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Get your investments going with this simple three-bucket system

​Your money deserves better than to idleGetty Images
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​Your money deserves better than to idle
Investing involves paying and receiving money for purchase and sale transactions, receiving interest and dividends, offering and receiving securities for market transactions and keeping track of all this for reporting and filing of tax information. Rather than paying attention to investment proofs and thinking that having a file with the details is sufficient record-keeping, investors need to see these arrangements as an act of keeping financial transactions in order.

Besides annual tax reporting, your investments need monitoring. Organise them efficiently so as to keep matters simple- which is exactly what the real task of investing also is- simple. All you need to do is create three buckets, which you allocate money to and draw from, as needed. Given below are these three buckets in better detail.
LiquidityGetty Images
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Liquidity
Liquidity is the need for money, expected and unexpected. You expectations of returns must be minimal, you must take nil to low risk here and you should be able to access these funds at short notice or instantly. For your liquidity needs, keep your money in a savings bank account, fixed deposit (FD) and in liquid funds.
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​Income
That bucket of investments which pays you an interest income is your income bucket, such as PF, PPF, bonds, company deposits, debt funds. This serves a two-fold purpose for investors. Firstly, your regular income may be insufficient and this provides you with a secondary income stream. For retirees, this is usually the case. Secondly, you stay protected from the risk that the value of your investments will fluctuate because these investments are stable and not volatile. You must make your choice wisely because you are the lender when you invest. Note this thumb rule- the best borrowers will offer the lowest interest.
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​Growth
Growth refers to investments that appreciate in value with time. Equity shares, property, gold are examples. You should not look at these from the income aspect for the simple reason that they offer little or no income. They also fluctuate in value and consequently, in returns. They, however, offer long term appreciation and compounding, if chosen wisely. They are good tools to link to long-term financial goals.
​How to deal with the 3 bucketsGetty Images
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​How to deal with the 3 buckets
You need to take a macro-level view on how much of your monthly savings should go into each bucket. Choose conservatively till you get a better idea. Invest when you have surplus funds, draw when you need the money. Investments are not a tactical task where you need to take a decision based on something new. Don’t trade, speculate or time the market hoping to make easy money. Begin with established products that have a healthy track record. Choose 3-4 products to invest in for a year. It is easy once you get started. Cross that initial bar of inertia.

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