In the world of wealth management, the Bucket Strategy is a powerful tool that we use to help you balance your immediate financial needs with your long-term growth objectives. By working together to segment your finances into distinct “buckets,” each tailored to different time horizons and risk levels, we can give you a clear sense of control over your money. This structured approach ensures that your investments are aligned with your specific goals and that your wealth is working effectively for you. Let’s dive into how this strategy works and how we can implement it to take charge of your financial future.
The Basics of the Bucket Strategy
The Bucket Strategy is how we work together to structure your investments into three key categories, or “buckets,” each tailored to various stages of your financial journey. This approach allows us to balance your immediate cash needs with the pursuit of long-term growth, all while managing risk in a way that aligns with your personal financial goals.
The Short-Term Bucket (The Grill)
- Purpose: We design this bucket to meet your immediate financial needs, covering the next 1 to 5 years.
- Investment Focus: Our focus here is on liquidity and stability, selecting conservative investments like high-yield savings accounts, short-term bonds, or stable-value funds.
- Why It Matters: With this bucket, we ensure that you have quick and easy access to funds for upcoming expenses, whether it’s a major purchase, an emergency, or a significant life event. By choosing low-risk investments, we can help protect your capital from market volatility.
The Mid-Term Bucket (The Fridge)
- Purpose: This bucket is where we address your financial goals over the next 6 to 10 years, such as saving for your child’s education, a home down payment, or an early retirement.
- Investment Focus: We aim for a moderate level of risk here, using a balanced mix of investments like intermediate bonds and dividend-paying stocks. This approach offers a blend of growth potential and stability.
- Why It Matters: The Fridge bucket allows us to grow your wealth while also protecting against inflation. Our goal is to help you achieve better returns while managing risk, ensuring you’re prepared for upcoming, but not immediate, financial needs.
The Long-Term Bucket (The Freezer)
- Purpose: Together, we build this bucket for your long-term financial goals, typically more than 10 years out. This might include retirement planning, legacy building, or funding a long-term dream.
- Investment Focus: Here, we focus on more volatile investments such as equities, aiming for substantial long-term growth.
- Why It Matters: With a longer time horizon, the Freezer bucket gives us the opportunity to pursue more aggressive investment strategies. Our objective is to ensure your wealth grows significantly over time, helping you stay ahead of inflation and taxes, and providing financial security well into the future.
Avoiding the Leaky Bucket
One of the key elements we focus on in the Bucket Strategy is preventing what is known as a “leaky bucket.” This happens when investments are not properly aligned with their intended goals and timelines. By working closely with you, we ensure that each investment is placed in the correct bucket, so you can benefit from both growth potential and liquidity. This approach helps you meet your financial needs without compromising your financial security, giving you confidence in your financial planning.
Implementing the Bucket Strategy
Successfully using the Bucket Strategy requires careful planning and ongoing management, and we are here to guide you every step of the way:
- Assess Your Financial Situation: Together, we will start by evaluating your current financial status. We’ll help you identify your immediate needs, medium-term goals, and long-term aspirations, estimating the costs and timeframes associated with these goals.
- Allocate Your Assets: Next, we assist in dividing your assets into three buckets based on their intended use and time horizon. The aim is to ensure sufficient funds in the Short-Term bucket to cover immediate expenses, invest in moderately riskier assets for the Mid-Term bucket, and allocate higher-growth investments to the Long-Term bucket.
- Align Investments with Goals: We’ll match each of your investments with the appropriate bucket. This alignment ensures that each bucket serves its purpose without exposing you to unnecessary risk.
- Monitor and Adjust: Regular reviews of your investment buckets are essential to ensure they continue to align with your evolving financial situation and market conditions. We make adjustments as needed to keep your plan on track.
Adapting to Real-Life Challenges
The Bucket Strategy we develop together is not just a theoretical model; it’s designed to be practical and adaptable to real-life situations. Whether you encounter unexpected health issues, job changes, or other significant life events, our well-structured bucket plan provides peace of mind. The flexibility of this strategy allows us to help you manage financial challenges without derailing your long-term goals, so you can focus on what truly matters.
Securing Your Buckets
The Bucket Strategy offers a comprehensive approach to managing your finances by breaking down your investment goals into manageable segments. This strategy helps to ensure that your investments are aligned with your life stages and financial goals, providing both stability and growth potential. Through careful planning, regular reviews, and a clear understanding of each bucket’s purpose, we’ll help you navigate the complexities of wealth management and secure your financial future with confidence.
If you have any questions or would like to explore further why the Bucket Strategy is such a crucial part of your financial plan, don’t hesitate to reach out to us. We’re here to help. Additionally, you can dive deeper into this approach by checking out Chapter 4 of ‘Wealth on Purpose’ by Bryan Ballentine.
Copyright © 2021. Ballentine Capital Advisors. All rights reserved.
Our mailing address is:
Ballentine Capital Advisors
15 Halton Green Way
Greenville, SC 29607
Sources:
Phasing Retirement with a Bucket Drawdown Strategy
What is a retirement bucket strategy?
A Comprehensive Guide to the 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.
