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Dollar Bill in Jar

The Bucket List: An investment strategy from a moneylender’s daughter

by Rachna Bijlani, CFP®

April 30, 2019


The most important financial lesson that I have learned from my dad, who is an old-time moneylender in India; is that you cannot become rich unless you can make money while you sleep. This essentially means that you need to put your money to work by investing it wisely, so it continues to grow even when you’re sleeping. The big question now is whether there is a strategy to investing wisely.


Growing up, I saw my dad buy rental residential and commercial real estate; invest in gold and diamonds, stocks and government bonds; lend money on interest to all kinds of people and businesses while also running a retail garment business. Although he involved me in all his business and investment activities, as a child, I understood the process but never fully grasped the reasoning behind the process. I always wondered how he knew how much to invest in which business, or why he was risk averse with certain investments while simultaneously taking high risk positions in other investments. Was there a method to his madness, was there a rule behind the diversification or was it all just random? As I grew older, I understood his well-crafted investment and diversification strategy. I am now a CERTIFIED FINANCIAL PLANNER™, but more importantly, I am a proud daughter, and sharing my father's wisdom on this platform is an honor for me.

Here is my dad’s investment strategy that I will call “The Bucket List”:










Bucket 1 : Nondiscretionary Expense Bucket


Make a list of all your non-discretionary expenses like mortgage/rent, food, clothing, utilities, insurance, medical expenses, childcare, taxes, car payments, gas and any other essential expenses. Calculate how much you spend annually on the above expenses. Your goal should be to keep this number as low as possible and generate income higher than this number.

There can be a lot of ways to fill this bucket, like income from a steady job, rental income, income from a business and income from dividend producing stocks or bonds. The common factors here are predictability and low risk. You need stable, low risk assets or predictable business or employment income to fulfill these needs. In my dad’s case, the income from his rental properties and his garment business were utilized to fill this bucket.

There is another component to this bucket, which is Savings.


Income – Expenses = Savings


Your savings then need to be transferred to Bucket 2 and Bucket 3.

Bucket 2 : Crisis Bucket


This is the bucket that you will need to draw from in case of a financial emergency like job loss, stock market recession, sudden death or a medical emergency. The assets in this bucket provide security and hence these need to be extremely low risk, liquid assets such as money in a checking account or other short term investments.

My grandparents were forced to migrate to India as refugees during the partition of India in 1947. The only assets that they were able to take with them while fleeing their homes to escape death and destruction, was cash and my grandmother’s jewelry. Because of this very personal experience, my dad considers gold and cash to be his safe havens which explained his investment in gold. You need to have enough in this bucket to handle a short-term crisis, but you cannot risk parking all your savings here or you won’t have anything left for Bucket 3.

Bucket 3 : Growth Bucket


The remainder from Bucket 1 & Bucket 2 is poured into Bucket 3. This is where you make money in your sleep. My dad’s Bucket 3 was filled with his stock market investments and his money lending business. These were riskier investments with high growth potential. A  portion of the growth in this bucket was used to pay for discretionary expenses like vacations, housemaids, nonessential shopping and other luxuries and the remaining was reinvested to reap the benefits of compounding . The growth in this bucket also reduced the dependence on active income in Bucket 1. Staying actively invested compounds the growth over time, which is how you ultimately get rich. It is extremely essential to make sure that you first take care of Bucket 1 and Bucket 2 and then go on to fueling Bucket 3 with your savings. Always determine your risk tolerance before making any investments and focus on risk adjusted rate of return, not merely the return, while evaluating an investment.


Applying the “Bucket List Strategy” to construct a well-diversified portfolio


The above principles also lay the foundation for constructing a well-diversified securities portfolio. Reits, bonds and high yield stocks can be a good source for stable dividend income to fuel Bucket 1. Certain commodities and money market funds can replicate the security in Bucket 2 and domestic and international stocks can provide the growth in Bucket 3. All these different pieces can come together cohesively to make a well diversified, low Beta portfolio based on your risk tolerance and financial goals. Seek a financial expert who can help you analyze your financial goals, assess your risk tolerance and make an investment strategy that’s right for you.


I would like to end this article on a quote that only a moneylender’s daughter could’ve heard! My grandmother would often say this to me and my brother in Sindhi, which is our native language, “Moor kha vyaj pyaaro thindo aahe”, which translated in English means, “Interest is dearer than the principal”. This was implied literally with regards to my dad’s business and figuratively, where she would blatantly declare than my brother and I were dearer to her than her own children!

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Nondiscretionary Expense Bucket

Crisis Bucket

Growth Bucket

Bucket 1

Bucket 2

Bucket 3

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