80/20 would allow you to sell the 20 portion after your 5 years of cash have run out to continue riding out the storm for several more years. Unless you're saying the 20 is your cash, in which case, yes, that's identical but I wouldn't call it 80/20 vs 100/0 since the CDs in the 100/0 would be your 20. Then again, if we are taking a holistic approach, it's not an 80/20 + 5 years of cash, but more like 60/40, depending on how the cash bucket adds up as % of total portfolio.randomguy wrote: ↑Sun Jan 27, 2019 1:36 pmYes but the idea that you need to only sell when the market is at all time highs is a bit questionable. Selling at 10-20% off of peaks isn't the end of the world. Being 100% stocks and having to sell when the market is off 30%+ for 3 years though is pretty bad.02nz wrote: ↑Sun Jan 27, 2019 12:49 pmNot clear exactly how they define the length of a bear market, but keep in mind that just because a bear market is over in 2.8 years doesn't mean that your equities have recovered to pre-bear values, merely that it's bottomed out and started to recover. Depending on when you bought, you may have a lot longer to go before being able to sell at a profit. From the Oct 2007 peak to March 2009 bottom it was only about 1.5 years, but it was another 3 years (spring 2012) before the S&P 500 recovered to Oct 2007 levels (including returns from dividends).
In the end we are basically talking about some bucket system variation. Research has shown it does pretty much nothing to help portfolio surviability. If you hold say 80/20 (5 years in cash) or 100% stocks with 5 years in CDs, you end up in just about the same spot. Some times one approach does slightly better than the other but not by much. And holding more bonds/CDs doesn't change the numbers much either. Now this mental accounting might help you sleep better at night. Can't discount that.
When we get to retirement age, we are mulling a slightly more aggressive AA coupled with this cash reserve, using the cash in place of a more conservative AA. Something like 70/30 with cash that amounts to 3 years of expenses + current year to date. This will let us keep the returns going but also give us a sleep an night cushion in the short term and more fixed income in the long term if necessary.