This running out of cash scenario is real. You also have to make sure you have enough cash available for normal bill paying and extraordinary bills as they come in.
IMHO, one of the keys is to keep the number of stocks or mutual funds small ... and therefore manageable. It can get out of hand quickly. As I recall, Mr. Lichello recommended using aggressive [high beta] mutual funds rather than individual stocks. Stocks can go to zero easily. Less likely that mutual funds will do that unless they are heavily into things like Fannie Mae.
[Speaking of which, a friend asked me to help out pick mutual funds from their new employer's 401(k) program. The booklet was excellent ... BUT [big but], the booklet was ONE YEAR OLD ... so the data were not reliable. Which meant a lot of manual labor had to be done to try to figger out which funds were still viable and reasonable. In addition the alleged money market fund was heavily invested in Fannie Mae. Hello!!!!] [There were three MMF's ... one was a GIC ... had guaranteed income contracts ... yeah, right. And one was in Treasury Bills ... ok, I guess unless China decides not to play nice anymore.]
With the advent of ETF's and other devices, it is easier to buy and sell mutual funds than it used to be. Some of the better mutual funds take a dim view of folks who are in and out. In addition the tax computations can get really complicated. Wash rules and 50-page long Schedule D-1's and all that.
So the KISS rule is paramount.
In addition, the once a month rule is also extremely important. Newport is set up for weekly inputs, and that can lead us to buy too frequently.
[I will now return to dormancy. Thankyouandhaveaniceday.]
- Al
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