Fire

jamesd

Audaxer wrote: »

I know that natural income in the form of dividends is less volatile that the capital, but in a really bad equity crash, how much are fund dividends likely to be affected?

Quick market drops not a lot, a normal recession or sustained drop maybe cut to 80% of previous. Great Depression, worse.

Audaxer wrote: »

When there is an equity crash I am more likely to reinvest the dividends anyway so that the capital balance recovers quicker, and use my cash buffer for income. Is there anything wrong with that strategy?

I don't see flaws with that, in part because if cash is part of bonds it's just gradual rebalancing.

Cutting bonds/cash more than just rebalancing could be tempting but it's dangerous because equities could drop more and stay low for a long time, during which you'd have spent the bonds that you might need to sell for income.

jamesd

coyrls wrote: »

Well you know the 2% overall yield can be achieved with less risk with retail fixed term deposits that you know have a higher yield than you know a high quality bond allocation with around a duration of one. I think you know that there's a difference.

The falacy is using the money market for cash rates and not retail deposit rates.

Yes, that's a potential issue in studies. No corresponding issue for bonds and those are more important...

...except that I use peer to peer lending and sometimes a bit of mortgage offset as a bond substitute so there can be things to think about in "fixed interest" overall.

Naturally you should take higher cash rates when they are available.