How do I bucket my Investments and Assets?

There are several dimensions to consider when we decide to invest in an asset like direct equity, mutual funds, debt, bonds real estate, venture capital, private equity etc. The key ones are

• life circumstances
• risk ability
• risk tolerance
• experiences

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These assets and investments are ultimately a means to an end. They are there to help us meet our goals like buying a home, sending our kids to college or building a retirement or independence corpus for us. And there we cannot miss the “personal” in personal finance.

The three buckets we can put them are in

• Personal Risk: They should not jeopardize our basic standard of living – Defensive investments like bonds and fixed income. Perhaps our first home which is paid off.
• Market Risk: They should ensure the returns beat inflation and for that, we have to take some amount of risk. Equity investments are the most common market risk investments.
• Aspirational Risk: We can only allocate that amount here and even if the investment goes to zero, it won't affect the first two goals. However, if this pays off then it will help move us to the next orbit in terms of our aspirations. Like starting our own business, buying a vacation home, or taking a year off to go on a world tour.

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Over the month we will discuss and look at the framework in detail and see how investors at different phases of their life can look at building their investment allocation framework and bucket their investments and assets.

Regards,

Anish