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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35365  
Subject: Re: A justification(?) for bond funds Date: 5/11/2000 2:46 AM
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TMFSynchronicity Date: 5/6/00 1:29 PM Number: 629
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<<I'm currently in the closing stages of paying off my credit card debt (rah!).>>

GREAT!

<<The plan is to follow a "three bucket" approach to investing.>>

I like your concept of "buckets". It appeals to my simplistic approach to life and sounds sort of neat, however, as expressed, there seems to be a bit of fuzziness and lack of comprehensive clarity and continuity of purpose regarding "bucket B".

<<. Bucket A is an emergency fund (money I might need at any time); this will go into a money market account.>>

Ok, that's clear. Ideally, everyone should have such an emergency fund.

<< Bucket B is money that I can't really afford to lose in the next three to five years. For example, I'm looking at making a down payment on a house within 3 years, and will be saving towards that goal. In true Foolish fashion, I'm not about to put that money in the stock market, as I can't afford to watch it drop 20%. (I'm not saying that will happen, only that it could).>>

Ok, your goals are clearly defined, however you then let your thinking become really fuzzy when you say:

<<So bonds and other fixed income investments are the choice here>>

Better rethink what you have said. You do not know exactly when you might be "MAKING A DOWN PAYMENT ON A HOUSE" and you "CAN'T AFFORD TO WATCH IT DROP ...", therefore you had better reconsider "BONDS AND OTHER FIXED INCOME INVESTMENTS" as "THE CHOICE HERE", because the actual realizable cash proceeds may really go down dramatically if you should cash out prematurely.

In view of the apparent present lack of massive amounts available (You had mentioned something about "SAVING IN BITS AND DRABS"), perhaps you should consider at least temporarily combining "bucket A" and "bucket B". It should be more simple and you might even achieve certain economies of scale by so doing.

<<Bucket C is my long-term savings (money I won't need for at least 5 years).>>

That's a good bucket!

<<Any comments or feedback would be appreciated. Thanks,>>

You're most welcome. Now, think clearly and go forth and sin no more.

DHatch

P.S. I did not see any "justification for bond funds".

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