Start here: The 3-Bucket System and why I built it

The income investing framework I used to retire from corporate life in 2023 — and what it can do for you.

3-Bucket System

Welcome to Freedom Builder. I’m Rico Nasol — and if you’re coming from YouTube, you already know the gist of what I do. If you’re new here, here’s the short version: I spent 20 years as a creative executive at Netflix and Zappos, building things from nothing. In 2023, I retired from corporate life. Not because I hit some magic number. Because I built a system that generates income whether I work or not.

This newsletter is where I share that system in full. Every week. No fluff, no hype — just what I’m actually doing with my own money and why.

Before anything else, you need to understand the 3-Bucket System. It’s the foundation for everything I talk about here. Once you get it, every ETF, every dividend, every portfolio decision I share will make sense immediately.

The problem with most income investing advice

Most people approach income investing one of two ways. They either chase yield — buying whatever pays the highest dividend without understanding the risk — or they play it so safe they barely beat inflation. Neither works if your goal is actually building an income stream that replaces your paycheck.

What I needed was a system. Something I could look at every month and know exactly what was working, what wasn’t, and where my next dollar should go.

That’s what the 3-Bucket System is.

Before the buckets: your safety net

One thing before we even get to the three buckets — none of what follows replaces a real emergency fund. Mine sits in a Fidelity cash management account earning around 3.5%. It’s not trying to perform. It’s trying to exist.

Rule of thumb: 6 to 12 months of your essential expenses, sitting in cash, completely outside your investment portfolio. If you don’t have that yet, this is genuinely where you start — before a single dollar goes into any of the three buckets below.

Bucket 1: Defensive

Let’s be precise about the name here — defensive doesn’t mean safe. These are still equities. They still carry real market risk and can absolutely draw down with the broader market. What makes them defensive is what’s underneath them: established, large-cap companies and broad index exposure, generating organic dividend income rather than yield engineered through options strategies.

Think SCHD, VGT, VOO, SCHG. Lower volatility, lower current yield, no reliance on premium-selling strategies that can erode over time. This is the most stable bucket in the system — not a risk-free one. Its job is to be the quality foundation everything else sits on top of.

Bucket 2: Core

This is where stability and income start to blend. Core holds funds built around option-income strategies on broad, diversified underlying indexes — think IWMI, IRYI, MLPI, QQQI, SPYI, JEPI, JEPQ. More yield than Defensive, still built on diversified exposure rather than single-stock concentration. This bucket does a lot of the steady, unglamorous work of moving you toward your Freedom Number.

Bucket 3: Income

This is your highest-yield bucket, and it’s the one that demands the most attention. Funds here are more concentrated and often built around a single underlying stock or a narrower, more aggressive strategy — think AIPI, CHPY, AMDW, or funds like XQQI, XSPI, KGLD, SVOL depending on what you’re targeting. These aren’t buy-and-forget positions. They require understanding the strategy underneath them — covered calls, premium income, yield sustainability — and they move the fastest, in both directions.

How the three buckets work together

Here’s what nobody tells you: your target yield — the 8%, 12%, or 17% I talk about — isn’t the yield of any single bucket. It’s the blended yield across all three, weighted by how much you allocate to each.

A Conservative target leans heavily on Defensive and Core, with a small slice of Income. An Aggressive target flips that — more weight in Income, less in Defensive. Neither allocation is “the right one.” They’re different tradeoffs between stability and speed.

For what it’s worth, my own blend currently runs around 22% — more aggressive than even what I’d call my Aggressive tier for most people. I’m still in the building phase, so I’m comfortable carrying more of that risk right now. That’s a personal call based on my own timeline, not a suggestion that everyone should run this hot.

Every month in this newsletter, I’ll show you my actual allocation, what changed, and why. That’s what paid subscribers get — the full picture, not just the framework.

What to expect from Freedom Builder

Every Wednesday, you’ll get a new issue. Free subscribers get the frameworks, the concepts, and the ETF education — genuinely useful stuff, not teasers. Paid subscribers get the specifics: my actual positions, monthly income reports, full ETF deep-dives, and the behind-the-scenes decisions I don’t share anywhere else.

If you’ve been watching the YouTube channel, you know I don’t do vague. I don’t do “it depends.” I give you my actual thinking and let you decide what to do with it.

That’s what this newsletter is. Let’s build something real.

“Messy action is better than no action at all.” — If you want the full picture — real positions, real income numbers, real decisions — consider upgrading to a paid subscription. $9/mo. Cancel anytime.