asset allocation after IPS

Let’s say you calculate living expenses of $100,000 and the net asset base is $1,000,000. So your required return is 10%. If given a table and asked to pick the best portfolio, you would make sure to pick one with a return of 10% or more.

But your liquidity constraint is also the $100,000 (you would put this amount in the liquidity section of the IPS). So wouldn’t the cash allocation in the asset allocation (t-bills, cash, etc.) have to be 10% as well?

If not, how do you determine the proper allocation to cash?

bump pls?

^ generally correct, however, in some case, the required rate of return can be different with liquidity requiremnt (in %). ’

Lets say, we incorporate inflation impacts…assume 5% infla

the nominal required return is 15% (rounded). liquidity require for 1st y is $105,000 =10%

the chosen port has allocate to cash >= liquidity rate

or they has to sell assets to pay for liquidity requirements, iam not sure, not yet see the situation in curr or SCH

if its current liquidity you take out of asset base if its ongoing like living expenses you use that to calculate return after you reduced asset base. if it says you need lets say 10k in 6 months to pay for school you would reduce asset base by that amount and put that in liquidity section but not return