Jan 20, 2016

Jason Zweig, author of the Intelligent Investor and columnist for the Wall Street Journal, has studied a strategy gaining traction with higher net worth clients. He reports on a form of bucketing strategy being used by investment thinker Ashvin Chhabra--a former Chief Investment Officer with Merrill Lynch. Chhabra has developed a bucketing system to match his clients’ stage in life. Alongside a market portfolio of stocks and bonds, he says, you should hold a “safety” bucket of stable assets with at least 40% of your assets, plus an “aspirational” bucket of even riskier investments with about 5%.

In research papers and in his book titled “The Aspirational Investor,” Mr. Chhabra argues that instead of organizing your portfolio around the markets, you should organize it around your own goals.

He says a portfolio should achieve three goals: insure your standard of living against severe short-term loss, maintain your standard of living over time, and even improve your standard of living if possible . You want a mix of assets that can fund each of those goals no matter what the stock and bond markets do.

As Zweig says, the larger your safety bucket, the more risk you can withstand elsewhere. Steve and Sinclair dig into the fine points of the strategy reported on in the Journal.

In the Q & A segment, CFP®, CIMA ® Murray Titterington with IQ Wealth reviews his screening process for high value dividend paying stocks for Bucket 3 of the IQ Wealth.