This is continued from our previous blog post on June 10th.
4. If the equity selections provide investment returns that will allow you to take profits and replenish the Cash Wedge, it may make sense to renew the GICs or bonds. The objective is to maintain a multiple of income payments within the Cash Wedge by taking profits where and when appropriate from the other investments within the portfolio. You want to maintain it but not have too much money in this form.
5. Any profits realized that do not need to be used to restore the Cash Wedge can be used to acquire additional units or positions in the investments that are flat or negative. If you have proper diversification in your investments, you should expect to have one or more of your asset classes/investments in a flat or negative position when your account is being reviewed. They should not all be performing in the same way at the same time. This is a sell-high, buy-low process that will likely result in higher returns over time. In addition, it will allow the portfolio to experience a lower degree of volatility. I’m not suggesting that you simply divest of good investments, but that you have a process through which you take profits and maintain them. It is important to note that all of this is done with an eye to maintaining the appropriate asset mix that was established at the outset.
6. This process also affords you the opportunity to be selective in terms of which specific investments you use to create income.
These are all planning efficiencies that I will address and that you will see listed in the “Investment Considerations for Your Withdrawal Portfolio” section in Part 3 of this blog post.
Check back on June 30 for the continuing story of the Cash Wedge!