This guy makes a big deal of this ‘new approach’ to investing.
Recognizing that people are scared of the market right now [AJC: before they become irrationally exuberant, again, in the next upswing] instead of giving this guy 100% of your money to invest in crappy mutual funds …
… you only give him 80% 😉
You put ‘the other 20%’ into The Bank, so that you have 2 years of cash to live off, and essentially ride the downswings.
I think that they’re hoping that by focusing on that yummy cash, you’ll forget to check what the market is doing, until you next go to top up your 2 year bucket.
OK, pre-retirement, 2 years living expenses is way too much to have aside. $0 is a better number.
Post retirement, I agree on the 2 year number (in fact, I recommend it); but, I don’t agree with his recommendations for the 80% bucket 🙂