If you’re like me, you like the stock market … a lot.

It’s like fantasy sports, without the pointlessness. As one client of a firm I used to work for explained it: “I want to be up $250,000 or down $250,000 by the end of the day.”

However, in fantasy sports we only lose our dignity. In stock market we lose our money.

Of course most of us don’t have the wherewithal to make and lose that kind of money on a daily basis as Mr. Big did. But chances are, in smaller way, you’re doing the same thing as Mr. Big with your own investing portfolio, but really even worse.

Because, as long as interest rates are low, the stock market will be king.

This leads investors to a fundamental problem of being overly invested in the stock market. And that leads to a more fundamental problem for you: What if you retire with your stock-market laden portfolio in a year the stock market loses a substantial amount of money, and it takes 6 years — or longer — to recover its previous high, like say, 2007?

If you looked at your portfolio today and honestly answered that question you’d probably be screwed.

But fear not. I am great and powerful and I have an answer to this problem that doesn’t involve a wholesale shift in your fundamental investment philosophy.  

You just have to change one simple question you ask each time you look at every investment you make in your portfolio.

Instead asking how much return this investment will give you, you have to ask: “When will I need this money.”

The bias in the investment industry is that they don’t want you to take your money out of the market.

Ever.

They don’t concern themselves with present-day events like buying drugs and clothes and food. But that ultimately should be your only concern.

So when you look at your portfolio, you have to envision it as a machine for creating cash-flow for you. You can do that by laddering your portfolio in the same way you’d ladder bond maturities. The maturity date is when you need the money.

That means that you have to know your cash flow needs for the next 30 years. And adjust your portfolio accordingly.

If you are 59.5 and ready to retire, you’ll need about 7-10 years-worth of investments that won’t fluctuate much in those time horizons even if the market crashes. It’s a strategy that focuses more on a distribution of money than just overall return on investment.

There are more benefits to this strategy than just not starving to death in your old age.

First, the farther you go out in time, the more risk you can take. For example, a 59.5 year-old man will still need money in 30 years, unless he truly plans to die before 90.

In an index-loving investment community, the true risk in the market is not selection risk, it’s time risk. And the longer you stay invested, the lower the risk of loss.

So even as you age, you’ll need to be investing in longer-term investments like the S&P 500 — because you still won’t need that money for 30 years … consequently, you’ll incur less risk.

The strategy also has the advantage of freeing up cash for those decadal market downturns that scream “Buy me! Buy me!” like 2007 — events that you can’t take advantage of because everything you own is invested in a various form of the S&P Whatever-index and you don’t have the cash.

Finally, the strategy might give you enough play money to play fantasy stock market, like fantasy sports. Then you can lose a small amount of money, but still preserve your dignity in your old age.   

Of course, always consult a professional investment advisor when implementing these strategies. If you need to find one, email me and I’ll help you out.

John Ransom is politics and economics writer/editor with offices in Washington DC, Singapore. You can find him on Facebook @ here and here.