Most people use a simple and straightforward approach to investing. They assume it’s simply a means to prepare for retirement. But really investing is a delicate balancing act that should change according to your lifestyle needs. A Sovereign Individual uses lifestyle investment strategies as a means to support freedom of choice and self sufficiency. They use investing as a way to cultivate the life they want to live.
Unlike retirement investing, lifestyle investment strategies require constant adaptation and need to evolve according to short, medium, and long term goals.
For example, a Sovereign Individual approaches short to medium term investing as a way to angel invest in themselves. They invest in growth assets to build a fund that can be used to start or buy an income stream. It helps create a multiple income portfolio.
But angel investing in yourself is more complicated than outlining the purpose of separate investment funds. Unlike retirement planning, your short term goals frequently shift and when they do, so too should your investment strategies. If you don’t shift your investment strategies according to your needs, you won’t be able to effectively use those funds to pay for the lifestyle you’re pursuing.
Here’s what you should focus on when building a lifestyle investment strategy.
Your Goals Will Change Along the Way
Your goals will change along the way. Like baggage stored in an airplanes overhead bin, your goals will shift mid flight. And as they change, so too might your investment strategy need to change. The point is that you cannot assume a one size fits all approach to your investments is the best solution.
It’s something you’d have to do when purchasing a house. You convert investments to cash or bonds to reduce risk leading up to your purchase. You don’t make any large purchases or investments that might spook the bank. And once you’ve bought the home, you may reset your investment strategies back to what they previously were.
But this makes sense for other areas of your life as well.
If you’re making any major life changes or thinking about making them – you must include the impact on your investment strategies. How might these changes impact how you approach your investments? Your angel fund and other shorter term strategies may need to be adjusted based on new risks you take on.
As an example, I created a very successful portfolio of assets for my angel fund. But when I started this fund I had no clear timeline to take profits and withdraw funds. ie: when I would go to cash in order to reinvest in buying or starting a business. That was a mistake. When my timeline for starting a business changed but my investment strategy didn’t, it put me in a scenario that required more challenging choices.
By understanding how you want to use the funds, you also need to effectively plan your exit strategy.
Whether you go to cash all at once or gradually exit positions as they reach a specific target price. Had I the ability to do things over again, I would have looked to adjust my investment timeline, understanding that when I hit my price goals, I should have reassessed my goals and how they aligned with my investment strategies.
Think Through The 2nd and 3rd Order Goals
I was surprised by how fast my crypto holdings went up. In truth – my expectation was to buy and hold them for a longer time frame (3 to 5 years). But my circumstances and goals have changed. I’ve identified a business opportunity that I want to fund and will need to convert this angel fund to cash. Consequently, I needed to reevaluate how my investment thesis would play into this new timeline.
What were the next steps in my plan to create my next income stream? I hadn’t prepared for what would come next once I hit my funding goal. Here’s the framework I made for working through it.
- Evaluate the purpose of the fund and clearly define the exit timeline and strategy
- Assess any changes along the way – if goals change how is the investment strategy and timeline impacted?
- Adapt the investment process to these new needs – do you gradually need to take profits, or do you go to cash all at once on a given date regardless of results? Or if your building your own business, do you take some cash to fund immediate operations and stay long the rest of the angel fund until you need them?
- Adopt a barbell investment strategy as your risk profile changes – you may sell assets to invest in higher risk initiatives – you’ll need to adapt your other investments to this risk profile. ie: possibly consider focusing more on capital preservation vs growth.
Leverage Decision Making Frameworks
We get emotional, mentally fatigued, and sometimes greedy when faced with complicated decisions. Especially financial decisions. It helps to have decision making frameworks in place to remove emotion and quickly make sound investment decisions.
- Make concrete goals and eliminate all abstract goals
- Reduce the number of viable options
- Commit 100% to your choice – no half in half out options
Reevaluate Your Investment Strategies After Major Decisions
It’s important to reevaluate your next set of short and medium term goals after a major decision is made. For example, I am selling off my angel fund assets to raise cash for a business opportunity. That means I have a few goals I need to set. Short term, I need to establish my runway – how much money I need to have to support the business until it can produce a profit.
How will my other investments need to be adjusted to reduce risk during this time frame? My retirement assets don’t typically need to be readjusted. But perhaps some of my medium term allocations need to change.
I also need to set a timeline for restarting my next angel fund. At what point will it be appropriate to restart contributions to more aggressive assets?
By thinking through the impact of my current choices and how they effect my investment strategies, I can better prepare for my near future needs.
Consider All Your Options – Collateralize Assets
My recent business opportunity found me caught off sides. The crypto assets I planned to sell had pulled back a bit and I didn’t want to sell them at their reduced values. This poor planning left me with some hard decisions. Sell for less, or wait until they recover. But delaying will not always be an option. An alternative and more risky choice would be to collateralize my assets and take a loan against them.
This method is common in the emergent cryptocurrency space because of the up and to the right nature of their growth over the years. But it’s highly risky and I don’t recommend doing it unless you’re in an extremely sound financial situation.
I mention leveraging assets because it’s a great way to tap into locked up value when you need to move quickly on an opportunity. It’s a good tool to have in your arsenal. And it highlights the importance of understanding all the options available to you.
Final Thoughts – Lifestyle Investment Strategies
You should not think of investing as a method of preparing for retirement. Instead, you should think of it as a tool for empowering the lifestyle you want at various life stages. Lifestyle investment strategies are different from much of the common investment advice out there. It’s a method that promotes adaptation, short and medium term planning, and a willingness to take on risk.
When was the last time you evaluated your investment strategies based on what you wanted in the near term as opposed to retirement?
I share unique perspectives on the societal change we’re living through. The things you can’t fully appreciate because we’re in the thick of it. The path to becoming a Sovereign Individual. Topics intersect at geopolitics, fintech, crypto, individual responsibility, and personal freedom.
*Photo by Patrick Fore on Unsplash