Monetize or Cannibalize your portfolio

If you are like the vast majority, you believe the best way to structure your portfolio for retirement is to shift your investments into conservative bond funds and other low-yield fixed-income investments. Wall Street makes billions of dollars a year by herding people into funds, known as life-cycle funds, that do precisely that. The idea is to generate a little bit of income, but because it is rarely enough to sustain your lifestyle, gradually sell the underlying assets to make up for the shortfall, and in doing so put more money into Wall Street’s already engorged pockets. The problem is you will eventually run out of these underlying assets if you live long enough, which should terrify you. Now that we have your attention, we would like to suggest a solution. Instead of following the herd and spending down your nest egg, monetize your portfolio. By that, we mean investing your portfolio in income-producing assets that generate more than enough income to sustain your lifestyle without having to sell the underlying assets. There are several important advantages to this strategy:


  1. Longevity risk: As stated above, you eliminate longevity risk. If you are generating more income than you need to sustain your lifestyle, you will have money to reinvest in the assets producing the income (a process known as compounding). Therefore you can never run out of money.
  2. Inflation protection: Because you can reinvest some of your income, your income will rise every year, allowing you to keep up with rising living costs, no matter how long you live.
  3. Risk mitigation: If you are cannibalizing your portfolio, when the market is down you will be forced to lock in losses that can never be recovered. But if you are monetizing your portfolio, you will benefit from market downturns. That’s because volatility does not affect your income, allowing you to reinvest some of your income in stocks that are cheaper during a downturn. The result is that your income stream will accelerate during market downturns.


There are other non-tangible benefits to monetizing your portfolio:


  1. Peace of mind: The most important one is the peace of mind that comes with knowing that no matter what the stock market is doing, or how long you live, you can never run out of money. Contrast that to someone who is cannibalizing their portfolio, watching their principal go down year after year, and desperately hoping they don’t run out of money before they die.
  2. Flexibility: Because you have a passive income stream that is more than enough to sustain your lifestyle, you can adjust how much money you pull out of your portfolio, depending on changing circumstances such as unexpected financial needs or other financial opportunities.
  3. Legacy planning: By monetizing your portfolio, you will be able to leave your loved ones, or your favorite charities, a substantial inheritance. Your legacy will extend beyond your lifetime by passing on your assets to your heirs or favorite causes.


If you agree that monetizing your portfolio is the best way to attain financial freedom, go to to learn how you can accelerate your journey to financial independence.