Liquidity: Blessing or Curse?

THE FINANCIAL COMMUTE

This week’s episode of THE FINANCIAL COMMUTE features a special session recorded live from Morton Wealth’s 2024 Investor Symposium. CEO Jeff Sarti, Chief Investment Officer Meghan Pinchuk, and Wealth Advisor Chris Galeski discuss the advantages and drawbacks of liquidity.

Here are some key takeaways from their conversation:

• It is crucial to maintain 3-6 months' worth of living expenses in a liquid emergency fund to manage unexpected life events without disrupting long-term investment plans.
• The downsides of excessive asset liquidity include the possibility of making more impulsive decisions driven by emotions and frequent trading, which can promote a shorter-term speculative investing mindset instead of a long-term one.
• Meghan, Jeff and Chris also discuss adopting an "ownership" mindset when investing. When investors view assets in their portfolio as something they own, like a house, they are more likely to focus on generating wealth and cash flow over time without being distracted by daily price fluctuations or trends.
• Illiquidity can promote disciplined, long-term investment behaviors, provide structural benefits in pooled investment funds by preventing forced asset sales during downturns, and offer the "illiquidity premium," meaning higher potential returns for investments requiring capital lock-up.
• Illiquid investments, especially those controlled by third parties, may receive valuation discounts for estate tax purposes, reducing taxable estate values by 20-35%.