1. The Security Bucket
By JT fredericks

2. Security Bucket
This is where you keep the part of your wealth that you cannot afford to lose
Safe investments that you lock up tight
Put the money in  don’t take it out
“Slow but steady” money-making machine
Contains:
Cash/cash equivalents
Bonds
CDs
your home
your pension
Annuities
your life insurance policy
structured notes

3. Cash/Cash Equivalents
Very liquid assets
Easily able to produce cash
Bank Accounts
Receive interest on deposits
Despite low interest rates, at least you know your money is safe and readily available
Bank accounts are insured by FDIC (government) for balances up to $250,000
Money Market Fund
Essentially mutual fund made up of low-risk, short-term bonds
Higher rate of return than bank accounts
Still have quick and easy access to money
Money Market Deposit Accounts
Savings accounts where bank invests your money in short-term debt, and they pay you a slightly higher interest rate
Insured by FDIC, meaning you are guaranteed not to lose money if they (the bank) make bad investments

4. Bonds Fixed-income investments Essentially an IOU that gives you money
The income (return) you get from bonds is fixed at the time you buy them
Essentially an IOU that gives you money
Different types of bonds have different ratings (AAA, BBB, D, etc.)
Security bucket-worthy bonds will have higher ratings
Can directly buy bonds or can buy low-cost bond index fund
Own the whole bond market, not limited to a select few
TIPS
Protects against inflation
If you think there will be inflation, buy these

5. CDs (Certificates of Deposit)
You loan money to the bank and they return it plus interest after a set period of time
Insured by FDIC
Market-Linked CD
CD linked to the growth of the stock market
Currently, traditional CDs only pay .28% interest but a market-linked CD can allow you to keep up to 5% of the stock market gains
Even if market falls, you get your entire investment back, plus the promised interest
Easy returns but with NO RISK!

6. Your Home
Owning a home with a fixed-rate mortgage is a hedge against inflation
Gives you tax advantages
If you have paid off you home entirely, you can earn income by renting out some or all of it

7. Your Pension
A fund into which money is added during an employee’s employment years, and from which payments are drawn to support the person’s retirement from work in the form of periodic payments
Pensions are increasingly rare these days, but if you do receive one, it is safer to keep it than it is to liquidate it
Also includes Social Security payments

8. Annuities
Insurance products that give you a guaranteed income for life
If done properly, they can be like private pensions
Fixed Indexed Annuity
“Fixed” = account is guaranteed to never go down will not lose original deposit
“Indexed” = tied to stock market index (S&P 500) gains
May be limited to a certain percentage (If market goes up 10%, you may be limited to only keeping 5% of the gains)
Some annuities allow you to keep 100% of the market’s gains while still allowing you to avoid the years the market is down
The catch is that the company that issues the annuity may share some of your gains

9. Life Insurance Policy Private Placement Life Insurance (PPLI)
Benefits:
Unlimited deposit amounts
No tax on the growth of your investments
No tax when accessed
Any money left over for your heirs cannot be taxed
*Unfortunately, these are only available to accredited investors (net worth of at least $1 million)
TIAA-CREF offers the public with similar financial services
Offers life insurance products with no sales or surrender charge
Investment options include low-cost index funds
Tax benefits equivalent to PPLI

10. Structured Notes
Loan money to a bank  they pay you back plus a percentage of gains from an index (S&P 500, commodities, gold, REIT, or a combination)
J.P. Morgan offers a 7-year structured note with 100% downside protection (guaranteed to not lose original investment), plus up to 90% of the market’s gains
*Structured notes are only as good as the banks that issue them
Choose wisely

11. Security Bucket Summary
Cash/Cash Equivalents (Money Market Account)
Bonds
Certificates of Deposit (CDs) (Market-Linked CD)
Your Home
Your Pension
Annuities (Fixed Indexed Annuities)
Life Insurance Policy (PPLI)
Structured Notes

12. To Learn More…
All information was taken directly from Tony Robbin’s book, Money: Master the Game