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Old 07-16-2013, 02:53 PM   #21
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Since I'm close to retirement, I'm holding more cash than what I'll likely hold 2-3 years into retirement. I just don't want to be surprised by an unknown and have to sell in a down market shortly after retirement. I've read the studies about a down market early in your retirement causing your plan to fail.

That said, if 2008-2009 taught me anything, it's to not be afraid to sell poorly run companies when the market is down. While I re-invested the cash in good companies then, I wouldn't be opposed to doing the same in the next down market to meet cash needs. I'd prefer to re-invest though.

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Old 07-18-2013, 03:38 PM   #22
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Join Date: Jul 2013
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Originally Posted by LOL! View Post
It seems to me that lots of folks hang tough when the market is down, but many don't rebalance into the things that have dropped. A target retirement fund or a balanced fund like Wellesley or Wellington will do that for them without them even knowing it.
Either that, or you do it yourself. Bonds, US stock, Int'l stock, Small, Large, whatever category, it doesn't matter. Just sell what you strictly need, and sell whatever is at its highest point relative to your target asset allocation.

Such reverse rebalancing is such a simple rule, and yet it should work beautifully in the long run, while avoiding to get emotions and gut feelings mixed in the process. In addition, if you do a full rebalancing, you'll buy other categories at a low point, and be very happy in the long run.

Now why do people keep large pockets of cash instead of just using such a rebalancing procedure? Beats me.

Disclaimer: I'm not retired yet, so... although such approach makes 200% sense to me, I've never used it for real, so... what do I know...

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