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galeno wrote:
I don't buy CDs for their investment value. We buy laddered CDs or Treasuries to get a few basis points more than a MMF would give us.

OK so even though you have invested in CD's or Treasuries, your intent was to accomplish another goal other than investing. Perhaps you could accomplish this goal in annother way that doesn't sacrifice return.

galeno also wrote:
The purpose of this 3 to 7 year cash buffer is to smooth out income fluctuation a/o to ride out a several year bear market.

There hasn't ever been a bear market that lasted longer than 2.5 years. So why a 3 to 7 year cash buffer that isn't making a decent return all the time?

The last really long bear market was in 1929 that was seventy years ago! We had a nasty bear market in 1973 & 74, 26 years ago, but we also had very high inflation at that time. Your 7 year buffer at that time would have lost its relative value due to inflation. I haven't run the numbers but I would bet that this buffer stratagy would have lost more than if it was in the stock market. If it had been invested in a Foolish Four stratgy, it would have gained value, not lost it.

I understand the need and attempt at trying to be consertative and safe, but the point I'm trying to make is that investing in short term near cash instruments or in a sizable amount of long term bonds is following conventional Wise wisdom. It isn't reality.

While trying to protect the portfolio from a possible "crash" the stratigy ignores the very real risk of long term inflationary losses. In recent history, long periods of high inflation are much more prevlant than long bear markets.

I agree with Pixie, it is up to you. I would add that everyone needs to be comfortable with their stratagies even if they only assuage perceived risks and ignore other risks.

Good luck,

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