What is the Bucket Strategy?
Background
The bucket strategy divides your retirement corpus into separate buckets by time horizon: short-term cash, medium-term debt and long-term growth.
Explanation
The near-term bucket (1–3 years of expenses) sits in very safe instruments so you are not forced to sell growth assets during a crash. The medium bucket funds the next 3–7 years using relatively low-risk debt funds. The long-term bucket stays mostly in equity to combat inflation. Gains from long-term buckets periodically refill the shorter ones.
Example
If you need ₹60,000 per month, you might keep ₹20–25 lakh in savings and liquid funds, ₹40–50 lakh in short/intermediate debt funds and the rest in equity. Even if markets fall, the first few years of expenses are protected.
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