In my previous post I spoke to you about my journey in discovering how to invest in a way that provided protection from crashes but also allowed me access to my cash when I needed it. So for example, not so long ago I was made unemployed. It turned out that it would take me 9 months to find a job but in the meantime, I needed to pay my rent and put food on the table. If the only investment I had was my pension I’d really be in trouble. Fortunately, I had prepared for this eventuality in two ways.
First I took out unemployment insurance which had a small monthly payment. Not really an investment per se but it really helped me. Second, I invested in gold. I did this because gold tends to hold its value against cash and it is fairly easy to sell (depending on how you organise it). This was really the only investment I made outside of my pension, since with the liquidity of my gold investment I am happy to wait until retirement to access my pension.
However, you don’t have to invest in gold necessarily. There are other fairly liquid investments. What you should consider first, before deciding how much to invest in long term and less liquid assets (such as real estate) is what your short-term liquidity needs are likely to be. If you are at risk of unemployment perhaps a large cash balance makes sense in spite of inflation. And/or take out an insurance contract. But there are five things you need to consider when it comes to finding accessible investments.
- Transactions costs: how much will it cost simply to sell the investment and get your money back? If you are selling a real estate property the costs could be enormous. But drawing your cash out of the bank sometimes is free.
- Volatility: in other words, does the value of the asset move up and down frequently? This can be an issue with gold for example, because at the time that you need the money the value of the asset may have just reduced in value.
- Your routine expenses: are you meeting these from your portfolio or from your salary? If you rely on your portfolio for routine expenses you may wish to invest in assets that provide an income, such as bonds.
- Emergency fund: as I indicated above, I invested into a significant amount which I was able to use when I was unemployed.
- Large anticipated expenses: for example, maybe you are thinking of buying a house and will need some cash to pay the deposit. Depending on when you think you need this, you could invest in an asset that pays out shortly before you need the money (like a bank savings bond or certificate of deposit) which at least provides some inflationary protection and is relatively low risk.
So if access to your funds is important you need to consider these five things as you are deciding which investments to make. Now I appreciate that this isn’t everything you need to know before you can begin investing so keep a look out for my next email in which I describe how one of my clients was able to implement these concepts.
P.S. If you can’t wait for the email and you want to know more, now, I provide one-to-one coaching on this topic and more and can get you started immediately. A full session is $197, three sessions are $497 or you can have a free 15-minute consultation. Additionally, if you have one session and you’re not happy I’ll refund all of your money. I take all the risk in this particular investment! 😊
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In the meantime, if you have any questions or if I haven’t explained anything well enough please feel free to shoot me an email and let me know.
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