3 Simple Portfolios You Can Start in 2020

Keeping it simple

Doing things simple is often the best approach for the great majority of people.

This is usually mentioned by the greatest investors of all time such as Warren Buffet and John Bogle.

As Warren states:

“I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”

It is far easier for the average investor to just focus on the long term and on what is more likely to happen.

As far as we can tell, the Stock Market, in general, goes up in the long run.

Yes, it is true, that we have market crashes.

Yes, it is true that some companies go bankrupt.

Yes, it is true that your money will not be the same if you check your account every day.

These are the facts that we know from the markets, so the simplest strategy should at least cover these.

Invest for the long term

The same way you are deducting part of your income to social taxes hoping to get a pension, later on, you should invest as much as you are able to for the long haul.

This will be your self-made retirement. The longer you keep your money invested, the longer it compounds generating magic returns.

Track the market

Instead of taking the risk of picking stocks, you should just buy a low-cost product that tracks the overall market.

3 positive things you are achieving here…

You are already diversified, protecting yourself against the rotten apples of the Stock Market.

You have low management fees and these play an important role in the long term. Fees do compound over time. Since these are generally a percentage of the assets you own, the more you have the more you will pay. So find something that is under 0.2%.

Some brokers offer free-cost transactions on some of these Index Funds. Take advantage of these. Again, if you are paying a fee every month for 30 years, it is going to add up.

Consistency is key

Investing every single month is important and this will average out your cost as time goes by.

Pay your self first even if it is just a fraction of your income. Some money is always better than nothing.

You are working for yourself, so be selfish. Pay others later than you pay yourself. You are the priority.

Portfolio 1: The Large-Cap Index

For this portfolio, we only care about the S&P 500 index. This represents the 500 largest companies listed on the US market.

A Vanguard fund that tracks this index is available under the ticket symbol VOO. It only carries a 0,03% management fee so it is one of the cheapest you can find.

This is composed of 100% equities. If you are young with a long term horizon, this is usually a great bet. You can read more details here.

Portfolio 2: The Total Stock Market Index

With Portfolio 1, one can argue that is very large-cap biased. Yes, it is true!

However, you are most invested in large companies as of today.

So we might be missing out on the potential big companies of the future which are still medium or small today.

The solution is to invest in a mix of large, mid and small-cap companies that compose the CRSP US Total Market Index.

If you stick with Vanguard, you can invest in VTI. Again with a 0.03% expense fee.

Read more here.

Portfolio 3: The International Index

With Portfolio 2, one is invested in the US market and not globally.

As a mix of Portfolio 1 and 2, you can add a portion into VXUS, which tracks the FTSE Global All Cap ex US Index, measuring the performance of stocks issued by companies located outside the United States.

It features a higher expense fee than the previous 2 options, of 0.09% but still a low value.

Treating your investments as an automatic savings account, that you are not able to touch for a few years is in my view one of the easiest and error-free ways to invest.

All you need is patience and avoid emotions to influence your decisions.

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Disclaimer: I am not a financial advisor. Always do your own research when investing.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.