Sometimes investing is not about how many funds, stocks, ETFs, or any other type of investment you have but rather the least amount possible with the maximum diversity. Those who are new to investing, often have problems managing a larger portfolio and staying diversified. The two portfolios listed below are easy ways to stay diversified while minimizing commissions.
One Fund, One Portfolio, No Commissions
Looking for a portfolio that requires very little if any management? Vanguard Target Retirement Funds offer investors an easy way to create a diversified portfolio with little knowledge or maintenance. All you really need is to pick a date, set up reoccurring deposits, or make deposits when you choose. This is the easy portfolio an investor can have as they readjust with your age to put more of your cash into income producing assets. This portfolio is more for retirement accounts, something you can make monthly or yearly contributions to and forget. This fund is not for trading; but rather for the buy and hold method.
Want more control? Try two ETFs.
If you are looking to be more active in your portfolio while keeping cost down, try a two ETF (exchange traded fund) portfolio. The only ETFs that you need are SPY (which tracks the S&P 500) and AGG (which is a bond fund). An easy way to know what percentage of the holdings take 100 and subtract your age, this is the percentage of the SPY you should own. The rest goes to AGG. If you want more risk just add more to your SPY holdings, and for less risk add more to your AGG holdings; pretty simple concept here.
These two portfolios are just an easy way for investors to start investing or to build a foundation on which to build a broader portfolio which I will write about in future posts. Many investors don’t want to look at the stock market on a daily basis and these two portfolios are very easy to run and keep commissions low. If you are a new investor, I would start with the second portfolio and watch how each ETF acts. You will know when to purchase more and when to sell a portion after seeing patterns.
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