Post by Admin on Aug 23, 2021 18:23:25 GMT -5
Emergency fund: After our savings which were invested in stocks passed a certain amount (for us $50K+) we no longer have cash or emergency for over 3 decades and are now in retirement.
Do I really need an emergency fund? not really, first I use credit cards, if I can't, I have several thousand in the bank. Beyond that, I can sell my mutual funds and get the money within 2 days. Why would you have an emergency fund unless you buy illegal drugs or need it for a ransom?
CASH: Do you really need years of cash, even as a retiree? IMO, a retiree needs maybe 3-6 months at most. Most/all retirees have a cash flow from SS + distributions + pension + can sell something, which isn't difficult to sell 3-4 times per year. When stocks do better, you can sell stocks, when stocks lose, you can use bonds. Some of these bonds should be a ballast for stocks, which means in a market meltdown they will go up or have minimal losses. Bonds have different categories, risks, duration, and behavior such as treasuries, Munis, HY, bank loan, MBS, TIPS, emerging markets, and corp. Usually, over the longer-term hold, they will do better than money markets and CDs. You can sell your bond funds and see the money the next day in your account.
CASH for trading: I never understood this concept, and I'm a trader and not a typical investor. A typical investor has stocks+bonds. If stocks go down, and you want to buy more stocks, it's pretty easy to sell some bonds and buy stocks, so why be in cash for months-years making almost nothing?
The only exception for me happened after our portfolio was big enough, and I was several years before retirement. I added the max loss allowed rule to protect my portfolio. Since then, I've been in the market most time and invested at 99+%(less than 1% in cash). Only at extreme risk, I'm out.
How can a retiree create monthly cash flow? Pretty easy. She can use 1 (or more) funds and create a repeatable monthly sell order for the amount she needs for years to come. It takes about 2 minutes and there is nothing to do after that.
A more sophisticated retiree can sell 3-4 times annually the fund that made more money or from the account (taxable, IRAs) she likes to use. She has full control of what and how to do it.
BTW, if it's in a taxable account, you will pay more taxes on CEFs that have very high distributions, regardless if you need all of them.
Do I really need an emergency fund? not really, first I use credit cards, if I can't, I have several thousand in the bank. Beyond that, I can sell my mutual funds and get the money within 2 days. Why would you have an emergency fund unless you buy illegal drugs or need it for a ransom?
CASH: Do you really need years of cash, even as a retiree? IMO, a retiree needs maybe 3-6 months at most. Most/all retirees have a cash flow from SS + distributions + pension + can sell something, which isn't difficult to sell 3-4 times per year. When stocks do better, you can sell stocks, when stocks lose, you can use bonds. Some of these bonds should be a ballast for stocks, which means in a market meltdown they will go up or have minimal losses. Bonds have different categories, risks, duration, and behavior such as treasuries, Munis, HY, bank loan, MBS, TIPS, emerging markets, and corp. Usually, over the longer-term hold, they will do better than money markets and CDs. You can sell your bond funds and see the money the next day in your account.
CASH for trading: I never understood this concept, and I'm a trader and not a typical investor. A typical investor has stocks+bonds. If stocks go down, and you want to buy more stocks, it's pretty easy to sell some bonds and buy stocks, so why be in cash for months-years making almost nothing?
The only exception for me happened after our portfolio was big enough, and I was several years before retirement. I added the max loss allowed rule to protect my portfolio. Since then, I've been in the market most time and invested at 99+%(less than 1% in cash). Only at extreme risk, I'm out.
How can a retiree create monthly cash flow? Pretty easy. She can use 1 (or more) funds and create a repeatable monthly sell order for the amount she needs for years to come. It takes about 2 minutes and there is nothing to do after that.
A more sophisticated retiree can sell 3-4 times annually the fund that made more money or from the account (taxable, IRAs) she likes to use. She has full control of what and how to do it.
BTW, if it's in a taxable account, you will pay more taxes on CEFs that have very high distributions, regardless if you need all of them.