Modeling cash reserve

[drbrandt1]

What's a good way to model my 2-3 year cash reserve? It's earning a whopping 0.5% so it doesn't belong in my taxable savings. Do I just ignore it or is there a better way to handle it?

[jimr]

I think the easiest way to handle this would be to just blend it into the taxable portfolio as a permanent part of your asset allocation.

Use whatever tool you usually use to determine the portfolio return and std deviation that matches your asset allocation, but instead of considering just your invested assets, also add in the extra cash reserve as a permanent cash component in your asset allocation.

[drbrandt1]

Logical and relatively simple. What more can I ask for?