smcculloch posted on January 24, 2006 10:27
Recently, I posted a little about financial matters here and here. I was suprised that quite a few people were interested. I received quite a few comments, PMs and emails. So I thought I would add a new category called Financial.
I heard a great investment strategy the other day, I think it was from Tony Robbins.
Pretend you have 3 buckets for creating wealth:-
- Secure Bucket
- Growth Bucket
- Dream Bucket
You need to first decide your risk profile for putting money into each bucket. If you were young and could afford to lose some money, your % might be 50/50, or more risk adverse (70/30). You need to decide this in advance, this is the split of the amount of money you put into the secure and growth buckets.
e.g. you put 50% (or 70% if risk adverse) into your Secure Bucket, which are really secure investments like fixed interest accounts, term deposits, treasury bills, etc.. you put 50% (or 30% if risk adverse) into your growth bucket, these are investments like shares, mutual funds, property etc that have the potential to grow quickly but fluctuate.
Now, here are the rules.
For the secure bucket, every time it makes money, it automatically goes back into that bucket.
For the growth bucket, every time it makes money, divide it in 3, put 1/3 in the secure bucket, put 1/3 back in the growth bucket and put 1/3 in the dream bucket!
So what's the dream bucket? Well, its for luxuries like fancy cars, xbox360, etc, mainly because you need to some encourangement in the investment process and figures aren't always that comforting!
I really like this strategy because I'm not an overly risky investor, and this allows you to diversify some of your investments and help cover for the bad times.
What was the best investment advice you were ever given?