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What Is Asset Allocation?

Allocate Your AssetsWhat is asset allocation? When you invest allocate your investment in the following buckets: security bucket, growth bucket and dream bucket. Start with a small amount when you start investing. Start to invest in the security bucket first.

Define a financial goal that when you receive your monthly income no matter what you invest the amount in the security bucket.

Begin to take small investment risk first. Start taking a big investment risk can quickly lead to financial disaster. Make the important decision that you are going to allocate your assets in the three buckets. With asset allocation you invest in all the three buckets, depending where you are in life.

The security bucket goal is for financial security. The amount in the financial security bucket must be the amount of money you need to cover your food, housing, car and other necessities. The security bucket will not give you high compounding earnings. Put your first investment in the security bucket.

Put the amount of cash that will make you feel secure as cash for 2 – 6 months. Make a research of the investment to make sure that it is a secure investment with low risk.

If you are conservative invest 40% of your total investment amount in the security bucket and divide the remaining amount in the grow bucket and the dream bucket. If  you are very agressive consider investing 30% of your total investment amount in the security bucket and put more money in the grow and dream bucket.

The growth bucket is to help you grow from financial security to financial independence. You reach financial independence when you don’t have to work. Everything is covered with the earnings of your investments in the financial independence bucket.

You have a greater earnings of your investments in the grow bucket if the investment is successful. However the investments in the grow bucket are high risk investments. You do not have any guarantee of the return of your investments in the grow bucket.

Research the investment in the grow bucket. Determine the total investment amount. Divide the amount in the security bucket and in the grow bucket.

The dream bucket is the investment category that lead you to financial freedom if the investment is successful. With the return of the investment you can pay for your dream lifestyle.

You pay for all the material things that you want in your life as world travel, buying an island, anything that you don’t really need, but will make you feel more fulfilled toward your dream life.

You have reach financial freedom. You don’t have to work. Everything you can think of in your life is covered. Invest in all the three buckets. Divide your total investment amount in all the three buckets.

To become financially independence and financially free you will have to create passive income from investments and/or business, so you are not trading one of your most valuable resources you have in life, which is your time, for money. Your income from investments and/or business will create you more money.

Your financial goal must be that you return on investments will be enough to cover your financial security, then the goals of independence and ultimately freedom. In order to do that spend less than you earn. Invest the difference. Keep reinvesting your returns of investments for compounded growth.

Invest. If you do not invest, you have already lost and you will never be financially independent and free. No risk, no reward. Manage your investment risk and invest in all three buckets. Give yourself a chance to experience the potential reward of investing. Build your money making machine that will give you income for life.

For your financial success!

 

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