Investment Portfolio for Beginners 🐣
The markets $SPX500 are down today after successive days of gains. In our portfolio, Disney $DIS is having the best day after great earnings yesterday. Disney+ will be launched next week. One of my regrets as you know was not to buy more of Disney when it was cheap. I first bought in June 2016 at $97/share. There are other companies in our portfolio having a good day, for example, two of our largest positions Skyworks Solutions $SWKS and Allergan $AGN . $TRV also doing well. $OIL and $GOLD prices are both down today meaning that our stocks $PE , $CXO and $POLY.L are all down. Not a bad time to invest more in these.
Investment Portfolio for Beginners 🐣
This video is not just for beginners but for anyone who wants to learn more about portfolio management and diversification. If you're a beginner and you don't have time to invest in the stock market, you want to do the least possible work and still beat the market percentage points. You don't need to see unrealistic returns. Let's just look at some examples, if you save$100 every month for 50 years, you'll have $60 000. If you invest in the S&P 500 (returns of 10%), then you'll have $1.5 million. If you can beat the market by 1% every year, that is, returns of 11%, you'll have $2.1 million.
Conventional wisdom says that you should have a portfolio of stocks and bonds with the ratio in bonds equal to your age. If you are 25, 25% of your portfolio should be in bonds. Bonds are usually less volatile than stocks but the returns are less. I don't agree with this rule. It all depends on your financial situation and your risk tolerance. You can be 25 years old but need to make a big purchase in the coming years(let's say a house), you don't want to put much money in stocks. Now, you can be 65 years old but with a high risk tolerance and you are able to have 90% of your portfolio in stocks. What we will look at today is the average portfolio but you can always adjust it. I believe that a beginner should adjust her portfolio every year. Some people will tell you to invest only in the $SPX500 since very few people ever beat the market. Going 100% in stocks is dangerous if you are a beginner. In 2008, the market crashed by 53%, if you happen to be retiring in such a year, you can lose half of your retirement portfolio. The best thing to do is to have an All-Weather Portfolio. Ray Dalio has one but I'll tell you my own which is more appropriate in our time.
A beginner should invest in ETFs (Exchange Traded Funds). 30% of your beginner portfolio should be in the $SPY ETF which follows the 500 largest US companies, the S&P 500 index. You will have exposure to Apple $AAPL , Microsoft $MSFT , Amazon $AMZN , JPMorgan Chase $JPM , etc. Smaller companies grow faster than big ones. Therefore, put 20% of your portfolio in the $IWM ETF which follows the Russell 2000 index, you'll have exposure to companies with market caps of less than $8 billion. 20% of your portfolio can be in the $EEM ETF which follows the MSCI index. This gives you exposure to emerging markets and to companies such as Alibaba $BABA , China Mobile $CHL and Samsung.
Because of low interest rates, bonds are not really a good investment right now. That's why I told you not to invest in Ray Dalio's All weather portfolio. But it is good to have some bonds because they usually go up when stocks are going down. I suggest you invest 20% of your portfolio in the $TLT ETF which follows long-term US Treasury bonds. Gold $GOLD is a hedge and you need to have 10% in gold through the $GLD ETF. Gold will always protect your portfolio in any uncertain time.
If you had invested $10 000 in such a portfolio on January 1st 2007, you would have $18 267 today. If you had invested in the $SPX500 , you would have $21 700. It seems we are losing money. Its because in 2007, there was a bubble in emerging markets. That's why I tell you to review your portfolio every year. It is minimal work, if you see US stocks, look expensive, maybe you should invest less in them. Don't make your portfolio static but also don't make drastic changes. For a beginner, making changes once a year is reasonable.
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