1. Bucket investing strategy
Asset Allocation
Bucket investing strategy

2. How to Save Money & Build Wealth!
Banks
Checking & Savings accounts, credit cards, loans, etc
Brokerage Firms
Specialize in accounts for stocks, bonds, mutual funds => where you SAVE!
Link checking & brokerage accounts
keep them at separate institutions
Save $ through Direct Deposit & Automatic Investing
90% of Paycheck
to Checking
10% of Paycheck
to Brokerage

3. Brokerage Accounts
Most financial institutions offer brokerage accounts
allow you to invest in stocks, bonds, mutual funds, commodities, etc….
Beware: many brokerage firms have high/hidden fees
mutual funds fees, management fees, etc…..

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Lawsuit Against Business Managers
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5. Asset Allocation
Process of dividing your savings into investment “buckets”
Buckets picked based on Risk Tolerance & Time Horizon
$100,000 Portfolio
I think
I’m Brilliant
very high
risk!
Cash
Account
no risk
Bonds
med. risk
Stocks
high risk
Real
Estate
risk?

6. Returns before inflation = nominal return
Real & Nominal return per year by Asset Class
Returns before inflation = nominal return .
= real return
Savings
Account

7. $100,000 Portfolio:
Step 1: Asset Allocation: Choose investment by bucket

8. Cash Accounts
Money Markets, Bank CD’s, Savings account: are short term accounts where you earn the federal funds rate (currently 2.25%)
Purpose: to have “liquidity” for planned & unexpected expenses
Target: 6 months living expenses in “cash accounts”
Expected return => usually equals the rate of inflation

9. Bonds Government Bonds: 2-10 year in maturity are medium risk.
Purpose: For a 2-5 year holding period
Expected Return: 1-2% above rate of inflation
Age based allocation: Bond % Portfolio = Your Current Age
20-year old => 20% Bonds & 80% Stocks
70-year old => 70% Bonds & 30% Stocks

10. Stocks Minimum of 5-year holding period. risk.
highest historical returns => 9.8% nominal return over 100 years
Highest historical volatility => losses of 20-50% do occur in Bear markets
Follow age rule: 80% Stocks & 20% Bonds (for 20-year old)
Invest in diversified stock portfolio, such as the SP 500 Index Fund
Minimize fees paid to mutual funds, financial advisors & brokerage companies