Here to solicit feedback on a new concept I am testing out.
The formula is:
Incremental yield to pursue = 12% - (cash on hand)/ 600,000
Example 1: Cash on hand = 12,000.
Incremental yield to pursue = 12% - 12,000 / 600,000 = 12% -2% = 10%
Example 2: Cash on hand = 60,000
Incremental yield to pursue = 12% - 60,000 / 600,000 = 12% - 10% = 2%
In example 1, the bullet system is telling me to only deploy cash for a suitable investment I approve of with dividend yield of 10%==> ie save $$.
In example 2, the bullet system is telling me I have too much cash on hand, that 2% yield is good enough for me.
I plan to revisit 12% and 600,000 and whether to tweak them in my formula in 1 year. These are some arbitrary numbers I thought of, but eg I could replace 600,000 with something more concrete like 100 x average monthly expense, and then think about whether the 12% stays.