look news india
Personal Investing for Retirement: In today's ever-increasing inflation and digital age, food, clothing and shelter are not enough, but fun and luxury lifestyle have also become included in the bucket wish list of most people, especially the youth. Along with meeting these needs, it is very important to aim for long-term wealth creation in your bucket list to face future challenges and have a smooth and comfortable retirement.
In the long term i.e. 25 to 30 years, you can adopt three bucket strategy to create capital worth more than crores. American financial advisor Harold Evensky introduced the Three Bucket Strategy in 1980.
three bucket strategy
Under this strategy you can invest in three different categories to meet your current, short-mid-long term financial needs. Under this strategy one can focus on liquidity for short term, balance between liquidity and returns for medium term needs and focus on capital formation for long term capital needs.
By adopting this strategy you can meet all the financial needs of short term as well as long term capital formation.
How do you invest?
1. Liquidity Bucket:
First of all, divide the amount you have allocated for investment into three parts. The first is the liquidity bucket which meets short-term cash requirements. In which monthly expenses, health expenses and emergency financial needs can be met with the help of this fund. For which you will have to invest in debt funds, short term fixed deposits and bonds etc. You can withdraw investments from this bucket at any time. So that investment remains in other buckets.
2. Safety Bucket:
Allocate the second part of the investment under the security bucket. In which you can invest for five or more years. For which such investment schemes will have to be selected which will give attractive returns compared to inflation. The objective is to maintain a balance between your liquidity and returns. In which you can adopt fixed deposits, hybrid funds, midterm debt funds, small savings schemes.
3. wealth creation bucket
The objective of investing in this bucket is to create capital. You can make your retirement secure by investing for more than 8 years. By investing in which you get the benefit of compound interest. For which you can adopt options including equity, real estate, gold and silver, long term debt instruments.