In our last blog post, we covered the post-retirement bucketing system with options for investments based on different objectives of the post retirement stage. Today, we will look at a more generic situation of “no-goals” investments or general wealth management. A good certified financial planner would be able to help you create your investment buckets even if you don’t have financial goals.

General Investment Fund: Times when you have surplus amounts to save and invest but no specific objective to save towards. Instead of holding onto the funds and missing out on investment opportunities or investing in unsuitable products, use the following balanced strategy:

• Cash Bucket: About 20% or more of the total investment amount should be retained in FDs, Bank accounts, Liquid Funds or cash to meet any unplanned expenses or emergencies. In the absence of this, you can use this fund to invest in opportunity-specific instruments like shares of a good company when its prices reduce, or investing in a Mutual Fund when the markets are low.
• Medium-term bucket: About 30% of the investments can be in products from where you can easily withdraw money in 2-3 years if need be, without losing value. These won’t drive the growth in your portfolio but ensure stability and a source of money (combined with the cash bucket) to meet urgent/unplanned short-term requirements without affecting the long-term, wealth-creating investments. A combination of a conservative hybrid mutual fund, a balanced advantage mutual fund, some corporate FDs or highly rated bonds for 3-4 years are suitable.
• Domestic Wealth creation, international wealth creation and gold buckets: Divide the rest of the 50% amount across these three categories. Choose well diversified equity Mutual Fund portfolios domestically as per your risk suitability for long-term wealth creation. Also allot some part to international equity mutual funds that give you geographical diversification which is very important to counter local risks. Gold adds balance and some support to your portfolio when all asset classes are performing badly, simply because in such times, most investors use the “flight-to-safety” approach and move their money to gold where they feel comfortable when no other investment avenue makes sense. Do not exceed 20% of the total investment amount for the international and gold mutual funds combined and keep a time horizon of 5-7 years for these three buckets.

The objective of this strategy is to cover all bases for when you don’t know what is coming your way in terms of financial aspirations. By striking a balance across different options available, you are preparing for different situations while letting your money still effectively grow.