Plan for the Unexpected

If you don’t have ample liquidity, and it’s not durable, in times of stress, as you’re looking for liquidity, you’re forced to sell assets at declining prices…there’s no question that liquidity is sacrosanct.

— Ruth Porat, Financial Executive

Just as you wouldn’t take medication without understanding the proper dosage and any side effects, so you shouldn’t invest in products you don’t fully understand. Unfortunately, Wall Street loves manufacturing complex and often confusing products that may not be in your best interests. And unlike properly-prescribed medication, they may treat problems you don’t even have.

In addition, some financial products make it very hard for you to access your money if you need it unexpectedly. It might be “locked up” for years and even decades. And getting your money early — can mean severe penalties. This isn’t necessarily a problem if you are sure you won’t need the money, or you are in an established product, such as your 401(k), with early withdrawal penalties to make sure you stay focused on investing for retirement.

Here’s how you make sure you have the right investment products for your situation. First: work with an independent financial advisor who has a fiduciary duty to always act in your best interests and will take the time to educate you on what you own and why. Second: have long-term plan that can handle those unexpected “rainy days” when you might need access to some of your money.