Bucket approach to investing

When we establish an investment portfolio for our clients, we look at strategies for the immediate future. We also look at strategies that can support you over the next few years and strategies for the longer term. We think of these as our three investment ‘buckets’ and this may be an approach that suits your goals.

Bucket 1: Supporting your short-term income needs

It’s important to set up investment strategies that will support your income needs in the near future. We usually say this is for the next 12 months. These strategies can contribute to any short-term lump sums you may be saving for, such as the cost of a holiday or a new car, along with building up your emergency fund.

Short-term investment strategies usually include things like:

• setting up a cash account with a high, fixed interest rate
• investing funds in the short-term money market
• setting up term deposits that will provide a guaranteed return over a set period of time.

Bucket 2: Working towards your medium-term goals

Many of our clients have financial goals they want to achieve well before their retirement, such as buying an investment property, renovating their home, supporting their children’s education or spending time overseas. Setting up a medium-term investment strategy gives you the peace of mind that you are working towards these goals even as you focus on more immediate financial commitments. Medium-term strategies may include things like income-focused investment products or investments that aim to provide competitive returns over the short to medium term.

Bucket 3: The growth portion of your investment portfolio

Alongside your short and medium-term investments, it’s also important to maintain sections of your portfolio that will grow over the long term. This section of your investment portfolio is one that you should not plan to access for at least five years. Typically, it will be invested in growth-style investments such as shares and property.

Finding the right mix for your financial goals

When setting up your personalised investment strategy, think about the following factors:

• your short-term financial commitments such as your current living expenses, home loan and other outstanding debts
• your medium-term goals like travel, further education or property purchases
• whether you currently have or are building towards a financial safety net that can support you through any unexpected challenges
• when you plan to retire and what you would expect your annual income to be throughout your retirement.

Whether you’re looking towards retirement in the near future, planning towards a medium-term financial goal or simply need more financial security today, the Milestone Financial team can help. Get in touch with us today on (02) 6102 4333.