Have a Long-Term Portfolio Strategy in Place for Your Cash from Selling Company Stock

By: Joe Morgan

Jun 24, 2021 | Company StockFinancial PlanningInvestment StrategyInvestment PhilosophyLong-Term PortfolioStocks

Once you have a plan in place to sell your Company Stock over time, be sure that money has some place to go. We don’t ever want our money to be without a job and the cash you get from your Company Stock is no exception.

How to Calculate Your Savings Target

You should always have a Savings Target which is made up of two things:

  • Emergency Fund
  • Any cash needs you have over the next five years

Your Emergency Fund is simply however much money you feel you need to keep available in case of emergencies. For most people this would be losing their job, so simply consider the environment where you might lose your job and ask how long it would take for you to find the next one. Your Emergency Fund is that many months spending.

Your cash needs over the next five years requires just a little thought and planning. If you take your income and expenses over the next five years – including anything big you have planned, like home repairs or sabbaticals – then you have your cash needs.

Note that we are including our expected income here and we are not simply adding up the extra expenses because we may meet some of them through our regular savings. Once we get our cash needs for the next five years, we simply add this to our Emergency Fund to get our Savings Target.

Long-Term Portfolio Strategy

Any other cash you have – whether it comes from selling Company Stock or a bonus from work or even an inheritance – should go directly into your long-term portfolio strategy.

We can do this confidently, because we know we’ve already taken care of all our needs over the next five years so, this extra cash must be for spending beyond at least five years.

What is a long-term portfolio strategy?

This would be the investment strategy that you plan to use the rest of your life. Because we know no one can predict the future in the markets, whether over the short-term or the long-term, we must create a strategy we believe will be best over the rest of our lives.

Yes, we may change it at some point in the future, but we want to base this strategy on something we believe will be true in all future market scenarios and all future economic scenarios. We can’t foresee the next Coronavirus or real estate bust, but we can structure a portfolio that gets us through whatever the next crisis is.

How do we do that? By creating an Investment Philosophy that is true in all markets and in all economies.

My Investment Philosophy

Humans are designed to connect with each other, to share resources and to trade goods and services. Companies are designed to enable these connections and they take a tiny profit from each one. However, we cannot predict which companies will do best and which will decline over time. Therefore, we will own all the companies we can while keeping our costs low and efficiencies high.

That’s my Investment Philosophy and you can see how it seems likely to be true in all circumstances.

Real World Challenges

Probably its greatest challenge to this philosophy was the Coronavirus but think back how quickly both people and companies adapted to the new stay-at-home world. Prior to the virus, no one could have predicted the boom in Zoom’s usage and stock price or the challenges so many other companies faced.

By having a broadly diversified portfolio we are capturing the experience of the overall market which must beat inflation over time. We know this because if companies don’t do better than inflation – if they don’t make more than their costs – they go out of business.

We cannot predict what return we will have, and we cannot say we will “beat the market” – no one can. But we can feel confident we will beat inflation giving us the ability to buy more goods and services in future years than we can today. And that is exactly what our portfolio is supposed to do for us.

Today’s tip is to have a long-term portfolio strategy in place for your cash proceeds from selling Company Stock.

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