Don't Lock Up Money You Might Need
The investment you can't get out of, and when that becomes a problem.
"Until you know what you need from your investments, don't invest in anything you can't undo."
Meet Chris. He sold his company and started putting money into the kind of investments you can't easily get out of. He quickly realized his investment objectives didn't line up with what he'd invested in, but by then there was no way out.
After we sold the company, we now had access, as a wealthy family, to what the wealthy call "alternative investments," things like venture capital, angel investing, private funds, and more, something we'd never had access to before. Having access felt like something we had to use, a new unlock in our investing strategy that we didn't want to leave on the table. So with this new opportunity, we started investing.
Every one of those investments worked the same way: we put the money in, and it would be years before we saw a dollar back. In the meantime, there was no way to pull any of it out.
One thing we didn't account for: our financial situation changed after we sold the business. The biggest shift was that we were no longer employed, so we weren't earning income anymore, but the bills didn't stop. It was after that realization that we understood we needed investments that produced income, income we could actually live off of.
Before we came to this realization, about a third of everything we had to invest was sitting in things that didn't produce income and we couldn't sell. That meant we couldn't move the money into what we now knew we needed. We couldn't undo a single one of those checks. The mistake was never the alternatives themselves, but the illiquidity of locking up money before we knew what we needed from our investments.
Our practical advice: give yourself a year to figure out what you actually need from your investments. The alternatives will still be there once you do.
Up next · Lesson 18 Just Dump It In Why waiting for the perfect moment can be its own expensive decision. Read next →