One of a useful method I used to reduce my risk and grow my wealth.
This method basically have you commit to spending less than you earn, split the difference and invest them in different place to reduce your investment risk.
The security bucket are investment like fixed income bond, insurance policy and your first home. This cover your basic needs so at least 60% of the money you saved up goes into here.
The growth bucket are investment like stocks and business venture where there are more fluctuation. This ensure your money grow faster, however there are more risk involve. Therefore put about 20%-30% of the money you saved here.
The dream bucket are saving for you to complete your dream. The dream bucket can be a dream home, a dream car or a dream vacation. This bucket is basically there to reinforce you to keep you motivated, if not you will have nothing but money.
The central idea is when you make money in your growth bucket, put 50% of the profit to your security and 50% to fund your dream. If your growth bucket goes bad, your security bucket is your safety net.
However, it is extremely important that you don’t take money from your security bucket to fund your growth when an opportunity arise as any unforeseen circumstances will set you back indefinitely. Or worse if you use money in the other 2 bucket to fund your dreams which create a big hole in your overall wealth.
Video Explanation: https://www.youtube.com/watch?v=JyHvNxpebIM
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