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Keeping cash enough to cover my cost of living keeps me feeling better about market downturns.

That's fine - but just be honest with yourself, and realize that it's a part of your total portfolio that you are keeping in cash. If you are keeping cash, you aren't 100% invested.

I may be wrong, but I feel safer with cash than CDs and bonds.

Where are you keeping your 'cash'? Under the mattress? Buried out in the yard? In your attic? Each one of those options has risks, too.

Because if you're keeping 'cash' at any FDIC or SIPC insured institution, you have the same insurance on cash per account/titleholder - $250k. With CDs that you've purchased directly from the institution, you may (or may not - read your terms) pay a penalty for breaking the CD early, but usually it's limited to x months of interest (again - read your terms), or the interest you've actually earned, whichever is less. With brokered CDs and bonds, you may take a loss to exit early, since you have to sell to someone else to exit your position. On the other hand, you may get a gain, too.

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