Why do you keep 25% of the portfolio in cash where it is earning nothing?

Because cash insures that 25% of the portfolio can never lose money. It also used for rebalancing so we can purchase more of a specific asset class when the value drops such as stocks at the end of 2008. Finally, it is what is used to provide the cash flow to our retired clients on a monthly basis.

If you use the cash for my monthly income aren't I depleting my principal?

No. While the cash portion will go down from your distributions it will be replenished when we rebalance. In 2008, the average client took 7% of the portfolio out, so the cash portion dropped from 25% to 18%. But at the end of the year, we sold US Treasuries that had risen 34% and replenished the cash back to 25%.

Is this portfolio tax efficient?

Yes. Most of the gains are capital gains as opposed to ordinary income and are taxed at the lowest rate. In addition, you can offset 100% of any gains from the portfolio with losses you have from previous years. There is no cap.

Can this portfolio be kept in an IRA?

Yes.

Is my portfolio liquid?

Yes. We can sell at anytime as much or all of the portfolio without ever disrupting the market.

Where is my money kept?

All of our client accounts are held in the client's name at TD Ameritrade. You will never have an account at American Asset Management & we never have access to any of the funds in your account.