Investing - Theory, News & General • How Does Cash Help Me Avoid Sequence Of Returns?

Because the monte carlo simulation assumes you're holding that much cash the entire time.

But you don't need to hold a bunch of cash and have it drag on your returns the entire time. Just at the beginning for a few years.

Its more than a few years...its closer to 10. That's why extended bear markets are such a concern

Ok, so start with 5x of cash. You'll spend 1x/yr and get ~0.5x/yr from dividends on 60/20/20 if retiring with 25x:

Y0 - 5x
Y1 - 4.5x
Y2 - 4x
Y3 - 3.5x
Y4 - 3x
Y5 - 2.5x
Y6 - 2x
Y7 - 1.5x
Y8 - 1x
Y9 - 0.5x

Less and less cash drag every year, as AA shifts over the first decade towards 60/40 (ending up primarily stocks and bonds w/ negligible cash allocation coming from dividend distributions).

All you're doing is spending the cash and setting dividends to go to the settlement fund. No rebalancing into cash allocation required.

Statistics: Posted by Beensabu — Thu Nov 27, 2025 12:33 am — Replies 43 — Views 2640

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