brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
- Messages
- 18,085
The benefit of holding a large bucket of cash to "prevent having to sell equities during any market unpleasantness" is highly overrated IMHO.
For someone who covers expenses 50% pension/SS and 50% portfolio withdrawals, it's likely that interest and divs would cover withdrawal requirements. If not and you need to sell a few bux worth of something, I've never had a time when my broadly diversified portfolio didn't have something in it that wouldn't be painful to sell during an equity downturn.
I suppose for someone whose expenses are met 100% by portfolio withdrawals and the portfolio is non-diversified and consists completely of equities all of which have taken a big hit, then it may have paid off to have been holding a bunch of cash.
It would have been mighty expensive to have been holding cash beyond investment liquidity needs these past few years. For example, look at the opportunity cost of holding $100k in 2% CD's vs holding $100k in Wellesley the past 3 years. The difference would buy a bunch of groceries during the feared downturn.
We get about 1/3 of our living expenses from DW's part time small business and the rest from the portfolio. I intentionally went into ER with a bulked up position in cash and CDs partially because I do not like what the bond market offers and partially because I am trying to mitigate sequence of returns risk. If the markets remain benign in the next couple of years I will be increasingly comfy with drawing down the excess cash.