107 Build a Simple Portfolio
Build a Simple Portfolio
Now let's build a diverse yet simple portfolio.
Things To Know
- The resulting portfolio looks good.
The plan
Michael has $10,000 to invest. He wants to retire in 35 years.
After tinkering with his asset mix, Michael decides to be aggressive. He wants his asset allocation to be 0% bonds and cash, 70% large-cap U.S. stocks, 10% small-cap U.S. stocks, and 20% foreign stocks.
The portfolio
He decides to put $8,000 into a total stock market index fund to cover the large- and small-cap allocations and $2,000 into a Euro-Pacific-type fund to cover the foreign position. He gets it analyzed for diversity with an online tool.
The verdict
Given that Michael has many years until he draws on his portfolio, this mix looks good. It's diversified by investment style, with roughly three fourths of his assets in large-cap stocks and the rest in mid- and small-cap stocks. The portfolio isn't terribly overweight or underweight in a single sector, nor is it overexposed to one type of stock relative to the market.
Pretty simple, huh?
