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Dear David
I read with great interest, your response to the West Point's Cadet.
You advise to avoid the volatility of the market, keeping 5 years of living expenses invested in:
 Money Market Funds
 Treasure Bills
 Certificate of Deposits
 Bonds, short and Mid-term
Taking into account that five years of expenses could mount to a considerable amount of money, I ask, how do you allocate the money among his different suggestions?
Thanks
A fool thinking in retirament.


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I think the goal is to have some sort of a ladder, i.e. 1 yr, 2 yr, 3 yr, 4 yr and 5 yr CDs or treasury notes. This way each year you have the option of taking the money out of the CDs if your portfolio is down, or roll the CD back into a new 5 yr CD and take money out of the stock portfolio if the market is up.

You can have any combination of money market funds, CDs, Treasury Notes, Bonds, etc. just nothing long term (longer than 5 years.)

You can build the ladder over 5 years by each December buying a 5 year note or CD. At the end of the 5 years you have the ladder. lol.

Jim
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Greetings, AEnriquez, and welcome. You asked:

<<I read with great interest, your response to the West Point's Cadet.
You advise to avoid the volatility of the market, keeping 5 years of living expenses invested in:
Money Market Funds
Treasure Bills
Certificate of Deposits
Bonds, short and Mid-term
Taking into account that five years of expenses could mount to a considerable amount of money, I ask, how do you allocate the money among his different suggestions? >>


I keep the current year's expenses in money market funds and T-Bills. The next year's money goes into CDs, the third into short-term bonds, and the last two into mid-term bonds. That just happens to be my preference, but there's nothing magic about it. Others would use CD or bond ladders for the last four years and perhaps T-Bills or short-term CDs for at least nine months of the first year.

Regards..Pixy
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Pixy,
Two more questions:
How to choose and where to buy your suggestions in the net?
Thanks Al
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Al asks:

<<Two more questions:
How to choose and where to buy your suggestions in the net?>>


I am explaining the issue further in Monday's column. Still, I leave the "how" and "what" to you.

Regards..Pixy
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