Here’s the user scenario: I have a sudden bill payment required, say an opportunity to purchase land, and need cash from my investment portfolio, which happens to be following the Brockmann Method and BeyondETFs Pro. How should one get the cash together?
Let us consider these options:
- Sell the lowest ranked stocks to meet your cash requirement?
- Take profits from the highest ranked stocks to meet your cash requirement?
- Take proportional cash from each investment to meet the cash requirement?
Sell the lowest ranked stocks to meet your cash requirement?
Pros: Selling low-ranked stocks can be a practical approach to raise cash. These stocks may have lower growth potential (price momentum) than the others, so selling them could streamline the portfolio, keeping only the highest (expected)-performing investments. With BeyondETFs Pro’s rankings, users have a clear guide on which stocks might align less with their financial goals, making these decisions easier.
Cons: Selling the lowest-ranked stocks increases the diversification risk in your portfolio. How much risk you are willing to handle is completely in your hands. The Brockmann Method leaves exactly 10 stocks in the Buy zone, since biology taught us the number of fingers on our hands. This approach will also likely increase the volatility in your day-to-day results. Some days big (paper) wins. Other days, big (paper) losses.
Peter likes this approach since it keeps the high growth engines growing. When he gets new cash to add to the portfolio, he often invests in the next highest Buy zone stock that he doesn’t already own.
Take profits from the highest ranked stocks to meet your cash requirement?
Pros: Selling high-ranked stocks that have appreciated can be a straightforward way to realize gains and meet cash needs without liquidating weaker assets. Selling profitable stocks allows an investor to “lock in” earnings from positions that may not continue their upward trend, ensuring gains are realized rather than speculative. With BeyondETFs Pro’s insights, users can identify stocks that are expected to be high performers, making a sale more calculated.
Cons: Taking profits from high-ranked stocks could disrupt a portfolio’s strong performers, reducing future TOTAL earning potential if these stocks continue to appreciate. Furthermore, selling high-ranking stocks could trigger capital gains taxes, potentially reducing the overall profitability of the portfolio.
Take proportional cash from each investment to meet the cash requirement?
Pros: Selling a proportional amount from each investment allows you to preserve the overall composition and diversification of the portfolio. This strategy reduces the risk of overexposure to lower-ranked or higher-ranked stocks by evenly distributing the sale across all holdings. It also reduces the potential tax impact that could come from focusing on highly appreciated assets, and spreads any losses or gains more uniformly. This steady approach can maintain alignment with long-term investment goals while addressing immediate cash needs.
Cons: However, this strategy might result in selling some of the portfolio’s strongest performers, potentially the real $ gains of future growth. Additionally, taking a proportion from every stock may involve selling shares in low-ranked stocks that aren’t performing well, potentially realizing losses. While balanced, this approach lacks the agility of focusing on either high-profit or low-ranking stocks, potentially making it less efficient in a rapidly changing market.
You are the manager of your self-directed fund, so use the strategy that suits your risk and investing style. When Peter needs cash, he sells some or all of the lowest ranked stocks. When Peter adds cash, he buys more of the leaders if he has 10, or he buys the Buy zone members that he doesn’t already own, so as to own 10. It’s up to you, since you’re in charge.
BeyondETFs Pro gives you the insights so you can easily determine which option is best for you.