One of the ways we add value at FORM Wealth is by not investing some of your money. We call it a cash reserve account and it’s designed for future funding, especially for those in retirement. Unlike your emergency fund that you may have in a bank account, this is the money that we've set aside to fill the gap for the monthly income you need. It may be a major purchase, an automobile, an addition to a home, a college education bill that's coming up, or a vacation.
We seek to fund these purchases through your cash reserve account when the markets provide opportunity to take profits from dividends and interest and build reserves so that when we go through markets that go through declines, we have a reserve to go to and therefore are not selling in a downturn. One of the number one rules we've been told ever since we were young is to buy low and sell high. This simply means never putting yourself in a position to have to sell anything when the markets are down. The only way you can do that is to have a reserve of cash funds set aside. This is a fundamental practice that we have at FORM Wealth and it gives us great peace of mind when we go through downturns that we can fall back on that reserve as we need to. The value that adds for you, our client, is substantial. We feel too many financial advisors want to take all your money and put it into an investment and then the whole investment is fluctuating. Or, we have clients that get so excited because the markets are doing well. They want to take that cash reserve and invest it. However, we advise against this as that cash reserve acts like an insurance policy. We know that's a sanctified amount of money that's not going to grow, but it's not going to go down either. This allows the rest of your money to fluctuate and to enjoy the upside that often is permanent. However, when these downturns happen again, the greatest risk that someone has in retirement is having to sell any part of their investable assets when the market is down 10, 20 or 30%. You’re losing that principle that you would have had if you put yourself in a position to sell when the markets were up. The cash reserve gives us that time and patience to try and have a better execution than having to put ourselves in a situation of selling.
The only way we can fund that cash reserve account is to understand from you, our client, what the needs are. One of our purposes on an ongoing basis with each of our clients is to understand what the next 12 to 24 months of your life looks like and how we can help you pay for it. Our continued desire to have a Total Relationship means understanding what you have, and helping you live the best life you can afford.