Customer Profiles: Asset Revesting Divorced Woman

Asset Revesting Divorced Woman

Jennifer is getting accustomed to being divorced. A stay-at-home mother for most of her nine-year marriage, she is now starting a career as a flight attendant in her mid-forties. She and her ex-husband Oliver have split custody of their two children: Lola and Riley. Jennifer also has a teen son, Kyle, from an earlier relationship.

As a stay-at-home parent, she made no contributions to Social Security, and since she and Oliver were married less than ten years, she has no Social Security income to help her through retirement. As personal savings go, Jennifer has just started contributing to her employer-sponsored retirement plan, as she doesn’t want to burden her kids in the future. In the divorce, she was awarded 50 percent of Oliver’s 401(k). This is, by far, her most significant asset.

Jennifer wants to contribute to all three of her children’s college funds but is currently unable to do so in the face of keeping up with the monthly bills and factoring in inflation. She is also trying to build up her emergency fund because if anything goes wrong, Jennifer must be able to support her family, keep a roof over their heads, and put food in their bellies. A friend recommended investing, but she has no financial experience and cannot risk losing her money. Jennifer feels scared and trapped, plain and simple.  

It breaks her heart when she cannot see a way to help support the goals of her kids. For example, Jennifer’s oldest son Kyle is working through driver’s education classes at his high school and has expressed interest in owning a car. He works part-time at a fast-food restaurant and puts a percentage of his earnings into savings every week. Jennifer wants to see Kyle have more freedom and independence, so she has set a personal goal to match his savings towards a used car. However, having just spoken to her auto-insurance company, adding a teenage driver to her insurance will significantly raise the premiums. Jennifer is pretty much positive that she won’t be able to afford the increase every month.

After six months, Jennifer could see that she couldn’t make ends meet and continue saving for retirement on her current income for much longer. She identified two areas to focus on. The first was to come up with ways to make additional income. The second was to figure out a way to more effectively manage the retirement savings she’d gotten in the divorce. It was critical that she preserve that capital and not lose it by trying to follow whatever stocks went from “not” to “hot.” She had to make the savings grow — thus making the most of what she’d gotten.

But Jennifer was almost frozen in fear of losing any money. She also recognized that she would need to push through this fear and take action. A friend recommended that she look at a financial newsletter focussing on Asset Revesting. Never having invested before, Jennifer was skeptical but was willing to learn and had to start somewhere.

Through the newsletter, she learned how asset revesting was different from the diversified buy-and-hold method that her parents used back in the day. Though still suggested by big firms like Fidelity and Schwab, she’d seen and heard investor friends struggle with buy-and-hold for years. She remembered having a picnic with her extended family recently and hearing about one of her uncles having lost so much money in his retirement account from holding onto assets that fell in value that he was facing either going back to work or downgrading his lifestyle.

That is not what Jennifer wanted to sign up for so she continued researching asset revesting. She learned that this method focused on capital preservation first and capital growth second. An asset hierarchy was used, with investments made in the asset that was performing the best. If this asset began to falter, the position was sold, and the funds either revested into the now strongest asset, or kept in cash if there was no signal to invest.

Digging in a bit more, Jennifer learned that to protect the portfolio, both profit targets and protective stops were used (aka risk and position management). This meant that if an asset reached a profit target, a portion of the position was sold to lock in gains. If an asset began to fall, there was a stop in place that, if reached, the whole position would be closed to protect the capital. Though still uncomfortable with the thought of losing money, Jennifer was realistic enough to know that not all trades would be winners. Setting stops in place at a maximum of 6% seemed like a good way to give the investment some room to breathe but also to give an exit strategy should it not work out.

To gain a second opinion, Jennifer called her Uncle, who had lost so much retirement money with the old buy-and-hold strategy, to ask his opinion. Imagine her surprise when, a few days later, he called her back and actually thanked her for introducing him to asset revesting and how he was going to give it a try with a portion of his account!

The last hurdle Jessica had to overcome was her schedule. Knowing the crazy, unpredictable hours she worked, she didn’t feel confident that she’d be able to pay attention to her portfolio during trading hours. So she contacted the asset revesting newsletter company she was looking into and discovered that they had a no-charge autotrading service she could sign up for. When she discovered that the trades could be executed in her account exactly how they would be by everyone else, she felt a huge sense of relief…and excitement. Jessica decided to step past her fear and took the opportunity to use asset revesting signals in her IRA to handle a portion of her portfolio.

Six months in, Jennifer had gained a huge amount of confidence and opted to let the asset revesting autotrader handle her entire IRA. No longer feeling paralyzed or trapped by her fear of losing money, she believed in this method of investing, protecting, and growing her account. Soon Jessica was able to open college savings accounts for each of the younger children and add a small amount each month to all three. With her financial stress reduced, she also found herself with more energy and could take on a few extra shifts to help her oldest son with his new, used-car purchase.