Setting up your investments like an RC low pass filter

[Lsbcal]

I think it's useful to make analogies. Many people would be helped by obvious ones like a couple of connected water tanks holding different amounts of water. These visually illustrate the parameters involved in taking income from your investments without the need to resort to the mathematics even thought it's simple differential equations. The RC circuit is just another way of looking at it.

Hi Nun, I don't mean to be too hard on you about analogies. The problem with cash right now is it has negative real returns unless you are talking about something like reward checking accounts which we have (only up to 25k at the 2.0% rate). I'm inclined to minimize this bucket right now. When rates get back to normal historical real returns I'll revisit this and maybe set up more maturing CD's for the "cash".

My own investment strategies are filtered through about 60 years of monthly backtest data to make sure they worked in a variety of market environments.

 

[nun]

Hi Nun, I don't mean to be too hard on you about analogies. The problem with cash right now is it has negative real returns unless you are talking about something like reward checking accounts which we have (only up to 25k at the 2.0% rate). I'm inclined to minimize this bucket right now. When rates get back to normal historical real returns I'll revisit this and maybe set up more maturing CD's for the "cash".

My own investment strategies are filtered through about 60 years of monthly backtest data to make sure they worked in a variety of market environments.

No problem at all. I'm not making any judgements about whether it's good to be in cash right now, just offering what I've found to be a useful way to think about the interaction between investment accounts and how a cash or short term account can be used to buffer market fluctuations.