pensions, Social Security, rental income, board fees, and consulting work if you are retired. Investment income can also play a role. We begin by examining the relationship between your recurring income and expenses. The stronger the coverage, the more sustainable your portfolio.
- Cash Reserves: These are your completely liquid, risk-free assets such as money markets and bank accounts. Our goal is to ensure you have enough cash to cover any shortfall between income and expenses, along with any larger planned expenses, for at least the next twelve months.
- Consumption Assets: These include near-cash investments like short-duration bond funds, CDs, and short-term Treasuries. They generally offer higher yields than bank deposits, with modest, market-independent volatility. We typically allocate consumption assets to cover income needs for the next 1–5 years, with the exact time horizon tailored to your specific needs, and to fund “someday” purchases, such as second homes or large vacations.
By efficiently bolstering the sustainability of your plan, we free up the majority of your wealth to invest in meaningfully diversified, quality holdings that work towards your longer-term goals. Rising income. Rising asset values.
As you might expect, this approach is far more successful when implemented before substantial declines occur. This will not be the last test we face. Markets will fluctuate and uncertainty will persist. If the recent volatility has made you feel vulnerable, particularly if you worry about needing to sell market-exposed assets to meet short-term expenses, then we want to hear from you. This is a good time to reassess and, if necessary, recalibrate.
As always, we are here to talk—whether to review your current allocations, revisit your plan, or simply provide perspective. Let’s keep the conversation going.
Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future results.
Investors should carefully consider the investment objectives, risks, charges and expenses of the specific mutual fund. This and other important information is contained in the prospectus which can be obtained by calling your Registered Representative. Read prospectus carefully before investing.