A great portfolio contains a mix of assets and levels of risk. This gives you a good mix of upside from higher risk investments, while also making consistent and guaranteed returns.
5 Core Components to a Diverse Portfolio
1) Large-base index of the market
2) Growth-focused index
3) High Yield Savings Account
4) High Yield Certificate of Deposits
5) Bond market index fund
#1 Stock Market Index Fund
This is investing fundamentals 101 — start with an index fund that tracks the entire stock market, and that does it for a very low fee. These are juggernauts of returns over time. The S&P 500 has never failed to grow over 100% in any given 15 year period. That means your $1,000 investment will almost certainly become at least $2,000 in 15 years.
Here are some of our favorite options in this category:
- VFIAX (+24% in 2023)
- VOO (+19% in 2023)
- SWPPX (+19% in 2023)
- IVV (+20% in 2023)
And here are some platforms we recommend to buy these index funds from:
#2 Growth Stock Index Fund
These are the higher risk, higher reward piece of your portfolio. This sort of investment tends to track stocks in emerging fields or areas of high growth potential. In recent years, these have performed exceptionally well, but also have larger downside than the full market index funds, because the risky stocks aren’t padded by more traditional ones.
- TMFC (+37% in 2023)
- QQQM (+50% in 2023)
#3 High Yield Savings Account
Again, very much a fundamental investing strategy. Find a good savings rate and keep enough money to cover a few months of expenses in one. There are lots of great options out there (see below), but there are also bad options. Avoid the big banks! They offer tiny interest rates that should barely qualify as being called “savings” accounts. 0.01% from Chase and BofA is just not giving you a meaningful return.
#4 High Yield Certificate of Deposit
Certificates of Deposit (better known as CDs) can be forgotten, but are a great way to ensure returns in an uncertain rate environment, like we’re in right now. Like HYSAs, the secret is to avoid the big banks that offer you almost $0 of return for holding your money.
#5 Bond Market Index Fund
These are not the most exciting investment, as they don’t generally give you a big return, but they give you two key things: (1) security, and (2) consistent returns. Treasuries are a good way to make a safe investment that does generate some returns for you via dividends. Here are a few options we like:
- VGIT
- BOND
- AGG
- BNDX
Here are some platforms we recommend to buy these index funds from:
Disclaimer: The market is volatile. No investment is a guarantee of returns
