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Subject:  Re: Investing for Mom Date:  8/10/1999  2:52 PM
Author:  zgriner Number:  13041 of 98546

...if possible retain as much of the $300,000 as possible.

Don't forget what inflation will do to nursing home & medication costs.

Instead of putting all the money into bonds, to try to generate the $23500 your mother's yearly needs, consider a 'total return' approach. You ladder 2-4 years' expenses into bonds/CDs/T-notes maturing in 1-5 years. You put 15 months expenses into a money-market fund. The rest of the funds are invested in a stock/mutual fund portfolio.

Expenses are paid from the money-market fund. At the end of the year, if the stock portfolio is up, fund the MMF with stock redemptions, and replenish the bond/CD/T-note ladder or roll the maturing bond/CD/T-note into an extended maturity. If the stock portfolio is down, fund the MMF with the maturing bond/CD/T-note. Do this yearly.

The idea is to let the MMF/bonds/CDs/T-notes provide the cash as they mature while the stock portfolio gyrates in the market. The assumption is the stock portfolio will provide a better long-term return than the bonds/CDs/T-notes, especially if left alone during down periods. This scheme forces you to use an asset allocation model with a yearly rebalancing to provide cash.

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