Pictured, left to right: Jared Nickoli (CFP®, CLTC® - Partner & Private Wealth Advisor), Brad Weeks (CFP®, ChFC®, CLU®, CASL®, RICP® - Lead Partner & Private Wealth Advisor), John Brannon (Ph.D., CFP® - Partner & Portfolio Manager), Ben Beshear (CFP®, CLTC®, AWMA® - CEO & Private Wealth Advisor), Tek Wiegert (CFP®, WMCP®, RICP®, ChFC®, CLU® - Lead Partner & Private Wealth Advisor), Clark Bixler (CFP®, ChFC® - Lead Partner & Private Wealth Advisor), Davie Co-chrane (CLU®, ChFC®, CPA, PFS - Lead Partner & Private Wealth Advisor), Andy Scarpitti (CFP®, ChFC®, RICP®, WMCP®, CLU® - Partner & Private Wealth Advisor)
Pictured, left to right: Jared Nickoli (CFP®, CLTC® - Partner & Private Wealth Advisor), Brad Weeks (CFP®, ChFC®, CLU®, CASL®, RICP® - Lead Partner & Private Wealth Advisor), John Brannon (Ph.D., CFP® - Partner & Portfolio Manager), Ben Beshear (CFP®, CLTC®, AWMA® - CEO & Private Wealth Advisor), Tek Wiegert (CFP®, WMCP®, RICP®, ChFC®, CLU® - Lead Partner & Private Wealth Advisor), Clark Bixler (CFP®, ChFC® - Lead Partner & Private Wealth Advisor), Davie Co-chrane (CLU®, ChFC®, CPA, PFS - Lead Partner & Private Wealth Advisor), Andy Scarpitti (CFP®, ChFC®, RICP®, WMCP®, CLU® - Partner & Private Wealth Advisor)Photography by Leah Davies

LiveWell Capital: Ceilings and Floors

LiveWell Capital provides steps to help determine the right time to sell your assets so you can enjoy life to the fullest.

Every investor knows selling stocks when they are at a market bottom should be avoided when possible. On the other hand, selling at exactly the market high is nearly impossible. This article will focus on the psychology between these two extremes. In addition, this article is not about investors trying to time the markets with their diversified portfolios. It is intended for the investor who has something they want or need to sell. A concentrated stock position that needs to be trimmed, a stock from a former employer that should be diversified, or even a home that needs to be sold because a move is imminent.

Before we dive in, however, let’s revisit the volatility of the last three years. It has been a whirlwind for most investors in every asset class. Below is a quick recap:

2020 The COVID crash was history’s fastest bear market recovery. Most indexes fell by more than 30% in 30 days and then recovered to new highs within six months.

2021 New market highs were created repeatedly throughout the year in most indexes, especially technology. Many equity indexes saw positive returns between 20% and 30%, fueled (in part) by easy money policy. In addition, residential real estate skyrocketed.

2022 The euphoria ended as inflation spiked, leading to a change in fed policy. Almost every asset class and sector (including bonds) fell 10-30%.

2023 (Year to Date) As of the writing of this article, markets have started strong and are trading significantly higher than their 2022 lows but haven’t fully recovered to the peak levels achieved during the end of 2021 and the beginning of 2022.

Ben Beshear CFP®, CLTC®, AWMA® | CEO & Private Wealth Advisor
Ben Beshear CFP®, CLTC®, AWMA® | CEO & Private Wealth Advisor

As a financial advisor, I’m often at the center of conversations about the right time to sell assets. This question gets asked more frequently during times when the markets trade over huge ranges, hence my reason for mentioning the volatility noted above. A question I get all the time goes something like, “I know we need to sell X (insert real estate, stock, closely held business, etc.). How long will it be before it gets back to Y (insert whatever was the absolute market high)?” I sincerely empathize with this question because we can all get caught in the trap of feeling FOMO (fear of missing out) when we don’t sell something at its absolute peak. Our rational self knows this isn’t usually possible, but the feeling that we missed an opportunity is real, and that feeling should be explored.

My friend James has a saying that I love. He says, “Our old ceiling becomes our new floor.” This has so many applications to wealth and investing. Maybe it’s that we put our house on the market a month too late, got busy on the day we planned to sell that stock, or had too much of our self-worth tied to a certain net worth number that has now fallen. Regardless of the circumstance, we can get stuck thinking we can’t take action or, worse yet, can’t experience happiness until things return to their previous high. This mental anchoring can feel like a prison. Here’s why: there is a chance that it won’t return in the near term, or conversely, it might rebound, and then you could fear it might hit a new high and you will miss it (if you sold). Either way, it is paralyzing.

So, now that we’ve clearly identified the problem, what’s the solution? Here are the steps we recommend for our clients:

1. Give yourself grace and understand the role emotion can play. We all want to think of ourselves as logical versus emotional investors, but emotion always plays a role. It’s essential to realize it and limit its impact.

2. Set price targets ahead of time. Again, this isn’t important if your investments are only in a diversified index or mutual funds, but it is important if you have something you need to sell. We typically recommend limiting any one individual stock to a maximum of 5% of a client’s portfolio. If an investment has grown well beyond that range, it may be time for a trim due to the excess risk from a lack of diversification. Setting price targets ahead of time eliminates the emotion on the day the investment reaches that target because the decision was made ahead of time. (Note: The 5% individual stock max will not be practical for those executives who get paid a large portion of their compensation in stock, but we believe it is good guidance for everyone else.)

3. Think in ranges rather than exact numbers. If you didn’t set a price target on a specific position ahead of time, thinking in ranges for assets that have grown may be helpful. Here are a few examples: If a stock has traded within a certain degree over the last 24 months, consider targeting that range’s upper half or quartile for an exit. Also, regarding retirement, advertisements on TV have convinced us we all have an exact number we need to get to for retirement, and if we fall below that number, financial security is lost. Your advisor can help you determine what range you need to be in, but please don’t anchor to an exact number for your own sanity.

4. Don’t let the tax tail wag the dog. Tax mitigation is very important, but no one ever went broke paying taxes.

5. Be clear about your goals. For most investors, the exact price of an investment is less important than their ability to meet their financial goals. Make sure you are in touch with what the money is truly intended for. If you have already achieved financial security, you might not need the emotional turmoil and stress of trying to perfectly time every investment transaction (which isn’t possible anyway). 

We hope today’s article allows you a little extra freedom and joy as you consider your financial situation. Money should be considered fuel to help us live the life we want rather than a measurement unto itself. Living well is about perspective and ditching the notion that we can get everything perfect.

Our LiveWell Capital team is comprised of seasoned professionals with almost 200 years of combined experience in the financial services industry. We are dedicated to our clients’ goals and possess the credentials and creativity to help them achieve their objectives. Our team is supported and strengthened by Northwestern Mutual, a
company that has served clients and fulfilled promises since 1857.
Our LiveWell Capital team is comprised of seasoned professionals with almost 200 years of combined experience in the financial services industry. We are dedicated to our clients’ goals and possess the credentials and creativity to help them achieve their objectives. Our team is supported and strengthened by Northwestern Mutual, a company that has served clients and fulfilled promises since 1857.

Can LiveWell Capital help you determine the right time to sell your assets so you can enjoy life to its fullest? Contact Ben Beshear and his team at livewellcapital@nm.com or visit them online at
livewellcapital.com to learn more.

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