What’s a bucket investment strategy?
Planning for retirement means balancing growth, stability and access to your money. A bucket strategy is a simple way to do that.
You divide your investments into investment buckets based on risk and timeframe. That way you have money for everyday needs, a buffer for emergencies and downturns, and investments left to grow over the long term.
The five investment buckets
Each bucket has a clear job, from cash you can access now to growth assets you won’t touch for years.
| Bucket | Purpose | Typical investments | Timeframe |
|---|---|---|---|
| 1. Cash savings | Ready access to money and a buffer against downturns or emergencies, often up to two years of income | High interest savings accounts | 1 to 2 years |
| 2. Term deposits | Steady, lower returns that preserve capital outside share markets | Term deposits, and for some investors gold | 1 to 3 years |
| 3. Income | Regular income regardless of market conditions | Rental property, bond funds and dividend paying investments | 3 to 4 years |
| 4. Balanced | Returns from dividends and growth, with stability | Companies with strong balance sheets and proven track records | 5 to 7 years |
| 5. Growth | Higher long term returns, with more volatility | High growth sectors and growth funds | 8 years or more |
Timeframes and investments are a guide. Your own buckets depend on your goals, income needs and risk tolerance.
How it works
Money moves from lower risk to higher risk buckets, and each bucket is ring fenced for its purpose. If share markets fall, the balanced and growth buckets may drop in value, while term deposits and cash hold steady. You keep your income flowing without selling investments at a loss.
Building up and drawing down
While you are working: you fill the buckets from the growth bucket backwards.
In retirement: you draw down from the lower risk buckets first, which gives the higher risk investments more time to grow. Cash stays available for medical, family or market driven needs.
If every investment bucket is temporarily down, you live off your cash savings and avoid selling during a downturn.
The benefits
A well run bucket strategy gives you:
- Diversification and steady growth
- Protection from market volatility
- Flexibility to adjust as your needs change
With that structure, you can reduce financial stress, protect your wealth and focus on enjoying retirement.
How Finsol can help
We design and manage bucket strategies around your retirement income needs and review them every year.
Call us on 0800 346 765 or book a free consultation.
Finsol is a financial advisory business founded in Hawke’s Bay in 2010, looking after more than 6,000 clients across New Zealand. This article is general information only and does not take your personal circumstances into account. Past performance is not a guide to future returns.
