Investment Tips: Bank account will remain full, you just have to invest like this..

Every person wants his life after retirement to be peaceful. For this, he works hard and raises funds for retirement. As important as it is to save money for retirement, it is even more important to invest the money saved in the retirement fund in the right place. If your money is invested in the right schemes, you will not have to face any financial problems and your old age will be spent happily. ‘Three Bucket Strategy’ is very useful in managing retirement corpus properly. American financial advisor Harold Evensky propounded the Three Bucket Strategy in 1980.

Bucket strategy proves to be effective in creating wealth in the long run. Under this strategy, the asset allocation of the retirement fund is done in 3 different “buckets” based on different investment tenures. Under this strategy the short-term focus is on liquidity, the medium-term focus is on the balance between liquidity and returns and the long-term focus is on wealth creation. Investments made by adopting this strategy can generate regular cash flow required for monthly expenses in the short term and earn good returns in the long term. Thus, with the 3-bucket strategy, you can make the best use of your retirement funds.

Liquidity bucket

Some part of the retirement fund is put in the ‘liquidity bucket’. This will meet your cash needs in the short term. The money put in this bucket will be useful to you when you need money for monthly expenses, health expenses, and emergencies. Here returns are not given that much attention. The money in the liquidity bucket can be invested in debt funds, short-term fixed deposits bonds, etc. You can withdraw the money kept in this bucket anytime for your monthly expenses. Because of the money kept in this bucket, you will not need to withdraw the money invested in other buckets and you will continue to get good returns on your investment.

Safety bucket

Once you have managed to meet your immediate needs through the liquidity bucket, you can park a portion of your retirement fund for the next five years or more in the safety bucket. Yes, it must be kept in mind that to keep the money in the safety bucket, it is important to choose such investment schemes whose returns beat the inflation rate. The purpose of investing money in the safety bucket is to maintain a balance between liquidity and returns. You can invest in fixed deposits, hybrid funds, medium-term debt funds, and small savings schemes up to a tenure of 5 years.

Wealth Creation Bucket

The purpose of putting money in this bucket is to grow your capital over time. By investing in the first two buckets, i.e. the Liquidity Safety Bucket, you have already made arrangements to meet your needs for the next 8 years. Investments are made in the wealth creation bucket to meet the needs over 8 years. By investing in it, you get the benefit of compounding and also returns that beat inflation. For this, you can invest in equity, real estate, gold, and long-term debt instruments.

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