This week I received a phone call seeking basic investment help. This blog post is written in response to that call. There are a few basic principles to investing and I’ve written about them on this blog for nearly 18 years. Here is the link to two very basic principles.
Rule #1
There is no substitute to saving for retirement. Begin as early as possible.
The Golden Rule of Investing
Rule #2
All You Need To Know About Investing On a 3 x 5 Card
And now for some “fresh” material. If I have not mentioned it before, my advice is to not waste money on “professional” management as it is highly unlikely to add alpha to your portfolio.
Definition of Alpha: Portfolio alpha measures a portfolio’s risk-adjusted performance compared to a benchmark, representing the excess return generated by an investment strategy. A positive alpha indicates the portfolio outperformed its benchmark, while a negative alpha means it under-performed. Alpha is often used to evaluate the skill of a fund manager, showing whether the extra return is due to their strategy or simply higher risk-taking.
Strategy #1: Set up an Intelligent Portfolio with Schwab. The initial cost is around $3,000 to $5,000 to begin such a portfolio. This minimum dollar amount may change from time to time so check with Schwab to find out the current minimum investment required to open an Intelligent Portfolio account. Follow the Schrodinger portfolio on this blog as Schrodinger is an Intelligent Portfolio managed by Schwab computers. Use the asset allocation of this portfolio as a guide for setting up a portfolio you may wish to manage. Learn how to access your account wherever it is located, be it Fidelity, Vanguard, Schwab, or some other broker. Working with a particular broker does not limit what securities you can use to populate a portfolio.
Check your current holdings to make sure you are not invested in load mutual funds. If you are invested in any such mutual funds, stop reinvesting dividends as it is important to reduce fees. Know the difference between load mutual funds and no-load mutual funds. I no longer use mutual funds. Instead, I strictly buy and sell Exchange Traded Funds (ETFs).
Strategy #2: This is new material even for this mature blog. Recently, I’ve been experimenting with ChatGPT, requesting sample portfolios. Below is the ChatGPT recommendation for a portfolio made up of ten (10) ETFs.
The following portfolio is quite similar to the make up of the Huygens portfolio readers can follow on the ITA Wealth Management blog. Use the search engine to find the Huygens portfolio.
🧭 Example: Balanced Global Portfolio (Moderate Risk)
Asset Class
ETF
Allocation
Description
U.S. Large Cap Equity
VTI (Vanguard Total Stock Market ETF)
25%
Broad exposure to U.S. stocks (large, mid, small caps).
U.S. Growth Equity
QQQ (Invesco Nasdaq-100 ETF)
10%
Tech-heavy growth tilt.
U.S. Dividend Equity
SCHD (Schwab U.S. Dividend Equity ETF)
10%
High-quality dividend payers for income stability.
International Developed Markets
VXUS (Vanguard Total International Stock ETF)
10%
Developed and emerging ex-U.S. equities.
Emerging Markets Equity
IEMG (iShares Core MSCI Emerging Markets ETF)
5%
Diversification into faster-growing regions.
U.S. Treasury Bonds
IEF (iShares 7–10 Year Treasury Bond ETF)
10%
Intermediate-term Treasuries for stability.
U.S. Investment Grade Bonds
AGG (iShares Core U.S. Aggregate Bond ETF)
10%
Broad fixed income exposure.
Inflation-Protected Bonds
TIP (iShares TIPS Bond ETF)
5%
Protects against inflation.
Real Estate (REITs)
VNQ (Vanguard Real Estate ETF)
10%
Diversified U.S. real estate exposure.
Commodities / Gold
GLD (SPDR Gold Shares)
5%
Hedge against volatility and inflation.
As an investor in retirement or coming very close to retirement, a conservative asset allocation may be more appropriate. ChatGPT recommends the following asset allocation.
🧭 Conservative Portfolio Using 10 ETFs
Asset Class
ETF
Allocation
Description
U.S. Total Market
VTI – Vanguard Total Stock Market ETF
15%
Broad U.S. equity exposure for modest growth.
U.S. Dividend Equity
SCHD – Schwab U.S. Dividend Equity ETF
10%
High-quality dividend stocks, lower volatility.
International Developed Equity
VEA – Vanguard FTSE Developed Markets ETF
5%
Diversification into developed foreign markets.
Emerging Markets Equity
IEMG – iShares Core MSCI Emerging Markets ETF
3%
Small allocation for long-term growth potential.
U.S. Aggregate Bonds
AGG – iShares Core U.S. Aggregate Bond ETF
25%
Broad exposure to investment-grade bonds.
Intermediate Treasuries
IEF – iShares 7–10 Year Treasury Bond ETF
15%
Core stability and flight-to-safety protection.
Short-Term Treasuries
SHY – iShares 1–3 Year Treasury Bond ETF
10%
Low duration, minimal volatility, cash substitute.
Inflation-Protected Bonds
TIP – iShares TIPS Bond ETF
7%
Inflation hedge, preserves real purchasing power.
Real Estate (REITs)
VNQ – Vanguard Real Estate ETF
5%
Income-producing real estate exposure.
Gold / Commodities
GLD – SPDR Gold Shares
5%
Hedge against inflation and market shocks.
Both of these portfolios will generate sufficient dividends to keep the portfolio in balance. I recommend rebalancing a portfolio four times a year at a minimum or after the conclusion of each quarter. Several of the above ETFs throw off dividends four times a year while others generate dividends each month. If dividends are not needed for living, use them to keep the portfolio in balance.
I recommend using different portfolios as a way to further diversify across the globe.
Comments and Questions are always welcome. Place them in the Comment section provided with each blog post.
Pass this link on to your friends and family members.
(Visited 33 times, 12 visits today)
Like this:
Loading…
Discover more from ITA Wealth Management
Subscribe to get the latest posts sent to your email.
