| Learning how to manage and build your own | | | | In order to protect your money, maximise your |
| investment portfolio is quickly becoming one of the | | | | investment returns and ensure that you always have |
| most popular topics on everyone's lips. Self managed | | | | sufficient capital to meet your lifestyle, you must |
| superannuation, share trading, derivatives, all topics | | | | properly allocate your funds. |
| once spoken by only the financial elite are now | | | | To do this, we think of using buckets. We have two |
| common subjects at dinner parties and Friday night | | | | buckets to consider, the Safety Bucket and the |
| drinks. | | | | Growth Bucket. |
| This interest in financial planning has been fuelled by a | | | | Safety Bucket |
| rapidly aging population who have realised that their | | | | The safety bucket is like a safety net. This is where |
| lifestyles will be substantially compromised if they do | | | | we put our safe, secure investments and assets, |
| not become much more financially literate and | | | | such as our house, term deposits, insurances, etc. |
| responsible. | | | | The safety bucket will not produce a good return, |
| In addition, the introduction of the Internet, financial | | | | but then, that is not its purpose. It is there to ensure |
| seminars and software have all empowered the Arm | | | | that we can always meet our financial commitments |
| Chair Investor to manage their own money. | | | | and that we never risk our most important assets, |
| However, many of these home based investors have | | | | such as our house. |
| had little or even no formal training in funds | | | | Depending on our age, risk tolerance and desired |
| management. Now, while it is not a pre-requisite to | | | | returns, the amount of capital you allocate to your |
| have a degree in order to profit from various | | | | safety bucket will vary, however, you should look to |
| investments, it is imperative that investors | | | | investing between 10%-30% of your capital. If you |
| understand the basics, have a clearly defined | | | | are nearing retirement, or financial independence, you |
| investment strategy, realistic goals and appropriate | | | | may choose to increase that proportion, but when |
| asset diversification. | | | | still acquiring assets, it's best to keep the safety |
| Now while we all have clear financial goals - to make | | | | bucket as small as possible, whilst still achieving its |
| more money - many do not appreciate the | | | | purpose. |
| importance of sound asset allocation, or | | | | Growth Bucket |
| diversification. Many people have made the mistake | | | | The Growth Bucket, by virtue of its name, is |
| of putting all their capital into only one investment. | | | | obviously where we want to allocate our high return |
| Diversification is critical to the success of any long | | | | investments. Assets such as investment properties, |
| term investment strategy. But, by diversifying, you | | | | shares, derivatives, etc. Now, to achieve a high return |
| must balance your investments based on risk and | | | | in your growth bucket, you must be prepared to |
| reward. Putting all of your money in the bank may be | | | | make a loss. Even the world's most outstanding |
| very secure, however, your overall return will suffer. | | | | investors have lost money many times. However, by |
| Conversely, using all of your money to trade in | | | | properly allocating their funds, they have been able to |
| options may produce very high returns, but the risk | | | | come back from those losses to continue building |
| is very high that you could lose the lot. Therefore | | | | their portfolios. |
| you must allocate your assets to suit your personal | | | | Within the growth bucket, you should consider |
| level of risk tolerance. | | | | segmenting the bucket into Short Term Momentum |
| Investment Buckets | | | | investments, such as short term stock, option and |
| What are Investment Buckets? Well, at Platinum | | | | CFD trades, and Long Term Growth investments, |
| Pursuits, we like to make investing fun and easy. So | | | | such as blue chip shares, covered calls and |
| when we looked at the topic of Asset Allocation, we | | | | investment properties. |
| likened it to buckets. | | | | |