Interesting Read using a three fund portfolio (VFINX, VUSTX, VSGBX or VFITX) and a 200 mda filter.
From the link:
"The popular 60/40 Stocks/Bond portfolio performs well over the past 24 years, but adding a simple moving average to this portfolio has increased returns, reduced the duration of draw downs, and substantially reduced portfolio draw down. Adding in an intermediate term bond fund as the cash fund accomplished even more, it increased annual returns more than 10% over the buy and hold portfolio, while having close to 1/3 of the daily draw down numbers. Avoiding draw down and still being involved in market upswings was the goal of this strategy, and it worked well in this instance. There were a few concerns, namely being involved in the cash filter fund for too much duration, not being diverse enough to capitalize on gains across different markets, and the potential of missing out on some of the market upsides. However, these concerns did not prevent us from accomplishing the goals of reducing draw down and risk along with increasing return in this particular example."
iema-blog.com/2016/02/6040-stockbonds-portfolio-with-market.html

In a stripped down form, I believe this is what one gets out of Buffett's advice for his future widow - 10% short term government bonds (effectively a cash substitute) and 90% in an equity index fund.
https://blogs.cfainstitute.org/investor/2014/03/04/warren-buffetts-90-10-rule-of-thumb-for-retirement-investing/
That's 2.5-3 years of buffer. As you noted, the length of the overvaluation period (do you mean undervaluation when a retiree is disinvesting?) is unknown, but that is likely enough to insulate one from the worst of it. If that period extends further, one does not need to replenish the buffer, merely sell off enough equity to meet cash flow needs. Once stocks return to a reasonable valuation level, the buffer can be refilled.
Personally, I'm more comfortable with a 4-5 year buffer and a more diversified equity portfolio, but generally find this a good approach.

Newer academic thinking about investment glide path allocations and withdrawal rates in retirement years ( Weigand and Iron / Sptizer and Singh *) has shown that an investor / retiree spend from bonds first and stocks last ( and build a "safe money" fund or bucket of approx. 2 years of expenses which can be used if needed or spent before bonds ). Under this thinking, a misconception about conventional 60 / 40 "glide path" schemes is, that a "bond" allocation be recommended "early" in the investment lifecycle. Yet, the young investor demographic ( age 20's to 50 ) has "time" compounding / "time" to ride out volatility advantages on their side and they aren't so invested in knowing the quarter to quarter fluctuations of their 401K portfolios. So it is logical to assume that a "maximizing" of asset growth by having a much higher portion of assets in equities is warranted and, consequently, should extend into an investors "final years".
Being a late 50's retiree with a somewhat limited but reasonable Roth IRA accumulation and with an extensive expertise in quantitative tactical allocation, I operate under the framework of "preservation of capital" model with an appreciation of what the Weigand and Iron study conveys. As the forward 15 year equity market returns, as measured by CAPE ** and price to book measures are extrapolated to be sub par, preserving capital and asset growth within alternating strategic periods of equity ( small cap value, mid cap growth ), money market, and occasional bond investment through the use of quantitative tactical methods, is my preferred choice. Many "equities heavy" buy and hold investors / retirees may have to ride out the overvaluation period, perhaps spending down their safe money portion and/or retirement asset stake, as is implied by "sequence of return risk". The unknown is how deep and how long the overvaluation period is; this accompanied by varying inflation / disinflation .
Historically, a simple, mechanical, low transaction price / moving average cross strategy has produced decent risk mitigation / capital preservation during these periods of CAPE overvaluation ***.
Some favorite quotes from retirement planner literature are: "Hope for the best, plan for the worst", "You can't predict, but you can prepare ".
* "Market Signals for When to Employ a Bonds-First Withdrawal Sequence to Extend the Longevity of Retirees’ Portfolios" R. Weigand
"Is Rebalancing a Portfolio During Retirement Necessary?" John Spitzer Sandeep Singh
** https://docs.google.com/document/d/1I4sH5UV6fS6UfCNiPl1AsB2SOMF1an1PRt8YH0dgOeQ/edit?usp=sharing
*** https://docs.google.com/presentation/d/1mdon_cto48rvs2_lKWyMWrfqSIh8K0phfe7tThle8qQ/edit?usp=sharing
https://docs.google.com/presentation/d/1Sn6BKRCKRU5tensBDFTkJXI3v2wRQ4M1bt8VoIM2Zmc/edit?usp=sharing

My experience with hundreds of clients over the years (no matter how many projections we run prior to retirement, MonteCarlo or not) is that those with public pensions (after working 30+ years) seldom have spending problems. The public pension system is very generous, and it allows folks to retire with most of their pre-retirement income continuing. If they also have no mortgage and other heavy debt, they are even in better shape. If the spouse has good social security benefits, even better. With these folks, the withdrawal rate on their other savings is not much of an issue.
For other clients, our experience has been that folks tend to spend less following down years for the markets, then discover that some of the "necessary" spending they did previously is not so necessary any more. The first 4-5 years of real retirement are when folks do the most traveling and other unusual expenses. But even then, with the exception of those who have always lived beyond their means, in the last 2-3 years folks have been more aware of their spending. As I have noted previously, those with no mortgage and other debts always seem to worry less than those with debts. And for good reason...their expenses without those things are almost always 30-60% lower.

A remarkably unremarkable fund (albeit concentrated). But terminating C shares (and converting to A shares) is a new one on me.
The closest situation I know of is American Funds class C shares that automatically convert after 10 years to class F-1 (not quite A) shares. That's also a one-off (I know of no other family that does this either).

As of February 29, the fund's holdings accounted for just over 90% of its assets. That implies a cash position just under 10%. With its focus on called bonds and other ultra-short duration securities, it generates a lot of reinvestable cash every week. My recollection is that Mr. Sherman has to find $4 worth of securities each year for every $1 in the portfolio.
The fund is up 0.89% YTD and might find the first quarter up 1%. Given its risk profile, it continues to hold the highest five-year Sharpe ratio of any fixed-income fund and second-highest over the past three years. The Sharpe remains positive over the past year, but far lower than the Sharpe ratios for other sorts of fixed-income funds.
David

I have personally known 4 people who chose a lump sum option from their employer in retirement vs annuity option. All 4 are in serious trouble now.

Ya I know someone who did the same thing when he retired 5 years ago at 62 and is in trouble now.
Spent every dime. Really sad to see someone work 30+ years at a tough job and end up with so little in retirement.
Maybe our schools need to teach the kids a jingle (to the tune of a Dinsey song I remember as a kid):
"D-I-S-C-I-P-L ... I-N-E spells Discipline." (dumb - I know)
Gets back to BobC's comment too about avoiding credit card debt.

Hi Guys,
Whenever a MFO discussion on retirement planning and drawdown schedule is initiated, my contributions are predictable and fairly consistent. Sorry about that, but I’m a firm believer that Monte Carlo methods are especially appropriate tools to provide actionable guidance.
I believe I posted on this subject recently, but I’ve forgotten the Discussion title. So I will repost my comments as follows:
“Simple heuristics (rules-of-thumb) are fine when making common everyday decisions like buying a hamburger or not, but are totally inadequate when making complex, significant decisions like those about retirement.
The retirement when, where, how much do I need, drawdown rate, portfolio size and placements seem hopelessly intertwined to permit a comfortable and confident decision. But a financial tool is readily accessible that significantly attenuates doubt, and it’s not rule-of-thumb based.
I’ve proposed this approach many times on MFO, but I don’t hesitate to do so once again. That tool is Monte Carlo simulation analyses. I do not apologize for being a broken record in this instance.
Many such tools are easily accessible for free on the Internet. Two such codes that I have previously recommended are the PortfolioVisualizer and the MoneyChimp codes. Here are direct Links to these Monte Carlo simulators:
https://www.portfoliovisualizer.com/monte-carlo-simulation
http://www.moneychimp.com/articles/volatility/montecarlo.htm
Please give them a few tries. The inputs are self-explanatory, and the codes are fast. Many scenarios can be explored over a short commitment of time. Endless what-if scenarios can be examined with end portfolio average value and portfolio survival likelihoods as their primary outputs. Thousands of cases are randomly constructed for the projected market returns.
The PortfolioVisualizer tool has more user options, but the MoneyChimp version also does yeomen work. Since these are Monte Carlo-based codes, each time a simulation is made, expect slightly changed predictions. That somewhat captures the fragile nature of the uncertain future.
Retirement decisions will be dramatically improved by application of these simulators. Imperfect analyses (even estimating the range of possible market returns is risky business) almost always beats poorly informed guesstimates. Before making a retirement decision, give the Monte Carlo codes a test ride. They are powerful stuff for everyone.
And for normal circumstances and drawdown rates, a 2 million dollar portfolio is not necessary for a portfolio with some equity holdings. Do the analyses to challenge the robustness of that statement.”
I hope my repost is helpful to some newer MFO members. Portfolio volatility degrades end wealth. That’s why when constructing a portfolio one goal is to minimize its standard deviation (volatility). Low component standard deviations and low component correlation coefficients work to accomplish that goal.
A simple equation demonstrates the need to minimize portfolio standard deviation to achieve a higher cumulative return. Cumulative annual return is roughly equal to average annual return minus one-half times the square of the portfolio’s standard deviation. Note the minus sign. Standard deviation always operates to reduce average annual returns over the years.
Good luck and good planning for your retirement, and for the likelihood of your portfolio’s survival.
Best Wishes.

Bee, I believe the less movable parts the better for a portfolio which is why I like 60/40 to 50/50 funds which balance it for us and make withdrawals easier. I have learned thru the years there are layers and dimensions of risk far beyond the day you buy any other alternative and your post hit on one of those. It seems investors are always confronted with a decision to make of some unpredictable origin if other strategies are adopted and each one of those decisions can be wrong which wipes out all the previous right decisions.

Here are the 2/29 holdings (from RiverPark):
http://www.riverparkfunds.com/Funds/ShortTermHighYield/FullHoldings.aspx
90.06% are securities. There are not sufficient details given to completely identify the securities, but based on M*'s analysis a reasonable guess would be that all but 2% are bonds, and the remainder are convertibles.
From one of M*'s methodology papers: "Morningstar includes securities that mature in less than one year in the definition of cash."
M*'s analysis of the fund portfolio says that its average effective maturity of bonds is 1.83 years. So we can guess that M* is calling about half of the bonds "cash". Possibly a bit less, depending on the distribution of bonds. Let's say it's 40%.
So M* describes 40% of the 90% of bonds as cash. That's 36%. Add in the 10% that Riverpark says is not held as securities, and we've got 46% cash (by M*'s definition).
One can call these short term bonds whatever one wants - cash, ultrashort bonds, securities. Regardless of what one calls them, recognize them for what they are - bonds maturing in under a year, that have better-than-cash yield but also retain credit risk.

Hey, a bumbler! Had a basement full of those little critters a few years ago.

Hi Carefree. If you didn't own SEQUX, would you buy it to fill that space? I always thought I would like to buy that fund if it ever opened up again, but I now feel like it is not the same fund it was 5-10 years ago. Trust in management and stewardship, a term borrowed from M* is not there for me, even though M* still ranks the fund gold for that aspect.
What's your gut say? For me. the best fund in the world is now in question. There are plenty of good funds to choose from.

Can't access the article, so here's a shot in the dark:
Observing my funds, especially at T. Rowe Price, I've observed over several years that they have been avoiding holding cash if cash is defined as a money market fund or bank deposit. Obviously, they don't want money earning near 0. However, many funds do hold suitable higher yielding proxies for cash (that is unless your investing horizon is extremely short). Here's three low risk funds you're likely to find in place of cash, often in substantial percentages, in T. Rowe Price 's allocation and balanced funds.
Limited Duration Inflation Focused Bond Fund TRBFX
Ultra Short Term Bond Fund TRBUX
Short Term Bond Fund PRWBX
(Correction to my earlier comments: PRWCX does not invest in the above funds from what I can tell. But, interestingly, as of last December the fund held 14.9% in Price's "Reserve Investment Fund", a money market fund apparently designed to serve their own uses.)
So, I wonder if Zweig is including these types of investments as cash in whatever numbers he's floating around? Additionally, recognizing that more and more individual investors now use allocation, balanced and target date funds, fund houses and managers may feel a bit more freedom to keep their equity funds aggressively invested.

Most fund managers also need to show performance in order to attract more AUM. Even if they wanted to hold more cash for a rainy day, they don't dare show 'drag' in a rising market lest potential customers put their $$$ into a competitor's fund instead.
Thankfully, us individual investors don't need to compete with an arbitrary benchmark to attract assets, so if we're holding large cash-like piles for prolonged periods[1], and our other holdings are doing just fine and meeting our goals/needs, at least WE will be in a position to buy hand-over-fist when quality stuff 'goes on sale.'
[1] I am. While I have many existing long-term positions/accounts and have added new stuff over time -- holding nice Sleep Well At Night equity-heavy portfolios -- I've had a hard time willingly committing large amounts of inherited funds into the market in recent years. There are few good values in my view. Ergo, I wait patiently.

FYI: Talk to some traders right now and you’ll hear the smartest ones talking about fading each edge of the range – the market-wide breakouts and breakdowns are all false.
Only amateurs are making high-conviction moves these days. They get bearish at SPX 1970 and bullish as we approach 2000. The market is chopping them up.
Regards,
Ted
http://thereformedbroker.com/2016/03/11/welcome-to-the-chop-shop/
When Do You Want Your Risk, Now Or Later?:
http://thereformedbroker.com/2016/03/10/when-do-you-want-your-risk-now-or-later/

Didn't we close at 2022 today? Hasn't oil rocketed ahead over 50% off its lows. Aren't junk bonds leading stocks and many after today's big move up in the 2.5% to 3% YTD range? I just love these so called professionals who talk down to the amateurs. I guess the difference between a professional and an amateur is the amount of capital involved? And as we saw earlier today, those huge sums of capital managed by the hedge funds have had dismal returns the past 7 years.

FYI: Study finds the pattern persists over five and ten years.
Managers who bought international equities fared better.
Chalk up another victory for indexing.
Sixty-six percent of mutual-fund managers who buy large U.S. stocks underperformed the benchmark Standard & Poor’s 500 Index last year, according to a study by S&P Dow Jones Indices.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-03-09/most-u-s-stock-pickers-failed-to-beat-index-last-year-s-p-says
MarketWatch Slant:
http://www.marketwatch.com/story/the-sp-500-beat-66-of-stock-pickers-last-year-2016-03-10/print
Click On SPVIA U.S. Year-End 2015
https://us.spindices.com/search/?query=spiva+u.s.+year-end+2015&Search=GO&Search=GO

I'm down to 8% foreign. After sticking to my guns about Asia for years, it's just plain not making me much money, anymore. Lots of macro reasons for that, of course. SFGIX is a small bite of my stuff now, too. Started with it 3 years ago.

I have been a fan of Matthews in general for many years and have owned both MAPIX when it first opened as an alternative to MACSX when that fund was closed to new investors. When MACSX reopened, I moved my MAPIX money to it. But when moving my 401k money to an IRA I was able to buy SFGIX. I moved that EM chunk of money again, to Andrew Foster.
At one time years back on this discussion board, many were saying Asia is the future - that's where the bulk of your money should be. Well, that was baloney then and it still is - at least I don't see it happening in my life time. Some exposure to Asia is great, but I for one don't think you need an Asia specific (especially China specific) fund. Not When Andrew Foster's fund is available. Who better then to determine an Asia allocation? And right now Foster is reducing Asia exposure. Matthews funds are the best of the Asian specific class, but are they needed other than for momentum bets? Here is a quote I pulled out of a different MFO post on SFGIX.

February 2016 – In his latest portfolio review, Andrew Foster discusses a shift in the Fund’s composition, away from the Asian region, and toward larger stocks at the expense of smaller ones. Next, he speculates as to the cause behind the collapse in China’s capital markets. While he does not offer a definitive explanation, he does suggest that circumstances may be serious enough to warrant attention from investors.

@hank said "So small investors are supposed to ...? "
Gundlach mentioned as possible investments
G-7 Bonds in local currency. Gundlach's newest fund Right product,right time.
http://www.doublelinefunds.com/funds/global_bond/overview.html
Bond C E Fs @ discount.His ?
DBL
http://www.cefconnect.com/Details/Summary.aspx?Ticker=DBL
DSL
http://www.cefconnect.com/Details/Summary.aspx?Ticker=DSL
@junKster said on 3/6
the Jeffrey Gundlach DoubleLine bond funds mentioned (DBLTX and DLTNX have been among the best of the best over the past 1, 3, and 5 years. And obviously had you *blindly* put your money in the trust of DoubleLine you would be sitting pretty in that bond category if a diversified portfolio is your thing.
http://www.mutualfundobserver.com/discuss/discussion/comment/75948/#Comment_75948
Also in JNK

By Bloomberg News | March 9, 2016 - 12:09 pm EST
Best junk bond manager of decade says recession fears overdone
Fidelity's Mark Notkin sees mid-to-high single-digit returns for 2016
Mark Notkin expected the rebound in high-yield bonds. The earlier plunge in the first part of the year is what didn't make sense to him.
Mr. Notkin, whose $9.7 billion Fidelity Capital & Income Fund FAGIX has outperformed all peers over the past decade, didn't flinch as high-yield bond prices tumbled in January and early February. While investors feared that declining oil prices and troubles in Europe and Asia might disrupt growth in the U.S., Mr. Notkin found little evidence to support the gloom.
http://www.investmentnews.com/article/20160309/FREE/160309924?template=printart
Gundlach's Slides From 3/9
http://seekingalpha.com/article/3956876-jeffrey-gundlach-probability-another-hike-march-june-2016-slides
Gundlach "uncanny"how accurate this indicator has been

My favorite fund in the World Allocation category: SGENX. Schwab waives the load and I have held it for many years.