Q: I am an odd duck because I am retired with zero in bonds. I do not like them, and at this point rates have nowhere to go but up. I am 60 and single, and I own two homes outright. Instead, I keep two years of cash to get me through the next recession. … Do you think I'm crazy for being all equity and no bonds? I hold individual stocks (60 of them), no funds. I want to control my tax liability.

Betsy

A: I don't think you're crazy (unless it's crazy like a fox). Your approach is reminiscent of the "bucket strategy" in the retirement literature. (The outline of your approach is a classic bucket strategy, although the details are unusual.) The core idea of the bucket strategy is to have one bucket with enough safe savings to handle two to three years' worth of spending. The safe savings are held in bank accounts, online savings accounts and similar savings investments.

The other bucket holds your riskier assets. This bucket is typically a mix of domestic and international stocks, long-term bonds, real estate investment trusts and other assets with prices that can fluctuate wildly and often inconveniently if you need the money. My own sense is that more than three defeats the purpose of the bucket approach.

The safe savings bucket is money that will be spent. The big advantage of the safe bucket is that it doesn't matter if the stock market plunges into a bear market. You don't need to tap into your stock market or bond market money to pay the bills. You have enough to tide yourself through tough times. You replenish the bucket so that you always have the safe savings buffer.

The other bucket offers the opportunity to earn a higher return on your investments. This is your discretionary wealth, money that can be invested more aggressively with the goal of earning a higher return. Some financial advisers recommend establishing three buckets — one for safe savings, one to meet intermediate spending goals and one for long-term savings. That's fine, but I think anything more than that defeats the safety-first simplicity of the bucket strategy.

The big advantage of this approach is largely psychological and emotional. When the market takes one of its periodic squalls, the safe savings bucket is reassuring. You'll probably tighten your spending a bit, but this strategy can help you avoid selling assets into a weak market, a natural but mistaken impulse.

The main alternative strategy to the bucket approach is systemic withdrawals, the so-called 4 percent rule. You take out 4 percent of your portfolio in the first year; the next year you take out another 4 percent, plus inflation.

What is unusual about your particular approach is that the riskier bucket comprises solely individual stocks. Obviously, I favor greater diversification. Still, while the financial literature isn't settled, with 60 stocks you should have decent diversification, assuming the stocks are in different industries. (The literature used to hover around 20 stocks for good diversification, but that figure has gone up substantially with changes in the market.) You're also right about the value of determining when you will pay capital gains. No criticism from me.

Chris Farrell is economics editor for "Marketplace Money." His e-mail address is cfarrell@mpr.org.