A Tiered Investment Strategy
Which is Better? Using your existing portfolio or updating it?
“You first must build a foundation to create a solid plan.”
Eliminate as much risk as possible.
Exchange plans that are out dated or low paying.
Keep Principle intact - to produce more interest.
Earned interest should keep up with inflation.
Have a Legacy plan
People approaching or already in retirement face a challenge in balancing the need for income
and growth from their investments. One method to consider is the tiered strategy.
Using this approach, you divide your portfolio into tiers representing different investment
objectives. Income blocks for the Foundation, Buckets for distribution and growth.
The number of tiers may vary depending on your specific circumstances, but let’s
look at a four -tiered strategy as an example.
The first tier would contain the funds you need to live on in the short term, say up to FIVE
years. *If not need for income now, they can defer
For this tier, your money would be invested in cash or cash alternatives – lower-risk
assets designed to preserve value but without much growth potential.
**unless you just receive interest, then the principle stays in place. Our Speciality!
The second tier would hold investments to generate income for the medium term – say, for a
period up to 10 years. Money in this tier could be invested in bonds and dividend-paying stocks or Annuities
that strive to provide both income and moderate returns, but also carry low risk.
The third tier would hold longer-term assets that you might not need for at least 10 years –
designed to pursue the growth needed to potentially fuel the strategy for
decades.
Here’s how everything works together.
As the assets in tier one become bucket begin to be depleted, they can be
replenished by returns generated by tier two.
Over the longer term, tier three can replenish Buckets one and two through rebalancing and other share sales, if needed.
Tier four if needed usually is left to the Family, because have a great job up front if preserving capital as well as creating consistent income.
The advantage of this strategy is that it divides an investment portfolio into manageable
segments. Income Growth and leaving as principle in tact as possible ,
However, it also requires disciplined oversight that carefully considers tax
consequences and unpredictable market performance, (If you in the Market…. ) as well as other factors.
Although a tiered / Bucket strategy is typically used in retirement planning, it can be considered for any
investment objective that strives to balance current income and future growth.
Asset allocation and diversification are methods used to help manage investment risk;
they do not guarantee a profit or protect against investment loss.
All investments are subject to market fluctuation, risk, and loss of principal.
When sold, investments may be worth more or less than their original cost. **Safer investments with collateral are preferred.
Investments offering the potential for higher rates of return also involve higher risk.
Rates of return will vary over time, particularly for long-term investments.
**Rebalancing sometimes involves selling or exchanging some investments in order to buy others. Investors should keep in mind that selling investments in a taxable account could result in a tax liability.
Always seek Qualified Tax advice.