Don’t Sell- My Strategy for Generating Income

Raise your hand if the thought of rebalancing your portfolio and harvesting capital losses is more exciting than the thought of an extra hour sleep on a Monday morning.

Nope? I didn’t think so. Today I want to introduce you to my ultra- contrarian investment philosophy- to never sell an investment.

Lest you think Lady Dividend is like the captain doomed to go down with the sinking ship, I’d like to let you know why I decided to implement this rule this year.

  1. It forces me to conduct proper due diligence. Since I’m basically entering into a marriage contract with my babies, I had better make sure that we can be together for the long haul.
  2. No selling means fewer fees. I don’t pay $7.95 for each ETF sale, or 5% for selling real estate. That’s money I add to my net worth.
  3. Asset allocation becomes easier. Any financial advisor will point out that re-balancing is an essential part of maintaining a portfolio. I agree. However, rather than buying or selling, I perform asset allocation when it’s time to buy a new round of investments. Just look at whatever allocation is low and buy more of it. Half the effort with the same outcome.
  4. It’s aligned with my plans in financial independence. My definition of financial independence is when my investments throw off enough money to cover my living expenses. I’ll look to get income other ways, but not by selling.

So if I’m never going to sell my investments, how am I going to live off of them one day? Easy. I will divert my dividend and coupon income into my checking account for stocks, bonds and ETFs. For real estate, my rental income will provide a monthly stipend. If I need extra, I will take out a small mortgage (ex, $15,000) when I need access to funds.

The final reason I implemented this rule was to get rid of investment stress. My stock went down 5%. Should I sell? I just read about a new ETF I’d like to invest in. Should I divest my old holdings? Should I sell my condo and invest in this triplex? No, no and no. Don’t sell.