ETF Portfolio: A Simple Portfolio Model - dummies

By Russell Wild

This model is an easier-than-easy ETF portfolio. It is a perfectly fine, workable investment model with decent (although not great) diversification. It may be enough for anyone without a great amount in savings (say less than $50,000), or someone who has more but wants to keep things as simple as simple can be.

This model includes (in order of appearance) large cap stocks, small cap stocks, international stocks (large and small), and bonds (both conventional and inflation-adjusted).

This portfolio can be tailored to suit the aggressive investor who can deal with some serious ups and downs in the hopes of achieving high long-term returns; the conservative investor who can’t stand to lose too much money; or the middle-of-the-road investor.

Keep in mind that you should always have three to six months in living expenses sitting in cash or near-cash (money markets, short-term CDs, Internet checking account, or very short-term high-quality bond fund). You should also have all your credit card and other high interest debt paid up. The rest of your money is what you may invest.

Aggressive Middle-of-the-Road Conservative
Vanguard Mega Cap 300 ETF (MGC) 20 percent 16 percent 12 percent
Vanguard Small Cap ETF (VB) 20 percent 14 percent 8 percent
Vanguard FTSE All-World ex-US ETF (VEU) 20 percent 16 percent 12 percent
Vanguard FTSE All-World ex-US Small Cap Index ETF (VSS) 20 percent 14 percent 8 percent
Vanguard Total Bond Market ETF (BND) 15 percent 30 percent 45 percent
iShares Barclays TIPS Bond Fund (TIP) 5 percent 10 percent 15 percent