Dollar bills

We would all like our practical decisions to go easily, and bear quick positive results.  That’s not reality.  As for me, I needed to decide whether I would:

  • borrow against my home at 3% for 15 years.
  • liquidate a portion of my taxable brokerage account
  • liquidate shares in best private manufacturer of commercial lawn mowers in the world.

I decided on the flexible and probably low-cost solution, selling some of the taxable brokerage account.  I have two accounts, an IRA and the taxable account.  They were invested differently, but my investors get a blend of the two accounts.  I used to put the higher income names into the IRA, while the taxable account would take the lower income names.

That has been changed. Both portfolios have the same proportion of names (companies). In the process, gains have been realized, but not so much as overwhelm the deferred losses of the past.

But for this exercise, one salient result was that both portfolios, which are the model portfolio in aggregate, would become like the model portfolio.   They are now clones of each other, as is true of all client portfolios that I manage.  My promise to clients is that they get what I get, so I create a clone of my portfolio for each client.  It certainly aligns my incentives with theirs.  Even after today, my next-largest client is 20% of my aggregate portfolio.  So, yes, I eat my own cooking, and in general, my cooking has been tasty over the last twelve years, even though the last year has been less than inspiring.

On the bright side, with the market up, it has allowed me to harvest an amount that will take care of my family for a year, while leaving my portfolio up considerably from one year ago.  That helps a lot when revenues from managing money are still light.

Hopefully, within a year, I will have enough clients that my revenues support my family.   We’ll see; but if that doesn’t happen I know there are a number of firms that would like to employ me, so my downside is limited.

One final note: one reason why this was a difficult decision was that the low rates for mortgaging my home were more difficult to obtain while self-employed.  Aside from my investments, I am not earning as much as I used to.  The fixed costs of liquidating part of my portfolio were 6% of the fixed costs of obtaining the mortgage.  Beyond that the question remains as to how well equities will do in the future, a question for which I have no good answer.

I think I made the right move here; I usually do, generally, but we will see whether this was the right decision over the next few years.

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