Identify the obligations capital must meet
The discussion starts with the obligations capital must support. Family spending, tax payments, business commitments and a planned purchase may require funds on different dates and with different levels of certainty.
A target term is not the same as cash availability
Private investments can have defined terms without a guaranteed exit on that date. Asset sales, refinancing and legal processes may affect when cash becomes available.
Preserve the ability to choose
Liquidity reserves carry their own opportunity cost, but they also preserve choices. A portfolio should be considered against the consequences of having to sell an asset at an inconvenient time.
Review the plan when circumstances change
A business sale, property purchase or change in family circumstances is a reason to review the investment plan. The objective is to keep the timing of capital available aligned with the responsibilities it needs to meet.
- Match the timing of funds with expected responsibilities.
- Consider delays in private asset exits.
- Revisit liquidity after a major family or business event.
This perspective is general information. Consider the relevant documents and your circumstances before making an investment or finance decision.