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TheBreeze,

"It's good to have some cash on hand to take advantage of the stock price lows, and also to avoid "having" to sell at the low points ad on the way down."

I manage our cash as 2 completely separate piles:

1. Expense Cash Cushion: This is not part of our portfolio. It is kept in passbook savings and in a Roth IRA annuity(not annuitized, just pays 4.5% interest.)

2. Brokerage Cash: This is included in our portfolio total and performance. I manage it to be around 10% of the portfolio. After today's sales, it will be around 11.25%. All cash dividends contribute to this cash. The amount of cash in excess of our target can be used to invest or withdrawn for use.

During down-turns, I have a table of percentages, market drop and cash to invest. I use the average of the NASDAQ Composite and the S&P500 to determine the "market drop" from their 52 week highs. A 10% drop is the first trigger.

Pile #1 is what pays our living expenses daily and will sustain us through a market down-turn.

Pile #2 is investing cash to push into stock when we are living off Pile #1.

This, for us, eliminates anxiety associated with having to sell at a loss when the market is going to hell-in-a-handbasket. Instead, I have cash to invest. It isn't "mixed together" where I have to remember to leave X-dollars for expenses.

Does that help you?

Gene
All holdings and some stats on my profile page
http://my.fool.com/profile/gdett2/info.aspx
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