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INVESTMENTS
SECURITY AND GROWTH BUCKETS FOR YOUR PORTFOLIO
Introduction
Professional portfolio management must differentiate between acquired wealth and wealth that is being generated. For acquired wealth creating two portfolio models makes sense.
Structure and operational features
The Security bucket is invested in anything that is 'safe'. This might be term deposits, cash, money market funds, low volatile "all weather" hedge strategies or government bonds with short maturities.
The Growth bucket is invested in line with two strategies. These are the buy and hold strategy, keeping what provides good value for money, and the momentum strategy. Investments are equity, high yield bonds, single strategy hedge funds, commodities, gold and precious metals and real estate.
The idea is to make sure growth is controlled by taking profits out of the growth bucket and at the same time enhancing growth by adding wealth in times when the growth bucket experiences losses.
Relationship to asset allocation
The two buckets are inter-related and are best aligned to an overall asset allocation strategy
Growth Bucket:
-Single strategy hedge funds
-Equity and equity funds
-High yield bonds, convertible bonds
-Property investments
-Commodities and gold
Security Bucket:
-Cash and deposits
-Money market funds
-Government bonds short term maturity
-Fund of hedge funds
Characteristics:
-Higher volatility, higher return
-Low correlation between assets invested
-Buy and hold and momentum strategies
-Currency management
-Low volatility, lower return
-Easy access to money
-No currency plays
The strategy provides discipline and a method that protects wealth without the need for structured products. Re-balancing is a technique to counter the cycles and in the long run enhances stability in the overall portfolio.
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