Passive income strategy - 3 basket approach

I was browsing for strategy specifically for handling my financial freedom account money that i came across the idea of basket strategy which was introduce by adam khoo in "Secrets of Self-Made Millionaire" book . To my surprise it was a book i have few years ago which i bought . Perhaps now i do have the real opportunity to try it out whether this strategy will work out.

You will need to divide the moneyfrom your financial freedom account into 3 baskets (the luxury basket is optional and the money from luxury will be coming from the other 3 basket) .

Security basket: The reason you need this basket is that it is for your emergencies usage in case you suddenly meet with some emergency financial situation and you can have immediate access to withdraw it. Yet you still need to regularly invest in here to keep up with the inflation.

Therefore, it should have a target return of 1.5% - 4.5% per annum / year

example of security basket:
- cash
- fixed deposit/ certificate of deposits
- personal housing
- insurance
-capital guarantee funds


Growth Basket: This basket is where you will build your net worth & positive cash flow assets that will lead you to financial freedom.

Target return for this basket should be around 8.57% - 20% per annum / year
- Index funds
- Exchange Traded Funds
- Mutual Funds

High-Growth Basket: This basket is where you will accelerate your building net worth and positive cash flow assets . Just like growth basket, it do grow your money except that in this basket , it will even increase more than invest in growth basket.

The target of return for this basket will be around 15%~ 25%
*in this basket, you must not touch it for 5 to 10 years to let the compounding work its magic.

Example:
- winning portfolio of 10 - 12 company stocks


Luxury Basket: This basket where you save up to buy your dream assets. you can take up some amount money which generate from growth basket and high growth basket investment (for example interest or dividend you get from funds but not the principal you invest).

Note: you will be only taking 20% of the returns from growth or high growth basket. THe rest of the 80% return from growth basket will be reinvest.


Steps for Basket Strategy
The first step is to fill your security basket with 3-6 months cash and short term fixed- deposit (for emergency).

2nd step - you allocate a small % into security basket , and then the rest is divide equally to growth and high growth basket.

Recommended Age saving %

Below 30 years:
Security basket:20%
Growth Basket:40%
High Growth Basket: 40%

30-40 years:
Security basket: 30%
Growth Basket:35%
High Growth Basket: 35%

40-45 years
Security basket: 40%
Growth Basket:30%
High Growth Basket:30%

45-55 years
Security basket: 60%
Growth Basket: 20%
High Growth Basket: 20%

above 55 years
Security basket: 70%
Growth Basket: 15%
High Growth Basket: 15%


Hope this will help you :) i'll be continually searching for more strategy to cater different needs in future :)