5 Things That Would Wipe Out Your $2M Portfolio Overnight

You don't need to sell your assets to live off your wealth. That's the myth. It's the exact myth that wipes people out. 5 headlines, though, are sitting on the calendar right now. We can see them sitting out there at some point, and any one of them could force a $2 million portfolio into a fire sale. Now, most people think risk means, you know, my portfolio drops, but it doesn't. Risk is being a forced seller. The risk is being forced to sell at the worst possible time because you built a portfolio but not a treasury. Now, one of those 5 scenarios forces more liquidations than the other 4 combined., and it comes down to a single structural flaw that almost nobody tests for. So let's go. All right, so jumping right into this again, we want to talk about the single biggest risk is always being a forced seller. And the reason why being a forced seller is the biggest risk is because over the long run, assets go higher. Now they go up and down. There's never been an asset in history that's gone up in a straight line, nor do they go down in a straight line. And so we understand that while assets will go up over the long term, Good assets, not every asset. Good assets will go up over the long term. The problem is that there is volatility in them. Now, most people look at volatility as the problem. Look at Bitcoin. Well, it's way too volatile. It's too dangerous. But again, the volatility isn't the problem. We want the volatility. We want assets to go up by a lot, but the volatility only becomes a problem if I become a forced seller. So the one question that every portfolio holder should be able to answer is how long can I hold this asset if things took a dive? If my income took a dive, if I lost my job, if the markets dropped, how long could I hold without being a forced seller? Let me give you an example. Let's say that you bought a rental property and you bought a rental property and it gives you, let's say, $2,000 a month of free cash flow. And you're using that free cash flow to pay for some of your living expenses. Good job. And you depend on that $2,000 a month and you hold that property for that. And let's say that you bought that property for $400,000. Well, let's say that in a year from now, the market drops, the real estate market crashes in that local area, and the property is no longer worth $400,000. It's now worth only $300,000. So what do you do? Do you panic? Your asset dropped, it went from $400,000 to $300,000. What happens? Well, are you still getting the $2,000 per month from the rents? And if you are, no big deal, right? Because the loan's not due. You have a 30-year loan on that. And so you can just wait until the property comes back up. It's still giving you what you bought it for, the monthly cash flow, and the valuation of that property will come back over time. Maybe 2 years, maybe 5 years, but eventually it comes back. Do you understand the volatility wasn't the problem? Now, what would happen if I had a property, for example, that couldn't rent out for what my payment was due? So it wasn't cash flowing and I lost my job and the market crashed at the same time. Now I'm stuck. And so the question again comes back to how long can I hold the asset in the event of some sort of emergency. What type of emergency? Well, you have to figure those things out. If I lost my job, what would happen? How long could I go? Could I go 12 months? How long would I potentially have to wait for that market cycle? For example, Bitcoin moves in these 4-year cycles. Could I wait 4 years? And so we understand what is the length, the timeframe I have to wait, and can I make that gap? Now, in my own story, you've heard me talk about many times how my 2008 experience shaped my whole financial life, and I was forced to liquidate buildings. I was forced to sell at the worst possible time because I couldn't hold on to those properties through the dip. Now, had I been able to do that, well, my financial life would have looked way different today than it is, but I was forced to sell at the worst possible time. And so that's the one thing you need to ask yourself: how long could I make it last? So how do we protect ourselves from this? Well, we need to make sure that we have enough liquidity that's available to us to prevent these things. Now, one big fallacy that people have is they think that just because I have a high net worth, I have lots of assets, then I have liquidity. And that's just not true. Just because you have the assets doesn't mean you have liquidity, and you could be even in more danger if you became a forced seller. If you were forced to start liquidating assets at the worst possible time, it can cause a cascading effect. So the way I like to think of this is having multiple layers, 1, 2, 3, and 4 layers of liquidity. So here I have cash. This is my operating cash. How much cash do I have coming in? Do it— does, does my job, does my income more than cover all the payments, the obligations that I have? How many months of cash flow do I have here? Then layer 2 is what I would call cash equivalents. So these are things that are making me 5 to 12% return on my money, but they don't have any volatility. They don't go up and down. And so if I, for some reason, ran out of layer 1, I tap into layer 2. Now layer 3 is what I just talked about. Maybe I have assets, I have a home, I have apartment buildings, I have stocks, equities, Bitcoin, et cetera. But do I have liquidity against that? So these are collateral assets. And then finally, if I went through all 3 of those, then I have my non-liquid assets. And so I would use a structure like this to make sure that it can support my entire portfolio. So I'm never forced into that forced seller position. Hey, quick thing before I keep going. What I just walked through is something most people never actually run the numbers on, for their own situation, and it costs them for years without even realizing it. Now, my team runs a free strategy session where we look at your actual numbers and we tell you where you really stand. Now, this isn't for everyone, but if you've got some money and it's on the line and you want a real answer instead of just a guess, you want the data, then go down below right now, book a call with my team, and then come back and finish this. All right. Now, what could go wrong? Well, there's things that we could see that could go wrong, and then there's things that we don't see that could go wrong. We call those black swans. Those are things that we're not prepared for. But let's focus on what we call the gray swans. These are things that could happen. We don't see them, maybe. So for example, could we have a huge stock market sell-off, a market sell-off, real estate drops, homes drop, equities drop like we saw in 2008? Now we do know that the fear gauge peaked above 31 in late March of this year. Of course, that was when the oil and the Iran tension had kicked off. It was historically high. Um, there's a big consensus of people who think there is a big market crash coming at some point. We don't know when. So if that happens, what would happen to your portfolio? Are you prepared for that? Now there's another consensus that happened in the market right now where they see inflation running away. We saw that the Fed just as of a few weeks ago was still projecting that they may have to start raising rates again because inflation was going to spike. Now, if that happens, that starts eroding your purchasing power. If you're living off of your assets, if you're living off the income coming from your assets, that inflation spike could force you to sell even more assets. So if you have a fixed withdrawal rate, you could see that go up at the worst possible time, especially if the market is coming down because of that. Now you'd be forced to sell more to make up for the cost increase, and you'd have to sell even more because the asset prices had dropped at the same time. So is that possible? Do your own research. Assign a probability to that. What about a Treasury seizure? So we talk about the Fed has to continue to issue more debt. Well, we need people to continue to buy that debt, but how many buyers are out there for the government's increased appetite to sell that debt into market. And so we can see the MOVE Index, for example, that shows the volatility of the Fed's being able to sell that debt into the market. And we've seen in times past, in 2009, in 2019, and we've seen how that market has seized up or at least had some volatility spikes, and that could cause the market to crash and that could hurt your portfolio. Also, we could see some tax law changes. There's a lot of tax laws that have been going into place, some good, some bad. For example, the Trump administration put back in the one big beautiful bill which gives us lots of tax breaks for Main Street, not just corporations, for people like you and I. But on the other side, we see like in California, like the billionaire tax, which will eventually come for everybody eventually. And so could there be a tax law, for example, capital gains goes up, for example, they take away depreciation, things that I had been planning on, and what could that do to my portfolio? Or, you know, what happens in the event of some sort of a medical emergency? Maybe you're older, you have to think about long-term care. Maybe you're involved in some sort of an accident or got some sort of sickness, heaven forbid, but what would happen to your portfolio in some event like that. Now, there's way more things that could potentially go wrong, and it's up to you to think, what are those things? Not what's possible. Let me just drop this for a second. We can't think about everything that's possible. Aliens could come to the world tomorrow. It's possible, but it's not very probable. The chance of that happening is so small, it's not worth me thinking about. So you need to think about what are the dangers that you see? What do you think could possibly derail your financial portfolio and assign a probability or a percentage to that thing happening. Anything that has a likely percentage or probability of happening, then you need to be planning and preparing for that. Not every possibility, only the probabilities. All right. So let's make this practical. What can you do with this information? What could you run this weekend? Well, run a test on your own portfolio. Think about it. What do you see as a probability? Could we have a market crash? And if so, how long would that last? Well, if I have to answer, judging of what happened in, you know, 2020, we saw this very quick recovery. My guess is that if we did see a major drawdown like that, it would probably be dealt with even faster? So I'm talking 3 months, 6 months. But let's double that. Let's call it 12 months. Maybe you want to double that. Let's call it 24 months. Could your portfolio survive 24 months of drawdown? What would happen if your assets dropped by 20, 30% for 24 months and your income also dropped at the same time? Model those out. Is all your income dependent on one source? How responsive is that income to some sort of a downturn in the market? Right? And then model that out. So for example, if my income were to drop, say, 50% and my assets dropped by 30%, could I continue holding everything for 6 months, 12 months, 24 months? Just do the math, add it up. Think about what your spending is every month. Think about what your outlay is for all the debt that you have out. And then think about what access to liquidity that you have. I gave you the example of the 4 layers of liquidity. Going back to that example, what type of liquidity do you have to cover you in that event? That you could access in a quick enough time that would keep you from having to force your assets? So pull out a pen and paper, do the math, go rewind this video, figure out what that is and do the math. Battle test your own portfolio. Make sure you can survive any downturn by doing this math. And if you want to understand the deeper math of understanding what do I actually own, I call it the Balance Sheet X-ray. What do I actually own? How do I understand that each of these assets are different, like tools in a toolbox? And how could I use these assets to protect my portfolio in a way that I've shown? Well, it's part of the 3 engines make up the Wealth Operating System. If you wanna understand how to do the Balance Sheet X-ray and the math that goes into it and the other two engines in the Wealth Operating System, you might wanna watch this video right here, and I'll see you over there.