Building a portfolio that accommodates distribution needs (Bucket 1), provides stability to the portfolio by reducing volatility (Bucket 2), and hedges against inflation (Bucket 3) helps to aid in your ability to “ride out” difficult periods in the market . Successful financial planning starts with an honest assessment of the target rate of return needed, the level of risk associated with the target rate of return, and if this risk level is tolerable. In prosperous as well as difficult times, the best outcomes are the product of good planning and consistent decision making.
PUTTING IT ALL TOGETHER Managing risk, harvesting profits, and meeting distribution needs
Bucket 3. Dividends and capital appreciation/gains are distributed to Bucket 2.
3
Bucket 2. Interest and rent used to fill and replenish Bucket 1.
2
Bucket 1. Provides funds to cover lifestyle.
1
The household budget.
9
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