ETF Investing

An ETF investing strategy is not one of the high-yield strategies that are the focus of this site. Rather, it’s a way to invest the main part of your portfolio that is comprised of stocks and bonds. In my opinion, allocating between a few low-cost ETFs is the best investing option for nearly every individual investor. This applies to both smaller investors and high-net worth individuals. The data shows that a simple portfolio comprised of 2-4 ETFs has historically outperformed many actively managed strategies. Although outperformance cannot be guaranteed in the future, I can guarantee that if you follow an ETF investing strategy, you will pay low fees.

Here are a few model portfolios comprised of ETFs.

1) 60% U.S. stocks/ 40% bonds

A portfolio comprised of 60% stocks and 40% bonds is a classic and simple allocation. Other investing strategies are frequently compared to the 60/40 portfolio, which serves as a benchmark. You can get this portfolio by buying just two ETFs: a S&P500 index fund and an aggregate bond index fund. If you choose an S&P500 index fund, you are allocating almost entirely to large-cap companies based in the U.S. (although many companies receive revenue from international markets).

2) 80% U.S. stocks/20% bonds

3) 60% U.S. stocks/20% foreign large cap stocks/20% bonds

4) 60% U.S. stocks/10% foreign large cap/10% foreign developing/ 20% bonds