13 Buckets Of Money

Everyone with some wealth asks themselves the same question....what should I do with my money? They say "money makes money" and that's true...except when it disappears through a bad investment and inflation. The obvious answer to this question use to be to put it in a bank account.

"What should I do with my money?" is really the wrong question to start with.

The question should really be "What CAN I do with my money?"

This is because there are a limited number of options for investing your money.  And these limited options are true for everyone in the world, from the kid saving a £1 a month to the billionaires in this world.

Think of it as 12 plastic buckets arranged on the floor.  Everyone comes along and throws their money into these 12 buckets.  When your turn comes along, you have to do the same.  You have to decide which of the plastic buckets to throw your money into.  Do you drop it all into one bucket or spread it around different buckets.  This is the same dilemma every investor in the world faces. This is how those speculators and bankers in the City Of London and on Wall Street in New York see the world of money.

So, let me quickly go through what each of these buckets say on them.

The Cash Bucket - You simply keep your cash under the mattress or preferably in a safe deposit box. Inflation slowly eats away at it's purchasing power.

The Foreign Cash Bucket - You swap your currency for the currency of a foreign country. Then you hope the value of their currency goes up against your currency so you can exchange it back for a profit.

The Savings Bank Account Bucket - You give your money to a bank and they pay a regular interest payment on your money. The bank will take your money and invest it somewhere. They take the risk on the investment.

The Property Bucket - You buy property, usually a home.  Most people just provide a deposit for a mortgage.  The lucky few buy it whole with cash.  Some inherit property. Landlords buy a property to let it out. Others buy commercial property such as shopping malls and office blocks.

The Collectibles Bucket - You buy real things that you hope will rise in value over time. These could be antiques, jewelry, gold and silver coins, artwork, wine or anything else expected to appreciate in value over time.

The Education Bucket - You invest in your own education to raise the value of your time. More knowledge and more skills make you a more expensive person to employ.

The Entrepreneur Bucket - You invest your money into your own business idea. You hope to profit from the sales of the product or service you supply to consumers. The government treats you as a CEO of the business.

The Debt Bucket - You buy other people's debt (IOU's) and they pay you interest on that debt.  When people buy a savings bond with a fixed interest rate, they are actually buying government debt.  It's also possible to buy corporate debt. Government and corporate debt can also be bought within Mutual Funds, pensions a Exchange Traded Funds. Another type of debt you can own is Peer-2-peer lending.

The Gambling Bucket - Yes, gambling on slot machines, horses, greyhounds and lottery tickets is an investment of sorts.  However, you will have be one of the lucky few to profit it. Most lose their money.

The Equities Bucket - You buy shares in limited companies and corporations. You become a part owner of these companies and receive a dividend (share of the profit) from their operations.  And you hope the value of the shares will rise on the stock market. This bucket also includes investment funds and pensions that allow you to buy a single share in a fund which covers shares from many different corporations. These are Mutual Funds, Investment Trusts and Exchange Traded Funds.

The Commodities Bucket - You invest in basic resources.  A basic resource is usually something that comes out of the ground like iron, copper and oil but can also be agricultural products like corn, wheat, rice, soy bean and even trees and pigs. I would also include the virtual currency Bitcoin in the commodity bucket.

The Speculation Bucket - This bucket is a type of gambling, but it is done on a huge scale with stocks and shares and commodities. It includes complex types of investments such as spread betting, stock options, future options, binary options, naked short selling and contracts for difference. Investors bet against each other without actually owning the thing they are betting on.  In the world of high finance, this is a very very big bucket.

Sorry, there is a 13th bucket.  That bucket is the dreaded Tax Bucket....aaaggggghhh. That's the government's bucket which devours some of your money. At the bottom of the Tax Bucket is an infinite black hole.  Most people try to avoid putting their money in the Tax Bucket.

The important thing is that all the money in the world ends up in one of these buckets. All those trillions of US dollars, British Pounds, Japanese Yen, Euros and many more are in one of those 13 buckets.  And so is your money. All those savers, pension funds, city slicker traders and speculators in the world are deciding into which of these 13 buckets to spread their money.

Does that make our world of wealth and money a little simpler to understand?

It answers the question "What CAN I do with my money."

Well, you can put it in one or more of 13 buckets.

As for answering the question "What SHOULD I do with my money."

I cannot answer that.  You have to figure that out for yourself how to spread it around the 13 buckets to fit your needs. Or get some professional advice to help you.