Monument Wealth Management Articles

Customizing and Bullet-Proofing Your Portfolio: Key Tenets for Post-Business Sale Success

Dec 16, 2021 Business Exit Planning

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Selling your business is tough. Designing a portfolio that meets your post-business sale lifestyle is tougher still. The portfolio construction process is “simple,” meaning it’s easy to understand and not necessarily complex – we believe there’s elegance in simplicity. Sticking with a simple portfolio, on the other hand, is challenging – and in this case, the challenge is almost entirely psychological.

The behavioral and psychological aspects that allow an entrepreneur to be successful are very different from the behavioral and psychological traits of a successful investor. There exists a massive difference between the skills and techniques needed to become wealthy versus the skills and techniques needed to stay wealthy.

Let’s start with the “simple” part: Positioning Your Portfolio

Positioning your investment portfolio to sustain your post-business sale lifestyle requires two seemingly contradictory goals: growth and cash flow. To be clear, cash flow is different than income. Income is usually derived from work, effort, or adding value to a business. Cash flow is generally considered to be passive, ideally from an asset that has two specific, unique characteristics: inflation protection and growth of the cash flow stream.

After selling a business, an investor can typically create high income from the purchase of fixed income or other conservative assets. But your lifestyle is not “fixed”. That’s why you must instead create cash flow that grows over time – this is particularly true given the combination of ultra-low interest rates and the ever-present specter of inflation.

Our lifestyles change and our needs grow over time. After selling a business and transitioning into retirement, we replace daily expenses like commuting with different expenses, such as healthcare and travel. To meet the growing costs of living, our cash flow must also grow over time.


Indexing Alone Won’t Cut It

We cannot simply move our assets into an index fund and hope it all works out. Indexing has specific challenges, including but not limited to: sequence of returns risk, behavioral challenges, cash flow challenges, and the index may not fit your unique circumstances. Also, generating cash from an index portfolio, versus a portfolio designed for high and growing cash flow, may require you to sell portions of your investment and make decisions on when to sell and how much in order to meet current spending needs. That said, an index portfolio can, paradoxically, introduce an element of market timing—which can have negative and lasting effects on your portfolio.

Now onto the “Hard” Part: Our Behavior

Now we’re going to focus on the skills and techniques to stay wealthy. Oh yeah, that’s the hard part of maintaining a certain lifestyle – our behavior. Our behavior determines our success more than any other factor, in every area of our lives—including our wealth.


Keeping ego out of your portfolio

A “high ego” portfolio is one where an investor gets to brag at cocktail parties, “My stock is up more than the S&P.” On the other hand, a lifestyle portfolio is a “no ego” portfolio. The “brag” for a lifestyle investor is much more subtle, powerful, and accessible: “The cash flow off of my portfolio exceeded my spending needs!”

Lifestyle portfolios typically have blue chip, mature investments that produce sustainable cash flow year-in and year-out, regardless of economic conditions, technological disruption, policy changes or other external factors. For example, in the midst of the COVID lockdown, several iconic dividend growth companies actually increased their cash dividends to shareholders.

Few people brag at cocktail parties about their shares of seemingly unsexy, blue-chip companies. In fact, that gives us a great idea…Monument Wealth Management can throw a ‘no ego cash flow party’ so we can all attend and break the mold of cocktail party chatter. We’ll work on that. Stay tuned.

Focusing on your unique needs

It’s imperative for a business owner to transition from following through on a business plan to following through on a personal wealth plan…or more specifically, a Monument Private Wealth Design – a living blueprint and action plan for enjoying and maximizing the sale of your business on YOUR terms. Otherwise, what was all the hard work for? A Monument Private Wealth Design will go beyond the numbers to provide you true clarity on your big picture and a sense of security through a joint strategy, vision and cohesive plan. You know, all the, “One day, I will…” stuff. It’s all those things you dreamed about when you initially started the business.

Your Private Wealth Design will have both flexibility and optionality… The flexibility to choose investments that meet your needs rather than investments that are most suitable for index inclusion, and the optionality over whether to buy or sell that index or strategy, rather than leaving that decision to the preset rules of index (and ETF) construction methodologies. More importantly, you’ll need know that each investment fits your plan— always remembering that you’re playing your own game…not someone else’s.

A Monument Private Wealth Design will customize and bullet-proof your post-business sale investment portfolio, ensuring you’re working with a collaborative Team—a “collective mastermind”—to seamlessly integrate your whole wealth picture. Work with us to choose investments that meet your dual mandate of growth and inflation-indexed cash flow, while retaining the optionality and flexibility to make those kinds of investments whether or not they are in an index.


See you at the cash flow party!


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