The 3-Bucket Approach to Investing

The idea of investing separately into three time-specific buckets is simple. Known in the financial world as liability-driven investing, or LDI, the 3-Bucket Approach focuses not on maximizing total asset returns, but on addressing future liabilities, including home mortgage and living expenses, college tuition, healthcare expenses, and—the biggie—retirement income. By assigning a “bucket” to three unique time horizons and identifying expected (and unexpected) liabilities for each, you can use this approach to focus on ensuring the right amount of cash flow when you need it.

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