Thomas H. Ruggie, ChFC®, CFP®, Founder & CEO, Destiny Family Office.
When most investors think about building a portfolio, they picture the familiar mix of stocks, bonds and cash. But the investment world is much larger than that. Alternative investments like real estate, private equity, commodities and collectibles can be valuable tools for long-term growth and diversification. They’re not for everyone, but when used thoughtfully, they can help investors weather the inevitable ups and downs of the market.
The key is to approach them strategically. Alternatives come with real benefits: diversification, inflation protection and higher potential returns. But they also carry challenges like illiquidity, high fees and limited transparency. Understanding how and where to allocate them in your portfolio is crucial.
A Strategy Built From Experience
I first developed my allocation framework more than 25 years ago, right around the peak of the dot-com bubble. Back then, I saw many clients eager to pour too much of their wealth into tech stocks, because that’s where everyone else was making money. Needless to say, that didn’t work out well for everyone.
I wanted to create a strategy that helped people resist the emotional pull of short-term excitement and instead focus on building durable, goal-based portfolios—in short, a structured plan to avoid putting every egg in one basket.
The “bucketing strategy” approach aligns assets with specific time frames to balance risk tolerance and liquidity needs. It looks at three factors simultaneously: how much money you have, how much you’ll need and when you’ll need it. Using present value calculations, it matches assets with future income requirements and divides them into three time-based buckets:
- 0-10 Years: Short-term needs, focused on stability and liquidity
- 11-20 Years: Moderate risk, balancing appreciation with accessibility
- 20+ Years: Long-term capital meant to grow without near-term pressure
The money allocated to that third bucket is, statistically speaking, capital you shouldn’t need for at least two decades. Since liquidity isn’t a concern for this portion, it’s the ideal home for alternative investments. Their higher risk and lower transparency become more acceptable when viewed through that long-term lens.
The strategy is a living, breathing plan, one that is reviewed annually and adjusted as life circumstances change.
The Psychology Of Calm Investing
One of the biggest lessons from using this strategy over the past two decades is how much it reduces client anxiety. When the market dips, I don’t get panicked calls. Because clients’ short-term needs are protected, they can ride out the volatility.
To help clients understand the concept, I use a simple notepad sketch instead of a pie chart. This makes the concept of time-based buckets clear—especially for spouses or family members who might not be as financially involved. This approach improves long-term retention. Clients who understand their plan don’t fixate on daily performance or benchmark comparisons. Once they see that their “now money,” “later money” and “future money” are clearly defined, anxiety fades. It might sound old-fashioned, but it works.
Age, Legacy And The Long View
One misconception I often challenge is the idea that older clients should automatically hold more fixed income. Age alone isn’t the deciding factor—needs are. For some, the money in that 20-year bucket might ultimately go to their children, grandchildren or favorite charitable causes. So, even if someone is in their 70s, it doesn’t mean their long-term capital should sit idle. If they’re not the ones who’ll need the money, the investment horizon effectively extends beyond their lifetime.
Sometimes this perspective requires a reset, especially when clients join during turbulent markets. When things start going sideways, people can lose perspective. That’s when the bucketing framework becomes invaluable by re-centering the conversation on purpose instead of performance.
I have a saying: “Strategy trumps performance.” The truth is, most investors don’t lose money because the market moves; they lose it because they react emotionally. A sound strategy up front prevents poor decisions in both up and down markets.
A Framework For Incorporating Alternatives
Alternative investments can be powerful tools when they’re integrated with intention. But without a solid plan, they can easily become sources of regret.
If you want to incorporate alternatives into your plan, start by clarifying your time horizons. Know what money you’ll need in the next five, 10 and 20 years. Build liquidity into your near-term buckets, and let your long-term capital work harder. Since alternatives often require years to mature, they belong in the portion of your portfolio designed to sit untouched for the long term.
Having a clear, needs-based strategy can protect you from market volatility and, more importantly, give you confidence and peace of mind. And in my experience, those are the most valuable returns an investor can earn.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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