Originally Posted by Crazcarl
The CD is there in case there happens to be another recession and you wont have to remove your money from the market when it is down low. Almost all recessions in the past have not lasted more than 12-18 months.
The recession itself may only last 12-18 months, but the market can take a lot longer to rebound.
The recession of 2008 is a perfect example. Yes, the recession itself lasted less than 2 years. Look at the S&P 500 index, though, and you will see that after the precipitous drop in March of 2008, it took four years for it to get back up to that same level again.
Hence, even if you had two years worth of expenses in a CD, you would still have had to remove money from your other investments when the market was "down low."
What you have to do is find an appropriate mix of different types of investments that fit your tolerance for risk. This is called "asset allocation," and the subject of asset allocation is way too involved for a forum posting
. Nonetheless, if you want to live off of your investments, asset allocation is something that you absolutely must understand.