Originally Posted by lsbcal
Why are some people so worried about cashing out of an intermediate bond fund if it is really necessary. Seems a bad year for a bond fund might be around -5% (less if short term bond fund). If you are cashing out 4% of your assets from this bond fund then the "permanent loss" amounts to only 0.2% of total assets. Not an ideal situation but hardly something to loose sleep over.
There may be some reason. I am sure everyone's situation is a little different.
I believe there are a number of ways to handle the draw-down in a bad market.
Our basic options are as follows:
DB pension - covers 17% of yearly expenses
Stock Mutual Fund dividends covers 20% of yearly expenses
Bond dividends covers 36% of yearly expenses
This represents 73% of our planned yearly expenses. We could get by on that fine.
The money market account will hold 8% of the total portfolio. 60/32/8
The other 27% of planned yearly expenses will be taken from the Money Market. It can cover almost 7 years of withdrawals (i.e., 27% of expenses).
Alternately that 8% represents 2 full years of expenses in cash.
We have a number of options to ride out a bad market for several years.
Even if the market dives, as long as the companies are still around, they will pay their dividends.
I am not too concerned about the market going to zero and staying there. If that happens, my dollars will not worth the paper they are printed on. Better be hold gold bullion instead of cash.