Achieving a harmonious balance between risk and return, especially in the face of retirement, is more art than science. One innovative approach that has gained traction among financial advisors is the bucket strategy. This method not only ensures diversified investment portfolios but also meticulously aligns with specific financial goals and cash flow needs. At its core, the bucket strategy segments investments across different “buckets” each with a designated time horizon and risk level, tailored to meet immediate income requirements and long-term growth aspirations. This article explores the nuanced art of segmented investing that allows financial advisors to offer a structured yet flexible roadmap to navigate your investment journey.
Understanding the Bucket Strategy
The bucket strategy is a tailored retirement investment approach that categorizes assets into distinct segments or “buckets,” each defined by different time horizons and associated risk levels. The strategy’s simplicity and focus are its core strengths, designed to meet various financial needs progressively:
- First Bucket: Targets immediate cash flow needs and contains low-risk, highly liquid assets such as cash equivalents and short-term bonds. This bucket ensures that funds are available for current expenses without jeopardizing the rest of the portfolio.
- Second Bucket: Focuses on mid-term goals, typically covering a timeframe of five to ten years. It includes more midterm investments, which offer a balance between stability and growth.
- Third Bucket: Dedicated to long-term growth, this bucket includes investments in equities, which come with higher potential returns and greater volatility. This bucket is crucial for achieving significant growth over the long term, aimed at ensuring financial stability in the later stages of retirement.
This strategic segmentation facilitates immediate fund accessibility for short-term needs while securing and growing wealth for future aspirations, effectively balancing the trade-off between risk and return over different periods of your financial journey.
Managing Cash Flow Needs
A key advantage of the bucket strategy lies in its effective management of cash flow needs and its capability to secure a stable retirement income. The immediate bucket serves as a financial safeguard for daily expenses and unexpected emergencies, minimizing the need to liquidate long-term investments during unfavorable market conditions. As resources in this bucket are used, funds from the subsequent buckets – reserved for medium to long-term growth – are strategically shifted to refill it. This dynamic reallocation not only maintains a consistent income stream but also leverages the growth potential of longer-term investments. By doing so, the bucket strategy helps ensure a solid financial base that supports a comfortable and secure retirement.
Strategic Implementation
Implementing the bucket strategy for financial advisors involves a deep dive into understanding your goals, time horizons, and risk appetites. Here are the detailed steps involved:
- Portfolio Segmentation: Initially segmenting your portfolio into buckets that reflect specific needs and goals. This involves detailed profiling to ensure that the investment timeline and risk levels are appropriately matched with your life stages and financial objectives.
- Investment Selection: Selecting suitable investment vehicles for each segment to meet the defined objectives. This selection process involves analyzing various asset classes and investment products to find the best fit for the liquidity, growth, and risk management requirements of each bucket.
- Ongoing Management: Regular reviews and rebalancing of the buckets are crucial to adapt to changing market conditions and your circumstances. This proactive management involves monitoring market trends, economic indicators, and your personal life changes to make timely adjustments. This strategy ensures that the portfolio remains aligned with your evolving needs, offering peace of mind and financial security.
Each step in this process is critical to creating a dynamic, responsive strategy that supports your financial journey toward and during retirement.
The Future-Proof Bucket Strategy
The bucket strategy represents a structured, yet flexible approach to investment management that provides us with a powerful tool to navigate the complexities of portfolio diversification and risk management. By embracing this strategy, we can offer you financial products with a definitive roadmap to financial security and peace of mind. The landscape of investing is always changing, but the bucket strategy’s adaptability and repeated success is a testament to the innovative approaches shaping the future of financial planning.
If you have any questions, give us a call, or read Chapter 4 of “Wealth on Purpose” by Bryan Ballentine.
Have a great weekend!
Sources: Located at the bottom of the article.
Golf Tip of the Week
One of the best golf swings on tour has some good swing tips for you
Last week I was walking around Augusta National with my fellow newsletter writer Sam Weinman. We were talking about the things us newsletter writers talk about, which is golf swings. Specifically, Tommy Fleetwood’s golf swing.
As we watched Tommy play his way up Augusta’s ninth hole, Sam pointed out something:
“I probably get more swing videos of Tommy Fleetwood on Instagram than anybody else.”
I hadn’t really thought about it before, but it was a good point. If your Instagram feed looks anything like mine, open it up at any given point and you’ll be flooded with lots of golf swing videos, but three players’ golf swings in particular:
- Nelly Korda
- Rory McIlroy
- Tommy Fleetwood
And of course, each time I do, I linger over the video, like it, and move on, leaving the algorithm with all the information it needs to know what to give me more of.
Anyway a day later, Tommy Fleetwood finished off his third-round 72 en-route to his career-best T-3 finish, so I decided to ask him: Why do golfers seem to get so many Tommy Fleetwood golf swing videos? And what can they learn from it?
He laughed.
“Good question! I dunno. Probably because people like you won’t stop talking about it.”
(Guilty)
“Listen, I’m not a coach, but I think my swing has a kind of good framework that could help a lot of golfers.”
1. No slide
That word—”framework”—is important because it’s essentially how Tommy views the golf swing. Like a car driving down lanes on the road. You’re not too worried about the little movements; the goal is keeping the car between the lines.
One of those is the idea of staying very centered on the backswing. A common fault of amateur golfers is to slide their hips too far away from the target on the backswing. And when that happens, they can’t get back to their left side enough in time. It causes chunked shots and tops and all sorts of ugly shots.
“I like to stay quite centered,” he said. “If I’m centered on the backswing, it’s easier for me to get to transfer my weight, and get to my lead side on my downswing.”
Often you’ll see Tommy work practice hitting golf balls caddy holding an alignment stick on the ride side of his head. The stick literally prevents him from swaying too much off the ball.
2. Clubface control
The clubface is king in golf—it accounts for about 80 percent of the ball’s starting direction. In other words, if the clubface is pointing way left or right, that’s probably going to be where the ball goes.
Naturally, Tommy says he thinks about this a lot—and thinks you should, too. Something you’ve no-doubt seen him do is hit shots with an abbreviated follow through.
It was a go-to shot once upon a time, which has basically become his stock full swing. The key feel here is making sure he finishes so his arms are straight, and his chest is pointing towards the target. You can see him doing exactly that on Augusta’s 12th hole on Sunday.
“It helps me feel the right things, and get a sense of where the clubface is,” he says. “That’s a good thing for a lot of golfers.”
3. Neutral(ish) swing path
The final piece of Tommy’s framework is his swing path, or the literal direction he’s swinging the golf club. Golfers who tend to swing over-the-top generally tend to swing too far to the left. If you’re stuck, you may be swinging too far out to the right.
Tommy wants his golf swing right somewhere close to straight down the middle, and he’ll practice this by hitting balls between a yoga block and a set of alignment sticks.
“It just helps me feel the right things and makes sure my swing isn’t moving in any crazy directions,” he said. “Again, just a basic thing that I think golfers like.”
A few things Fleetwood says we can learn from his move, that will maybe make our own Instagram-worthy.
Tip adapted from golfdigest.comi
Recipe of the Week
Bikini Bellini
1 Serving
Ingredients
Cucumber & Basil Syrup
- 1/2 c. granulated sugar
- 1 Persian cucumber, coarsely grated (about 1/2 c.)
- 1/2 c. tightly packed coarsely chopped fresh basil
Cocktail
- 1 to 2 thin slices Persian cucumber
- 1 oz. pine
- apple juice (100% juice, not from concentrate)
- 4 oz. Prosecco
- Pineapple wedge and fresh basil leaves, for serving (optional)
Instructions
Cucumber & Basil Syrup
- In a small saucepan over a medium-high heat, cook sugar and 1 cup water, stirring frequently, until sugar is dissolved and liquid is reduced by almost half, about 5 minutes.
- Remove from heat. Add cucumber and basil and stir to combine. Cover pot and let cool.
- Note: It’s fine to strain and use the syrup at this point, but refrigerating the unstrained syrup in an airtight container up to 2 days yields much more flavor, as the intensity increases with time.
Cocktail
- Using a fine-mesh sieve, strain 2 tablespoons syrup into a small bowl or measuring cup.
- Place cucumber ribbons in a champagne glass. Add strained syrup and pineapple juice. Top off with Prosecco, then gently stir to combine.
- Garnish with pineapple wedge and basil leaves (if using).
Recipe adapted from Delish.comii
Travel Tip of the Week
Why You Should Always Order Ginger Ale on a Flight
Everyone has their drink of choice while flying.
Some people swear by the salty and spicy Bloody Mary. Some are tried and true Coca-Cola fans, and others stick to a trusty bottle of water, which — while certainly the healthiest choice — is a bit bland if we’re being honest.
And some of us know that a crisp, bubbly ginger ale is by far the best drink at 36,000 feet.
Sure, ginger ale may not seem like a very exciting drink on the ground. On the surface, it seems like a fairly milquetoast beverage reserved for sick days or a cocktail mixer, but as a standalone soft drink, it’s not what we would consider to be “exciting.”
Or is it?
Ginger ale was once one of the most popular soft drinks and mixers in North America. It was first developed in Ireland and England in the 1840s and quickly sailed over the pond where both golden and dry-style ginger ales became the talk of the town, so to speak.
John J. McLaughlin of Enniskillen, Ontario, first created Canada Dry — one of the most recognizable and popular dry ginger ale brands to this day — in 1904. His invention was so sharp and bubbly that he even marketed it as the “Champagne of ginger ales” because of Canada Dry’s taste and color.
In the 1920s, ginger ale became a staple in United States speakeasies. Bootleggers smuggling various liquors like whiskey and gin found that the soft drink was particularly good at making these spirits easier to drink.
Today, ginger ale brands don’t break the top 10 popular sodas in the U.S. Sweeter drinks like Dr. Pepper, Mountain Dew, and, of course, Coca-Cola, have clearly cornered the market, but there is one place in the world where ginger ale reigns supreme: the sky. And science can tell us why that is.
What happens to our taste buds?
It’s been proven time and again that our taste buds act a little differently when we fly. This is because the drier air and cabin pressure can dull our sense of taste and smell, making certain food and drink taste a bit different than they do on the ground. The air inside an aircraft cabin is about as thin and dry as it is on top of a mountain peak that’s about 6,000 to 8,000 feet above sea level, according to the World Health Organization.
Because of this, tastes like sweetness and saltiness are impacted the most, according to nutritionist Lauren Grosskopf, MS, LDN, who spoke to Travel + Leisure. The saltiness of drinks like the Bloody Mary or plain tomato juice can actually seem a bit dull, leaving a fresher and sweeter taste behind. So, Bloody Mary’s often taste better in the air, providing a sweet and spicy taste that gives humans more satiety (a feeling of satisfaction).
When it comes to ginger ale, the drier varieties (as opposed to sweeter, golden ales) are often more popular among the masses. When you’re in a plane, a ginger ale’s extra sweetness may not register on your taste buds, making your ginger drink extra-dry and sharp. Refreshing.
Other benefits of ginger ale
Grosskopf told T + L that ginger can also be especially good for travelers because of its medicinal benefits. Ginger has been used as a home remedy for nausea, indigestion, and muscle pain, and as an anti-inflammatory long before it was a soft drink.
“Ginger helps ease stomach upset with nervous flyers,” said Grosskopf.
It should be noted that Canada Dry actually had a lawsuit filed against them in 2018 because it was discovered that there was no ginger in their ginger ale, so it’s most likely the power of suggestion and the ginger-like taste that is giving you that soothing feeling. Plus, Sherry Ross, M.D., from Providence Saint John’s Health Center told FoodBeast that the carbonation, rather than the ginger, is what’s doing most of the work to soothe your upset stomach.
If your flight is handing out a brand of ginger ale that has real ginger in it, however, that’s all the better.
Drinking ginger ale also helps travelers avoid a common problem with other bubbly soft drinks like Diet Coke, which requires extra time for the bubbles to dissipate due to the high altitude. Diet Coke is actually one of the worst drinks to order from a flight attendant, since it slows them down during drink service.
In addition to any scientific or medical reasons you might want to reach for a Schweppes or Canada Dry on a plane, drinking ginger ale just feels good on an emotional level. Those of us who always order a bit of the bubbly stuff can’t really explain the reason why, but it’s clearly part of our ritual. And who can argue with that?
If you haven’t tried a ginger ale on a flight yet, we highly suggest giving it a shot. You’ll never feel more refreshed.
Tip adapted from travelandleisure.comiii
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Sources:
Phasing Retirement with a Bucket Drawdown Strategy
What is a retirement bucket strategy?
Disclosure:
Ballentine Capital Advisors is a registered investment adviser. The advisory services of Ballentine Capital Advisors are not made available in any jurisdiction in which Ballentine Capital Advisors is not registered or is otherwise exempt from registration.
Please review Ballentine Capital Advisors Disclosure Brochure for a complete explanation of fees. Investing involves risks. Investments are not guaranteed and may lose value.
This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.
No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. You should not assume that investment decisions we make in the future will be profitable or equal the investment performance of the past. Past performance does not indicate future results.
Advisory services through Ballentine Capital Advisors, Inc.
i https://www.golfdigest.com/story/tommy-fleetwood-golf-swing-tips-golf-iq
ii https://www.delish.com/cooking/recipe-ideas/a60360699/bikini-bellini-recipe/
iii https://www.travelandleisure.com/travel-tips/why-drink-ginger-ale-during-flight-plane
