Investment Portfolio Safety Drill – Build A Cash Fortress…

Investment Portfolio Safety Drill – Build A Cash Fortress…

Planning for your eventual retirement from the workforce can be scary.

After all, you are walking into the unknown.  It creates a level of stress and anxiety.

How are we going to survive?

Are we going to be ok?

Will I run out of money?

A successful retirement comes down to impeccable planning.  This includes structuring your investments in a way that will provide the security you need to fund your lifestyle in retirement.  Knowing that you will have levers to pull should certain events happen and you’ll be ok with whatever the future throws at you.

Have you ever been a designated driver?

You’re out for a night on the town with all your friends.  They are drinking having a great old time.  It just does not seem the same watching them have a better time than you, you’re not quite getting all the jokes.  It’s as though you are missing out on something.

Then comes the next day, while you are up early full of energy, your friends are struggling to get moving.  They have headaches and feel unwell for the whole day.  This is when you are glad that you were the designated driver.

Two very different experiences with two very different outcomes.

Building a great foundation for your investments, while feeling at times you are missing out will give you the rewards when everyone else is suffering.


In the last few posts, we have laid out a strategy to safeguard your investment portfolio.

Safeguard it against any market corrections and provide a level of confidence that you are going to be ok.

Now, I’m not saying there is going to be a market correction anytime soon, but we know at some point in the future it will happen and the longer we go the closer it will be.

Being prepared and building a fortress around your investment portfolio is key.

Just think, if you follow this strategy and a market correction comes, how will you feel knowing you are well prepared?  No need to worry, you’ve got this.

I suspect you’ll feel a lot better about it and be less stressed.

Just in case you missed the previous posts:-

In the first step, we talked about the minimum amount of risk to get the job done.  Review the actual risk you are taking in line with your long term goals.  CLICK HERE to read>>

In the second step, we discussed the importance of rebalancing your investments and provide guidance on how to do this.  CLICK HERE to read>>

Cash Reserves

So, what do we mean by having cash reserves?

Although not very sexy, it’s an important pillar in building a secure financial foundation whether pre-retirement or in retirement.

We generally like our clients to hold 3-6mths worth of income held in a separate account for emergencies.

So, if your income was $10,000 a month, you would want to be holding $30,000 – $60,000 in cash reserves.

An emergency is not buying a new car.  It’s anything that is unplanned.

For example, it could include anything from a loose employment, the fridge breaks down or anything else that was unexpected and unplanned.

Depending on the type of employment you have will depend on how much you hold in your cash reserves account also.  The more unstable your employment, the more you will hold in cash reserves.

Planned Capital Expenditures

The next level down is any lump sum amounts you will require in the next one to three years.

Let’s take a look at Sally.   Sally is planning to retire in the next couple of years.

Her plans include a couple of overseas trips, one to Europe and one to the US at an approx cost of $60,0000.  Sally wants to upgrade her car at retirement and expects after trading in her current car she will be out of pocket for about $20,000.

Bec, Sally’s daughter is getting married.  Sally had always wanted to pay for her daughter’s wedding and expects this will cost $30,000.

We have the overseas holidays ($60,000), upgrade of car ($20,000) & her daughter’s wedding ($30,000).

We would be suggesting that Sally retains $120,000 in cash to cover these upcoming expenses.

This is something we plan for at every meeting for clients.  To ensure our clients have sufficient cash reserves to fund any lump sum capital expenses in the coming years.

We do not want to be in a position where our clients are forced to sell investment assets at depressed prices.  That’s not such a great feeling.

Let’s think about it for a minute.

let’s say you’ve planned a special overseas trip and decided you will sell down some of your investments when the time comes.

But when the time comes, the share markets have taken a turn for the worse.  You’re now sitting there reconsidering whether you take the trip or not.  Not a particularly good feeling.

Sure you have to accept the return you get from cash is not great, but it’s far better than the alternative, don’t you think?

Income Reserves

During the Global Financial Crisis, I saw many stories where retirees were forced to sell their investments at significantly depressed values.  The devastating impact this had on people’s wellbeing was significant.  Not only did many have to sell share investments at significantly depressed prices, but there was no opportunity to recover once they sold those investments.

Sure, it’s ok while you are working, you have time to continue to add to your investments, but when you are retired these opportunities disappear.

This is why for our clients we recommend holding anywhere between 3-5yrs worth of their yearly income requirements to be held in cash or secure investments like term deposits.

Why the large range? It all depends on the client’s retirement funding arrangements.

All of our investment portfolios generate some form of income within super/pension or individually held investments.  Throughout the year their cash holdings are being topped up with income from their investments.  Generally, the smaller the account the more that will be retained in cash.

But hey Glenn, that’s way too much in cash?

That may seem that way and while you may have been used to being fully invested, its a critical pillar in safeguarding your retirement lifestyle.

Prior to the Financial Crisis, we had implemented this strategy for all clients and still, today remains as important as ever.

While our clients at the time were still extremely concerned about the value of their portfolios.  Their retirement lifestyle remained unchanged.

They were able to leave the growth component of their portfolio alone to recover as we have seen.

How would you feel?  To know that your lifestyle is protected when a market correction comes?  Pretty good I would have thought…

What about my Return On Investment?

Hey Glenn, what about maximising returns?  Cash rates are so low.

It’s important to remember the short term is short term and long term is long term.  Don’t get them confused.

Don’t forget we are not looking to maximise the risk and therefore return on investment portfolios.

The priority is achieving the right balance between the life you want to live and the right amount of risk to get the job done.

The return on investment comes from having the liquidity right when you need.  Not being forced into a corner where you need to sell in market corrections or realise a capital gain at the wrong time.

Think Investment Fortress.  A strategy that can protect you in times of uncertainty.

The real benefit I think is the emotional resilience you will have in times of uncertainty and gives you more flexibility in your financial decisions.

You can be flexible if you really wanted too.  You have the control, not the other way around.

Has this been useful?

Over the last three weeks, we have outlined a strategy for you to build a fort around your investment portfolio.  To help you build a portfolio based on the life you want to live, not what most risk profile questionnaires are used for.   To assess the maximum amount of risk.

It’s more about being dynamic in your approach to retirement planning, giving you the rock-solid foundation to set you up for success.

I would love for you to send me your comments.

What did you think? Good, Bad or Ugly…

You can send me an email at

Hope that’s been useful:-



We are taking on new clients at present…

If you’re someone who is up to 15 years away from retirement.   You plan on being self-funded. You have accumulated some assets and want some help to hone your retirement plans.  Feel free to book in a 15 min Rock Retirement call here>>> .   In this call, we’ll help you work out what that first step is for you, what you need to focus on to fast track your progress.

I’ll be honest here, we won’t do your pushups for you.   But if you are motivated for the right reasons we can save you a lot of time and heartache.  We can save you from the mistakes most people make to fast track your way to a ROCKING RETIREMENT.

Ps. We don’t sell you anything on this call.  We will help you determine what the next step is for you.  However, if you are someone who is looking for a get rich scheme, silver bullet or believe you know everything we are not for you. If you are someone who really wants to achieve financial freedom, committed and wants to work collaboratively then we can help.

Know someone that would gain benefit from the information, feel free to forward on.


Make it a great Life!

Challenging the Status Quo!

Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth



Mob: 0401 253 729

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Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at date of publication. This is an online information blog. It does not imply an offering of securities.

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