Hi. Great point. Harold explains it this way. If you have 1 M USD, you keep in bucket #1 up to two years of cash flow (two years of annual costs), roughly 100,000 USD. If the market goes down, you have at least 2 years of cash available without selling investments from Bucket #2. So, if both bond and stock investments go down, you have 2 years to go through the correction and/or bear market. He comments that if the market goes down, you won´t be happy, but you won´t need to worry too much (for 2 years). Clearly, it is a mitigation measure. Hope it helps.
What happens if both the bond and stock markets are down when your cash bucket #1 needs refilling?
Hi. Great point. Harold explains it this way. If you have 1 M USD, you keep in bucket #1 up to two years of cash flow (two years of annual costs), roughly 100,000 USD. If the market goes down, you have at least 2 years of cash available without selling investments from Bucket #2. So, if both bond and stock investments go down, you have 2 years to go through the correction and/or bear market. He comments that if the market goes down, you won´t be happy, but you won´t need to worry too much (for 2 years). Clearly, it is a mitigation measure. Hope it helps.