Each bucket represents a different phase of your retirement. The first bucket represents the first phase and should include the safest investments since you'll need that money soonest. The second bucket is the middle phase of retirement and should have a blend of safe and risky investments so you have a chance to make good returns while playing it safe at the same time. The third bucket represents the last phase and here you can choose your riskiest assets because you need this money to grow the most. If something goes wrong you still have time to take corrective action.
Learn more and see a sample bucket portfolio at Morningstar.
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