You may have heard about dollar cost averaging or DCA investing. This generally involves the systematic purchasing of a set dollar amount on a regular basis over a long period of time. This allows you to purchase a varying amount of units depending on price fluctuations. In effect, you end up buying more units when prices are low and fewer when prices are high. Given that it is very difficult to time the market and purchase only when prices are low, this has proven to be an excellent investing strategy.

When the time comes for you to retire, the reverse of this starts to happen. People generally want a systematic cash flow from their investments. One problem with the traditional method of drawing income from your assets is that, if you redeem a fixed dollar value on a regular basis, you end up selling more units when prices are low! This is the opposite of the investment adage - buy low & sell high.

We have a solution. It is called using a Reservoir strategy.  With this modification, you systematically redeem a fixed number of units rather than a fixed dollar amount. Here you end up redeeming more dollars from your long term investment program when market values are high and less dollars when market values are low. These variable amounts go into your reservoir.  On a regular basis (usually monthly), you withdraw your required fixed payments. 

The Reservoir is a pool of savings.  It is like a pond of water that is replenished with rainfalls; this water is drawn off on a systematic basis in regulated amounts.  As you redeem the fixed number of units from your long-term investment program, in the months when markets are strong, you will be topping up the pool and during the months when markets are weaker, you will draw down on the reservoir, thus allowing time for your long-term assets to recover.