Hi {{first_name}},

Vanguard recently published a study on what happens to rollover money.

When people leave a job and move their 401(k) into an IRA, more than half park the proceeds in cash. Most intend to invest it later. Seven years on, a third of women and a quarter of men still haven't. The median balance is over $90,000. That’s zero growth. Even worse, it’s seven years of inflation eating away at its value.

The investors in the survey data did everything right up to the final step. They forgot to keep going or they got hung up on where to allocate. The cash sat there as they continuously made the same non-decision everyday. 

What struck me was how familiar the behavior feels. In fact, I’m in the data myself. I spend most of my time structuring private deals for appreciation and cash flow, and I currently have a significant balance in a money market fund that’s been untouched for years. And I know that money could be doing more for me. 

We spend our energy studying deal flow, evaluating fund structures, and learning the advanced curriculum. Meanwhile the most basic layer of our financial architecture sits idle, often in cash.  

That basic layer is the foundation of it all. Your liquidity position influences how much capital you can confidently deploy, how quickly you can act on opportunities, and whether your portfolio functions like an integrated system or a collection of disconnected accounts. We stop actively managing liquidity once it feels safe enough and we move our attention elsewhere.  

Last week I argued that your income is more fragile than most wealth plans assume. The replies came in immediately: I want to redeploy but I'm afraid to touch the reserve. 

It’s a rational fear. A cash reserve is the load-bearing wall between you and a really bad year. But safety has a carrying cost. With inflation around 3.8% and the best HYSAs yielding just under 4.5%, a $100,000 cash reserve generates only about $674 in real annual gains, roughly a 0.67% real return. In practice, the money is barely compounding.

Being intentional with liquidity is one of the simplest shifts an allocator can make. The opportunity is often in redesigning the instruments sitting closest to idle cash. Because the safety we associate with cash rarely comes from cash alone. It comes from access, flexibility, and confidence that capital is available when needed. Those qualities can exist across different instruments, timelines, and liquidity layers.

Cash is simply the one we know best. It’s also one of the most expensive ways to purchase liquidity.

This week is about rethinking the cost of liquidity:

Let’s get into it.

— Walker Deibel
WSJ & USA Today Bestselling Author of Buy Then Build
Founder, Build Wealth

Liquidity has a cost. And cash is a pretty expensive way to buy it.

Not all liquidity options are equal and they aren’t meant for everyone. Between your savings account and your invested capital, there is a full spectrum of instruments that provide access to your money on timelines that range from same-day to quarterly, and at yields that range from 4% to 12%+. Most wealthy investors already use a variety of them. But very few build it intentionally. Coordinating them together is the Liquidity Spectrum, and it changes how much true cash you actually need to hold.

Liquidity is a service, and you pay for it with foregone return.

A savings account charges the highest price because it offers immediate access. T-bills charge less because access is measured in weeks. Munis charge less still. And at the far end of the spectrum, an ABLOC against low-volatility equities preserves both access and compounding, simultaneously.

Your bank already understands this. It borrows at one rate and redeploys across its own liquidity spectrum at higher yields. The spread is the business model. 

Knowing Where You Are Positioned

Picture a horizontal line. True cash on the far left, earning very little. Invested capital on the far right, high yield, limited access. The additional tiers form a coordinated stack.

The tiers move left to right by yield and speed of access. High-yield savings sits closest to cash with same-day liquidity. T-bills and ultra-short duration instruments extend the timeline slightly in exchange for higher efficiency. Further right, municipal bonds and low-volatility equity sleeves introduce moderate market exposure while materially improving long-term compounding.

Each tier earns more than the one to its left and accesses it more slowly. Allocation depends on when liquidity is actually needed. Even if it feels safer to hold it.

Cash you need tomorrow stays in HYSA. 30-day needs belong in T-bills. 90-day needs can earn muni yield. Rare emergency capital sits in the equity sleeve, where it compounds and supports a credit line accessible in 24–48 hours.

But how much are you willing to pay for this speed of access? Because knowing the spectrum gives you alternatives at every horizon.

ABLOC: The Structural Backstop

The low-volatility equity sleeve turns the spectrum into a system. 

An ABLOC (asset-backed line of credit) is a revolving credit facility collateralized by a stock portfolio. The brokerage extends the line. You draw when you need to. You repay when you choose to. For a portfolio of $1M or more in stable equity, an ABLOC at 70% LTV provides $700K of standing credit, drawable in 24 to 48 hours, at approximately 5.5%. The line costs nothing to maintain and you pay interest only on what you draw.

If the portfolio falls, the line contracts but it doesn’t disappear. A sleeve of low-volatility equities and short-duration bonds can withstand a 30–35% drawdown without triggering a margin call at conservative LTV. This only works if the ABLOC is treated as a portfolio design decision.

Many investors see leverage as risk, but this is the banking model. Banks are among the most leveraged institutions in the world, borrowing short and lending long for centuries. Compared to banks, a 70% LTV is a conservative version of the same structure, but applied to your own capital. Just make sure you build a stock portfolio engineered for less volatility.

Banks run this model at scale. You can run a simpler version with less leverage and more control.

This is what makes the whole system work. Your equity keeps compounding. Your credit line stands ready. Your cash reserve can shrink because the ABLOC provides the emergency access that cash was previously providing, backed by assets that are growing instead of treading water. If you anchor the sleeve correctly, the ABLOC is the most reliable and least expensive source of liquidity on the spectrum.

The Role of True Cash

Near cash is not risk-free. 

T-bills held to maturity carry zero loss in any scenario short of a U.S. sovereign default. Munis held to maturity behave similarly for investment-grade issues. The ladder rungs mature when you might need the cash, so you never sell into a drawdown.

Ultra-short bond funds carry small mark-to-market risk. In March 2020, JPST fell ~2% before recovering. So, losses are possible if forced to sell during stress or downturns, but it’s less likely with layered liquidity to the left.

In that same period, low-volatility equity fell ~18–20%. At 70% LTV, ABLOC capacity shrinks but remains available. It doesn’t vanish though. That’s why cash still matters.

The worst case is a household shock during a market drawdown. Cash absorbs that first hit and ABLOC handles the rest.

The spectrum works because risks are layered. Cash functions as the first-line emergency fund, covering immediate shocks that can’t wait. Near-cash absorbs short-term needs. ABLOC covers larger, less frequent events. Each layer is designed so stress in one does not force liquidation in another.

This structure also creates tension in the system. The same cash that protects you from financial disruption is also the asset that loses value the fastest over time.

That tension is the Emergency Fund Paradox.  We dove into how this plays out in our report this week. Read about The Emergency Fund Paradox HERE.

Take a look at how the numbers stack up. The traditional portfolio looks safer because it holds more cash. But looks can be deceiving. 

The portfolio that was intentionally layered is actually more resilient. Liquidity exists across multiple independent tiers instead of one over utilized idle bucket. Resilience comes from diversification of access, timing, and purpose in addition to your actual account balances. 

Most people don’t revisit how they hold cash. They upgrade their income, they upgrade their investments, and they optimize taxes. But the way they manage liquidity often stays frozen in the version of life they had years ago. What made sense when you were building your net worth doesn’t always make sense once you have it.

All our lives we are taught to save because you never know what can happen. You have to protect yourself.  But savings can’t just fall into one safety bucket. In reality, different liquidity needs require different levels of access, timing, and structure.

Your own cash floor is actually the sum of three components. Each one points to a different tier on the spectrum. 

1. Expense Shock. 

This is the money you need when something breaks or there is a sudden emergency. A medical event, an issue with your home, a legal or family obligation that cannot wait.

For most affluent households in the $2M + range, this is achievable, usually between $25K and $50K. It scales with household exposure. 

This is the only layer that stays in true cash. HYSA or money market. It has to work instantly with fast access no matter what and under any condition. It likely can’t depend on any market-linked instrument.

2. Income Gap. 

If your primary income slows, pauses, or disappears, then you need time for everything else to catch up. Once you account for other income streams including a spouse, distributions, severance, or vesting, the gap that appears is what you are filling with your reserved dollars.

Size the gap for four to six months. Then figure for a household with two or more surviving income streams, you may need to account for $20K to $80K.

This layer still needs to be liquid, but it doesn’t need to sit idle. It belongs in short-duration instruments like rolling T-bills or similar near-cash vehicles that can be accessed weekly or on a monthly basis.

3. Opportunity Reserve

This layer feels trickier and just like it sounds, is more about when you need to account for an opportunity to build wealth over time. It’s protection against hesitation.

The capital that you lean on when something big is available lives here. You need to move on the real estate or investment deal or shift in strategy without selling long-term positions at the wrong time.

Depending on your deal flow, this is maybe $25K to $100K.

This belongs in ultra-short duration funds or municipal instruments where it continues to earn while still being accessible within weeks.

For some added context, you can look back at how we illustrated utilizing an Asset Backed Line of Credit (ABLOC) for opportunities with quicker return of capital (ROC).

Once these layers start to come together, a liquidity system should take form.

For a $2.5M liquid investor, the true cash floor is often around $140K when you sum those three layers. Everything above that becomes over-reserved liquidity. It’s sitting in the most expensive form of liquidity while better tools exist across the spectrum.

Matching the right liquidity vehicle to the right job is a stage of wealth growth we take for granted. As wealth grows, the question that builds is “what am I asking each layer of liquidity to actually do and when do I need it?”

“When people say ‘cash is king,' that's crazy...It was sure to go down in value over time. Anytime we have surplus cash around, I'm unhappy. I would much rather have good businesses than cash." - Warren Buffet

Engineer your liquidity around opportunity, not your anxiety.

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This is not financial advice. Illustrative output of a reasoned thought experiment. Not a backtest, guarantee, or prospectus. Actual results vary based on market conditions, fund selection, timing, fees, taxes, and factors not modeled. Private credit, CRE, and leveraged strategies involve significant risk including loss of principal. Consult a qualified financial advisor.