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Subject:  Re: Asset Allocation Date:  4/4/2013  7:30 PM
Author:  pauleckler Number:  71712 of 88807

Exactly. TMF emphasizes equity investments where possible, but fixed incomes make sense in some situations especially when funds are needed in that 2-5 year band.

For those retired on investment income, the usual suggestion is to put 5 years of living expenses into a laddered maturity bond portfolio. You live off the of the interest and the bond that matures each year. Then in a normal year, you sell equities to cover your living expenses and buy a 5 yr bond to maintain the ladder.

In bad years, when stocks are down you live off of the bond portfolio and defer selling stocks until the market recovers. This keeps you from selling stocks in a down market. Most dips are 3 yrs or less. So 5 yrs is considered adequate. But of course a longer one with more bonds is safer (but because equities give better return gives lower returns).

This ideas has to be fine tuned to fit your situation, but you get the idea. It works quite well for many.
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