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Chris:

I'm suprised that my post initiated this discussion. What a spectrum. My friend's concern about "losing a lifetime's investment returns" has kept him out of the market completely. You're completely invested for the moment but are apparently poised to jump out when you decide we're in a bear market. I am not pleased about the drop in market value of my port, but I am calm about it. I would be less calm in your situation, but I still disagree with your approach.

First, a clarification. Your reply took my statement out of context. In ten years, the dip of the past two days is very likely to be a squiggle on the line. It's a few percentage points. Now, if you want to soften the focus to look at the trend of the line and postulate the existence of a "entire severe bear market" during a substantial portion of the 20 to 25 years I have until retirement, I'll agree that it would have a substantial negative impact on my final savings. If I needed the money in five years, then I'd be sweating bullets.

Your situation does sound different. You might consider Tom's advice about where to move short time horizon money. It sounds like you have money that you need to live on (100% invested) in the stock market. Maybe that would be better off in a money market fund.

Our situations are the same in some ways, though. We'll both get older, and we each have a long-term need for money to sustain us during periods when we expect little or no income. Assuming you can project that some portion of your lump sum can be set aside for long-term goals, I still think it should stay invested. Given your age, you could recover from a bear market, even if you don't add anything. For me, the conservative assumption is to plan on approaching retirement age in good health (financial need-wise, a worst-case scenario).

I don't understand why your greater need for capital preservation makes market timing "awfully, awfully important." It doesn't make it any better as a strategy. I've read enough books, articles, and Fool writings to be convinced that market timing does not work. Buffett is famous for saying that, as far as he is concerned, the market doesn't exist. No way is he a market timer. Seems to me that the more you need to preserve your capital, the better off you are NOT trying to time the market.

Time will tell, but I would guess that cash king stocks are great for capital preservation. Despite the ten year time horizon in the strategy, these seem like larger, more stable companies, unlikely to be ridden into the grave and less prone to wild swings. I'd be interested in Tom's opinion on this, but I predict that the cash king port will exhibit a lower "beta" than most of the other ports for that reason. There are no volatile small cap TDFX's or SBUX's in this port (apologies to brother David--I own both of these stocks). The Foolish Four are probably even better.

These are just my opinions based on your posts, Chris. I know that I really don't, and probably can't, truly understand your situtation. Best of luck in your money management and investing.

--Paul
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