The 3-Bucket Strategy Is Lame

I love how my clients love the 3-bucket strategy. It's easy to explain and understand, but I really don't like using it in practice. As an advisor, the pros of the 3-bucket strategy don't outweigh the cons, and here's why...
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Patrick King is a fee-only financial advisor in Atlanta and the Founder of Prana Wealth. Over his career, Patrick has helped CEOs, all-star athletes, Grammy-winning artists, and many others build their wealth, retire sooner, and create a legacy. Patrick enjoys yoga, mountain biking, golf, travel photography, and Clemson football.
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[@ChloeBensonBeautyBoxes]

I have 1 year in the bank, 2 years in CDs currently at near 5%, 90% of rest is in the S&P 500 with 10% scattered in things I’m exploring.

[@corvette1023]

Great content! Any thoughts on creating a podcast? I listen to The Money Guys but I think your voice and delivery could carve out a good niche

[@jayholiday256]

It's the same thing but with a different name. You can also cover your expenses with social security plus a small SPIA annumity for all weather safety

[@BSGSV]

Before hearing about this today, I arrived at a multi bucket strategy on my own based on business logic as I saw a need to mitigate the risks of retirement. My buckets are Bucket 1) 1 year operating cash on hand at all times to make annual life stable but also to ride out most market ups and down. Bucket 2) Emergency fund (my old savings acct) now deployed in CDs and conservative investments which can provide another 3yrs of operation to ride out a longer crash (not replacing a water heater - main cash covers that). Bucket 3) My main retirement funds invested 50% growth (index funds and long haul stocks with excellent track records for growth and stability) No speculation here, just diversified, consistent market-level growth. Bucket 4) is the other 50% of my retirement funds which are in income generation from dividend stocks diversified across REITS, utilities, finance, healthcare, commodities. Each is chosen for historic stability of price and dividend payout, and ability to recover after crashes. I live out of bucket 1. Bucket 2 is reserve capacity. Bucket 4 is my income engine which I use to replenish bucket 1 annually. Bucket 3 (growth) increases my wealth and replenishes income generators over time. Bucket 5 is social security which provides extra safety. So my risk mitigations are: portfolio capable of income covering my needs despite having SS, operating cash to avoid liquidating stocks in bad markets, reserve funds to operate during extended crashes, and sufficient growth to continue to build wealth and repair my income engine as needed.

[@payroll970]

Just a waste of time. Just rebalance annually. If stocks are down you are not selling stocks you are buying them.

[@ivanvarykino8202]

I use Vanguard professional services and have had the same advisor for a couple years now. 2 buckets: 1 is my portfolio that we agreed on how to divide up. I'm not officially retired but living on cash - bucket 2, while i make up my mind. Have 2 yrs expenses in high yield savings, 1 yr in a 5+% cd. Will receive another 3 yrs expenses worth of cash next year. Hope to end up with about 2-3 yrs to sit on and use the rest to buy and fix up a used motorhome that I will use to explore during retirement. Cause ya only live once....

[@randy74989]

To each his own: If you are retired, about 50/50 allocation is a good start (Moderate allocation) and that includes T-Bills, Intermediate Bonds, and your money market fund. And a mix of AVGE, FDIF, and MAGS for your equity exposure and Worldwide coverage. You can pick between MAGS and FDIF if you want to avoid duplicate company coverage; however, both of these ETFs cover AI, go with FDIF which is a fund of funds ETF of "DISRUPTOR" companies in five sector ETFs in the stock market. You can also add the GLTR to add precious metals to your portfolio. I have four buckets with the fourth being a taxable account for my RMD withdrawals.

[@KayakBassNation]

So almost a barbell strategy rather than 3 buckets? Cash and a 60/40 portfolio rebalanced intermittently?

[@davidfolts5893]

Compartmentalization fails to account for the total picture, which has flux built-in...

[@jeanjasinczuk7543]

I am skeptical about bucket strategy as never understood how the Bucket strategy refill the buckets: for example, after 1 year, stocks and bonds are down (like 2022!) ? What do you do with cash bucket. Looks like it should be nothing. What if after year 2, bonds and stocks are up, but have only recover half of what they loose during the previous year. Which bucket do you refill? What if such pattern goes for several years and bucket 1 and bucket 2 need to be refill.

[@semosancus5506]

You refill big when the market is sailing strong? It's all about timing and of you are that into it you won't need some simplified nonsense like the 3 bucket strategy.

[@pensacola321]

I am 73 years old and have been retired for 16 years. I have never used, nor have I ever known anybody else that has ever used the "bucket strategy." A bad idea with no practical use...

[@dawsonspath2257]

Excellent! At a high level then, how do you manage your investments and cash? I won't have millions when I retire (maybe 1 million at most), so I am trying to figure out the smartest way to manage that egg and make it last 30-40 years. I have experimented with a bucket-ish approach and it appears it will perform well. Would be curious what your approach is.

[@johnjerrehian4642]

Way too much going on with most advisers. No one seems to talk about passive income. Rental properties, etc. Why not make life simple and put most of one's funds in a 5+% CD and never look back. Risking your capital preservation on riskier stocks does not sound like that much money should go in there. If you want to generate income with stocks, write covered calls. Enjoy the premium on a monthly bases.

[@ivanvarykino8202]

Jibberish

[@PJBHolden]

Because cds won’t be 5% forever just like they were 1% pre covid

[@CalmerThanYouAre1]

I use a 3 bucket strategy too. 40% BTC, 40% TSLA and 20% TQQQ! 🚀 Scared money don’t make money, my man! 😎😂

[@michaeloconnor6683]

Man o man, are you going to get smoked

[@CalmerThanYouAre1]

@@michaeloconnor6683 haha just a joke but if I’d have used that allocation 10 years ago, I’d be wiping my tears of joy away with $100 bills! 🤷🏻‍♂️🤦🏻‍♂️

[@semosancus5506]

No Nvidia? You are a lightweight 🤣

[@CalmerThanYouAre1]

@@semosancus5506 😂

[@bold2013]

War chest sounds some much better than a bucket

[@fialee8ca132]

10 years in the safe bucket is an insane amount. If you are in retirement, there's prob a good chance you'll be dead in 10 years.

[@PJBHolden]

😳

[@H-Zazoo]

I noticed that also. How many 10 year cycles does he think I have left ? 😵

[@MaryOlson7]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family...

[@MaryOlson7]

@AustinWalker67 Quitting may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. Bridget Mary Turow, a licensed fiduciary whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help.

[@MaryOlson7]

@AustinWalker67 Bridget Mary Turow

[@MaryOlson7]

Lookup with her name on the webpage

[@Patricia-Margaret]

@AustinWalker67 Bridget Mary Turow her trading strategies is working for me for more than a year now and I’m making good profit from the stock market and she's 100% honest, reputable and trustworthy