The Impossible Plan Part 2

Jack inherited a lot of his money and it's higher in value today even with the meltdown than when he first got his hands on it. I don'r say that to clients because clients don't want to hear what you did for them they only know what you didn't.

Anyway, I agreed with Jack that we should do some things and then after we hung up thought some more and asked myself what things? If, for example, I agreed to park his money in cash each time the market lost 10%-15% I would be facing the re-entry problem of when to move back in. Jack, knowing him as well as I do, would be calling me every hour on the hour asking me if it was time yet. I could see myself selling his investments several times a year or, at worse, several times a month. And, when moving back in, how would I know that I wouldn't be waltzing into a typical bear trap and sending my client's money deeper into the abyss?

Then there is the tax thing. Every time we, the collective me, pull the plug we have to pay taxes on his non-qualified account and that could get expensive if you pay ordinary taxes without the capital gain benefit.

Or- maybe we can just set the parameters at an extremely high percentage before 'we' sell say when the market falls 20% or 25%, but what good is that? We're down 20%-25% for crying out loud and that's what old Jack is trying to avoid and if the market pops up before we're ready to move back in we miss whatever upside there could be - maybe for the entire year.

Then we have the pay thing. How much do you charge someone to live with his or her account? If I know Jack he doesn't want to pay me a cent, simply having his account should be psychic income enough for me is the way he usually figures.

This delimma, dear friends, is that there is no easy answer when designing a plan that tries to reduce risk while maximizing return and taking advantage of economic depressions.

It truly gets complicated and my head hurt thinking about it but I finally go my little grey cells a purring and before long had an answer for my friend Jack.