The Investor's Triangle: Balancing Growth, Liquidity, and Safety

In this episode, host Trevor Lawson introduces "The Investor's Triangle," a framework for understanding different investment products. He explains that investments can offer two of three key benefits: liquidity, growth, and safety, but never all three simultaneously. Trevor illustrates this concept with examples like stocks, which provide growth and liquidity but forgo safety, and CDs, which offer growth and safety but lack liquidity. He emphasizes that this framework highlights the importance of diversification, not just to manage volatility, but also to ensure investors have access to all three benefits across their overall investment portfolio.

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A podcast designed to help retirees and those nearing retirement navigate finances and life planning with expert insights from financial advisor Trevor Lawson. Tune in for practical strategies and inspiring ideas to ensure your retirement years are purposeful, fulfilling, and truly your best chapter yet.

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Welcome to The Retirement With and On Purpose Podcast. I'm your host, Trevor Lawson, and this show is all about helping you not just reach retirement. But truly thrive in it. You've put in the work. Now let's make sure you can enjoy every moment to the fullest.
Today's episode is all about what I call the Investors Triangle. So this episode is really designed to give you a visual to help you think about how investors. Can, can frame thinking about different investment products. So if we think about a triangle, the, a literal triangle, and you've got the three, three connecting points of a triangle.
Each point represents a different, [00:01:00] a different type of, of investments. So Pickety point you'd like 0.1, let's call it liquidity 0.2 growth. Point three, safety. So we've got a triangle here, liquidity, growth, safety, and when it comes to the investment world, we get to pick two of the three for our particular investment product.
To my knowledge, and I've been doing this for quite some time now, there's no investment product out there that offers all three growth, liquidity, and safety. We only get two of the three. And so let's run through some examples to help kind of illustrate this concept. So let's take growth and liquidity, for example.
Well, a stock provides both growth potential and access to your money if you need it. So you can sell out of your stock, get whatever cash is, is in that stock, and it's, it's very [00:02:00] accessible. So stocks provide both growth, potential and liquidity, but EU forgo safety. So the stock is going to fluctuate with the the market.
So with stocks, you get two of the three. Growth and liquidity. Let's think about another. Common type of investment CDs, particularly here recently, as interest rates have have gone up over the past year and are kind of leveling off now, but CDs still around 4%, give or take are are what you can earn. So with a cd, you're getting growth potential.
The interest that the, the, the issue of the CDs providing and you're getting safety. CDs are principally protected, but you're giving up liquidity. So most CDs are invested for, for a period of time, six months, 12 months, 18 months, two years. Um, they're, they're, your money's tied up for a period of time, so you're foregoing liquidity.
So those are just [00:03:00] two common types of investments, but I think they help illustrate the point that with. Any type of investment product you're gonna get two of the three. And so that's one of the many reasons why investment professionals preach the importance of diversification. It's not only to smooth out the ride inside of your investment account and, you know, make the, the, the ride up much more.
Tolerable, but it's also to give you the investor access to liquidity with some of your monies, safety with some of your monies and growth with some of your monies. So my, my hope in in today's episode is to give you a framework to think about different investment products, but also when you think about diversification, not only think about diversification inside of your investment account from a.
Smoothing out the rod, you know, minimizing your, your, the volatility in, in your portfolio, but also thinking about [00:04:00] diversification from a product standpoint and having different products inside of your in, in investment profile that allow you to access all three growth, liquidity, and safety. That's it for today.
We will start a new series here soon on cognitive biases. But as always, if you've got any questions, you know where to find me in the link below, and I'll look forward to being with you again soon. Take care.
Thanks for tuning in to the Retirement with an on Purpose podcast. I hope you're walking away with new ideas and a fresh perspective on how to make the most of your retirement journey. And remember, retirement isn't the end. It's your time to live with purpose. Until next time, I'm Trevor Lawson. Here's to a fulfilling and thriving [00:05:00] retirement.