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I'm 66 yrs old, may retire soon, probably somewhat better set than many of my peers.... that is, own home and another rental property free of mortgage and have about 1.5 million in financial assets. Along with SS, the rental income, and a very small pension, also small annuity, could certainly live a long time taking 4 percent on financial assets.

That said, like everybody, would prefer to do better than that. Conventional wisdom for my age(and I don't discount conventional wisdom off hand) would probably have me 20 or 30 percent in stock, the rest spread in bonds. Even the fool would probably put it at.. what, 50% stocks at my age?

As I read current situation, regardless of where we are in bullish cycle, it is certainly true that stocks, in last 15 years have twice dropped 50% and took 5 years to get back to old highs. That, at my age, mitigates toward the "safety" of bonds. But I also keep hearing that when interest rates rise, bond funds will drop as well, since the old bonds are worth comparatively less than new bonds in a rising interest rate market. Plus bonds pay so little now, not much better than cash anyway. So I ask the question, is it better to avoid bonds now, and be raising cash? Is this not a valid version of Buffet's, "be greedy when others are fearful, and fearful when others are greedy?"

My present position is about 33% cash. My thought is that on a 10% market drop, I would invest a third of that. On 20% drop, I would invest another third. On thirty percent drop, would go fully invested. In event of a sudden crash that dropped 50% (hey, it happens!)I would be losing "only" 33.5% (.5 x .67% of assets )and would have a large war chest for capitalizing on the low prices. Assuming the same 5-year time for market to recover, my 66.5% remainder would double to 133% versus the simple buy and hold forever strategy taking the same time to return to previous high.

All of this, obviously, depends on the discipline to act, which is why I settled on fixed trigger numbers at 10, 20, 30%. In recent drop, I think about 6 or 7%, high to low, I did buy a couple watch list Fool stocks on the dip, but made no major reaction.

Discussion welcome.
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