Most of the tech clients Rand works with require diversification and better cash flow than whatever their tech stocks pay once they retire, she said.
To reduce clients’ tech holdings, Cascade Investment Advisors uses outright sales and, when possible, hedging strategies. Rand noted some companies have hedging restrictions for current employees.
“With any large block of stock, but especially tech stocks, we use covered calls to stage out of the position while boosting cash flow for the client,” she said. Covered calls let investors hold a long position in an asset and write call options on the asset to generate an income stream. Cascade Investment Advisors writes covered calls close to pre-determined prices it agrees upon with a client, she said, and it may also set up limit orders to make sales.
Rand is able to tilt clients’ customized portfolios away from tech or other sectors they have a sizeable stake in because she sidesteps mutual funds and ETFs and only buys individual stocks and bonds. To diversify tech-heavy portfolios and try to dampen volatility, she may use bonds and staple stocks such as food and drug companies.
It’s a good time to make sure all clients are diversified.