1. Cash Savings provide liquidity, held outside of investments. Could be up to 2 years income depending on strategy and level of risk. It’s function is to provide immediately accessible cash to ensure protection from market downturns or for emergency funding situations. Typically in a high interest bank savings account. 1-2 year timeframe for use.

2. Term Deposit (or we could use Gold as part of this), providing a return of around 2-4% p.a. in a safe and secure environment. It’s function is to hold investments outside of the equities market and preserving capital. 1-3 year timeframe for use.

3. Income Bucket holds income generating assets, this could be an investment property or fixed income funds holding bonds or dividend paying assets. It’s function is to ensure you have cash generating investments regardless of market conditions. 3-4 year timeframe for use.

4. Balanced Fund ensures you have value investments, companies that have a good long term track record and a robust balance sheet. It’s function is to provide returns via dividend and equity growth but remain relatively stable. 5-7 year timeframe for use.

5. Growth Fund ensures you have growth investments, it’s likely to be much more volatile and requires a longer timeframe to realise higher returns. It’s function is to capture the full benefit of global trends which might include things like biotechnology, electric vehicles, renewable energy, cloud computing and e-commerce in the digital space. 8+ year timeframe for use.

As you can see from the above picture, the funds flow from the most risky to the least risky and are designed to try and keep the sectors ring fenced. For example, if there is a stock market downturn that will negatively affect the Balanced and Growth Fund buckets, this should mean that your Term Deposit (or Gold) holdings in bucket 2 increase. If both are liquid, this would mean that you can still maintain an income stream for retirement without the need to draw down from negative positions (closing a loss).

This is also a holistic structure that will allow you to grow your assets while employed by filling up your holdings from Bucket 5 backwards. Another thing people often do not understand about ‘risk’ in investing is how to best structure your draw down. You want to be drawing down from your least risky assets first in retirement. This allows you a longer investment timeline for growing your wealth in the most attractive sectors such as the technology sector.

This leaves the cash there available for regular income but also for emergencies which can cover medical, family, employment or even stock market downturns. If for some reason you found a situation where ALL your 4 invested buckets were negative for the quarter, you could fall back on cash and not need to touch your portfolio.

When properly implemented, this strategy will allow us to ensure that you don’t have any ‘blind spots’ in your wealth and retirement planning. It should also provide you decent growth, wide diversification as well as a layer of protection throughout retirement and while we monitor and adjust the amounts in each bucket to suit your lifestyle or through any life changes we can help alleviate any undue stress and allow you to relax and enjoy your retirement.