9 Most Popular Investment Portfolio Strategies

in today's video we're going to delve into the nine most popular Investment Portfolio strategies hi if you're new to the channel my name is Tay from Financial tortoise where we learned how grow our wealth slow and steady as people get smarter about investing one of the key obsessions that I have commonly seen with many individuals is this the obsession with designing the perfect Investment Portfolio we understand the importance of Buy and Hold the importance of keeping costs low and the importance of using passive Investments over active ones and the answers to these principles are pretty straightforward by broad market index funds with low expense ratios and hold them for a very long time however when it comes to constructing our personal Investment Portfolio we can't seem to agree if you just Google best Investment Portfolio you're bombarded with thousands of comments regarding what people believe are the best portfolio out there Warren Buffett's two fund portfolio Bogle has three phone portfolio Ray dalio's all-weather portfolio the list never ends so do you want to know the secret behind the perfect portfolio it doesn't exist it's like unicorns and Santa Claus yes I've told my kids that they don't exist judge me how you want just like mermaids there is no such thing is a perfect Investment Portfolio and if someone espouse that there is one be highly doubtful to be honest no one I mean no one knows what portfolio is going to perform the best in the future yes are there general rule of thumb we should follow when it comes to constructing a good Investment Portfolio of course a good portfolio should be well Diversified within each asset class and across different asset classes but to know what specific allocation will outperform all others is akin to a fortune teller predicting who is going to win the World Cup in 2026. no one knows but that doesn't stop us from continuously trying right so in that Spirit let's review the nine most popular Investment Portfolio strategies that I've seen talked about the most and just a heads up there's nothing scientific about this list it's just what I've seen within my circle I'm sure I'm missing thousands more so feel free to add the list in the comments below also for this list of portfolio ideas I'll use Vanguard funds as my usual default but similar low-cost portfolios can generally be made using Fidelity swap or iShare index mutual funds or ETFs all right let's kick it off with the most simplest portfolio out there the first most popular Investment Portfolio strategy is that one fund strategy that's right one fund 100 in either the S P 500 Index Fund or the total stock market index fund the Vanguard equivalent will be Vanguard S P 500 Index Fund the vfix or the Vanguard Total stock market index fund vtsax Just One Fund from start to end no asset allocation no second or third fund to complicate your portfolio just writing out the ups and downs of the market with this one single fund you might think I'm just joking that this could be a portfolio idea but I've actually seen people follow the strategy and done surprisingly well and when I mean well having a portfolio in the millions now mind you some did it unintentionally but I still commend them for their consistency this strategy as simple as you can get every investment dollar whether in a retirement account or a taxable account goes into the single fund it is simple very low cost Diversified among 500 or 4 000 different companies and it has a long track record of exceptional returns now my personal take is that this is totally fine when you're in your wealth accumulation phase thinking your 20 30 years even 40s and that would actually highly encourage it if you're in this phase but I do get a bit nervous about the strategy if you're mirroring retirement the stock market's long-term returns comes with a lot of short-term volatility and you can be forced to sell at the least optimal time alright moving on to the number two most popular Investment Portfolio strategy a step up from the One Fund strategy and as you can guess the two fund strategy you diversify your stock Holdings with some bonds if we were to construct a portfolio with Vanguard funds it would look like the following a good percentage in the Vanguard Total stock market index fund also known as vtsax and also some in the Vanguard Total Bond market index fund also known as vbtlx from a high level perspective the strategy follows the stock to bond ratio framework espoused by many personal finance professionals it's a general rule of thumb to add Bonds in your portfolio as you get closer to a retirement age to smooth out your equities holding and the nice thing about this strategy is that it's simple enough with just two levers stocks and bonds and allows for slightly less risk than the one fund portfolio that we just talked about earlier it is also the strategy that Warren Buffett has set out in his will for his wife's trust ninety percent of low-cost S P 500 Index Fund and 10 percent in short-term government bonds personally because I love Simplicity I straddle the line between two fund and the three fund portfolio we'll talk about in a bit when it comes to my personal Investment Portfolio the number three popular Investment Portfolio strategy is a three fund portfolio popularized by the Bogle heads the self-proclaimed followers of Jack Boerboel and the index fund strategy it is probably one of the most talked about strategies in the index fund investing World in addition to a US equities index fund and a bond Index Fund you also add an international stock index fund if we were to construct a portfolio with Vanguard funds it would look like the following a good percentage in Vanguard Total stock market index funds vtsax some in the Vanguard Total Bond market index fund the bbtlx and also some in the Vanguard Total International stock market index fund vtiax to be honest despite its popularity you can see there's nothing really special about this portfolio especially when we compare the two fund strategy that we just covered earlier it just to ask some International flavor to the mix and the argument around the effectiveness of the National Funds is a highly debatable one you have individuals who swore upon the need for international diversification whereas you also have individuals who will say U.S companies have enough International exposure built within them I personally believe both arguments are valid and I'll be the first one to admit that I don't know all the inner workings of all U.S and international companies to know what extent this is true or not true so I do include a bit of international funds in my portfolio to be on the safer side but not too much to make a significant difference alright let's start moving on to some I would say less conventional but nonetheless popular portfolio strategies out there the number four popular Investment Portfolio strategy is the three fund plus one portfolio and the plus one being a Reit fund Real Estate Investment Trust essentially following this reform portfolio with just a little tilt towards real estate why because real estate is sexy no but in all seriousness real estate does provide good additional diversity to your portfolio if we're to construct a portfolio with Vanguard funds it would look like the following a good percentage in the Vanguard Total stock market Index Fund vtsix some in the Vanguard Total Bond market index fund vbtlx some in the Vanguard Total International stock market index fund the vtiax and now add the Vanguard real estate index fund vgslx a Reit is a company that owns operates and finances income General in real estate but what we will need to know is that they're modeled after mutual funds so buying a wreath is similar to buying index funds index funds allow us to buy publicly traded companies without buying individual stocks similarly REITs allow us to tap into the real estate Investments without having to actually buy manage and finance any properties ourselves the Vanguard Reit the vgs LX represents close to 170 real estate companies that represent all different types of property investments in the real estate industry properties such as Office Buildings hotels and even residential homes now I'll tell you that I do like real estate as a way to additionally diversify your holding however I personally prefer holding actual property just because I like the idea of being a landlord but that is just a personal preference if you like the three-prong portfolio structure would like to add a little bit more Jazz the three from portfolio plus one could be a good option the number five popular Investment Portfolio strategy is Dave Ramsey's for fun strategy now I love Dave Ramsey he is one of the first personal finance gurus that really changed my life and I'm forever embedded however I'll be honest I can't help myself but cringe a little bit when I review his investment strategy he doesn't specify particular funds but recommends dividing his mutual fund Investments equally between four types of Funds growth and income growth aggressive growth and international now he does advocate for mutual funds which I like but he also says he has no problem paying commission for mutual funds which means actively managed mutual funds again I do love Dave Ramsey but I have a very different philosophy on investing so I'll pick index funds for the purpose of this exercise if we want to construct a portfolio with Vanguard funds it would look like the following 25 in Vanguard 500 index funds vfix to represent the growth and income fund 25 in Vanguard mid cap Index Fund vimax represent a growth fund 25 in vanguard's small cap index on vs Max represent the aggressive growth fund and 25 of Vanguard Total International stock invest funds vtiax to represent the international fund one downside to this fund strategy that is missing a bond fund in addition in the big picture it's not that much different from a three phone portfolio just adding more granularity by splitting out your U.S equities to three separate funds versus one like the vtsix regardless if you're a hardcore Dave Ramsey follower this strategy could work my only recommendation is to focus on low-cost index funds versus actively managed funds when constructing your portfolio the number six popular Investment Portfolio strategy is Bill Bernstein's no-brainer portfolio Bill Bernstein is an interesting character not only does he hold a PhD in chemistry but he is a board-certified neurologist a physician who studies the brain and if that wasn't enough he decided to write countless books on financial theories and investing kinda makes average people like you and I wanting to hide in our little caves right well Dr Bernstein actually has a lot of asset allocation ideas but one of the simpler ones is the no-brainer portfolio an equal allocation across bonds European stocks U.S small cap stocks and the s p 500. it has booked the intelligent asset allocator Dr Bernstein examines academic research and historical performance to arrive at a relatively simple to implement portfolio that expects to perform well for the long term if we were to construct a portfolio with Vanguard funds it would look like the following 25 of Vanguard Total Bond market index fund vbt Alexa represent bonds 25 of Vanguard European stock index fund v e u s x to represent European stocks 25 of vanguard's small cap Index Fund vs Max to represent U.S small cap stocks and 25 of Vanguard 500 Index Fund vfix represent the s p 500. I do like the fact that this fund includes the S P 500 and bond funds also I like the fact that it's still simple with just four funds the number seven popular Investment Portfolio strategy is what is commonly called the ivy league endowment strategy a strategy at Famous Ivy League schools like Harvard Stanford and Yale uses to manage and grow their billion dollar endowment funds now in reality most Investments That decent elements invest in are hard to replicate for individual investors because they also allocate a big chunk of the allocation to private equity and Venture Capital however in general when we translate the accessible asset classes in order to construct a portfolio with Vanguard funds it will look like the following 35 of Vanguard Total stock market index fund vtsix to represent U Equity 28 in Vanguard Total Bond market index fund vbtlx will represent bonds fifteen percent of Vanguard Total International stock index fund vtix to represent foreign Equity 11 in Vanguard commodity strategy fund vcmdx to represent Commodities 11 in Vanguard real estate Index Fund AKA vgslx to represent real estate for me everything in this portfolio makes sense except for the Commodities allocation the Vanguard representative fund VC and Dex not only has a relatively High expense ratio of 0.2 percent but also has a minimum investment of fifty thousand dollars and is an actively managed fund but other than that if you like the idea of having a portfolio allocation that the most prestigious universities use to manage endowment this could be be a nice option the number eight popular Investment Portfolio strategy is the coffee house portfolio strategy this strategy was popularized by investment author and financial advisor those show ties in his book The coffeehouse investor it's got a bit of everything except the kitchen sink some s p 500s some value funds some small cap some Reit some International and bid heavy on the bond side if we were to construct a portfolio with Vanguard funds it would look like the following 10 in Vanguard S P 500 Index Fund vfix 10 of Vanguard value Index Fund vviax 10 in vanguard's small cap Index Fund vs Max 10 in vanguard's small cap Index Fund vsiax 10 in Vanguard real estate Index Fund vgslx 10 Vanguard Total International stock market index fund vtix and 40 in Vanguard Total Bond market index fund vbtlx to be honest I feel like there's a lot of overlaps here between the different funds now Mr Bill shoaltice is a smart guy so I know there's a good rationale behind the strategy but when it comes to rebalance thing I feel like this could end up being a bit of a nightmare alright moving on to an even more complex portfolio if you can even imagine in one the number nine popular Investment Portfolio strategy is the ultimate Buy and Hold portfolio that includes 11 different funds Yes you heard me right 11 funds this portfolio is popularized by Paul Merriman a successful investor who focuses effort on educating people on how to invest through his foundation the Maryland Financial Education Foundation he has a number of variations of his portfolios but here's one that captures the different Equity asset classes by type if we're to construct a portfolio with Vanguard funds it will look like the following six percent of Vanguard S P 500 Index Fund vfix six percent of Vanguard value Index Fund vviax six percent in vanguard's small cap value Index Fund vs iax six percent Vanguard real estate Index Fund VG SLX six percent in Vanguard Total International stock index fund vtiax 60 in Vanguard international value fund vtrix six percent in Vanguard international small cap Index Fund vfsax six percent in international small cat value fund there's actually no good Vanguard representative for this six percent an ultra small market fund also there is no good Vango representative for this one six percent of Vanguard emerging market stock index fund v e m a x 40 of vanguard's short-term Bond Index Fund vbirx are you out of breath yet I sure am though again I know there's a good rationale behind the strategy can you match the complexity it comes to trying to maintain and rebalance such a portfolio but if you're a big fan of Paul Merriman and would rather have someone tell you specifically how to structure your portfolio this could be an option all right that's it guys I know I haven't covered thousands more portfolio ideas out there but I hope this provides a good overview of how complex or even how simple our portfolio strategy can be again I want to reiterate there is no such thing as a perfect portfolio owning a portfolio that works for you pick a strategy that you like and stick with it for the long run and if you want to change don't constantly change your portfolio in response to changes in the investment wins if you'd like to learn why you don't want to over complicate your portfolio strategy check out my video here until next time all the best [Music]

Channel: Tae Kim - Financial Tortoise

Views: 274,721

Keywords: Personal Finance, Money, Finance, Investing

Id: eJmt9sqDFNc

Length: 14min 7sec (847 seconds)

Published: Thu Dec 15 2022