What is a good investment portfolio for someone starting in their 20s? 90% VT and 10% BND for a Roth IRA then 100% TDF for a 401k?
07.06.2025 15:58
STOP doing the stuff that doesn’t work.
If he REALLY knew what he was doing, that would NEVER have happened, because the first rule of investing would have stopped him in time.
One of the rare times that a young adult can have their cake, and eat it too!
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There is some truth to that. Figure out how much truth. For yourself.
You will wonder why anybody gets excited by 7% annual “average” stock market returns, when practically any business that you pick, can often make 100% percent returns, EASILY?
While you are young, and are to be commended for doing even minimal investigation into the whole retirement account and investment thing, and realize that investing in both an IRA and 401(k) is by far your best initial option, you do not have even a clue yet what will really work (well), and what won’t. Nobody is born knowing even a lick about money or investing. Nobody teaches us a thing about it in school either. Our parents CAN’T teach us, either because they don’t know themselves, or, like Warren Buffett, the kids just don’t want to learn, and are only going to want to play Santa Claus, by giving guilt money away at their “favorite charity”! Warren Buffett’s ex-daughter-in-law, was possibly the most avid student of his system, and she has made a small bit of money, writing books about her former family connection and what she learned from him! Smart girl!
They lost the money, not once, but TWICE, on the same investment. Guess what happens to the “old” toy, that is getting replaced with a “better” model?
Look at their prospectus periodically. List their purchased assets on a sheet of paper. Do TWO simple things.
I don’t recommend a “good investment portfolio” for people in their 20’s. Why would I waste my time on such a thing? I am far older than that. I want something good for ME! RIGHT NOW! No matter how old I am, no matter how ignorant I remain! I need something good for ALL seasons of life!
Use your nose, as well as your eyes! Collect ALL the data that is available to your senses!
(Content: DD FF 2024Jul30)
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It is SO obvious, that most investors ignore it immediately. “Why would you even have to be told such a perfectly obvious statement as that?”
You start with tiny, no, MICROSCOPIC amounts of cash. Each deal, must represent far less than 1% of your available cash.
What you MUST do, is to embark on a lifelong, self-educational journey, into the realm of finances, money, proper money management, investments, and do so, on a fairly wide range of topics. Crypto is crap, unless you are, perhaps, an exceptionally talented psychologist, with a deep understanding of human nature, and can exploit other people’s weaknesses sufficiently to make one or more big killings, and then get out.
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Allowing you to learn surprisingly rapidly! Make TONS of experiments! Write down your rosy projections in advance in your trading and business journals.
This is my current portfolio allocations. When I eventually figure out a better system, I will immediately switch to it, but for right now, I am pretty ignorant, and this is the best that I have discovered so far:
Financial independence, on the other hand, comes to people who put in the time, self-study, and effort, in as little as 5 years! Whoa!
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Do the experiment. Record the results. Record the results of EACH deal, each trade! EXACTLY how much did you make or lose?
Yes, they do.
You just got 1.1% MORE than your TDF units!
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This includes all real estate RELATED investments as well. You need to allow for this, so that you can get started with small amounts of money.
Want to outperform ANY index in the world?
DON’T buy ANY shares of companies that were once MAKING money, and are now LOSING money!
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Yep.
First, eliminate the annual fees.
Look more closely.
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While ANY plan is better than “no plan”, allowing people to help themselves to your investment cash whenever they want, is a particularly foolish strategy. High annual fees guarantee sub-par returns, and even small drops in annual investment returns WILL result in dramatic end results, when compounded over sufficient lengths of time.
Read a copy of “What I Learned Losing A Million Dollars”. A top, professional guy, who belatedly realized, that he was merely LUCKY for DECADES!
Most people that I talk to, don’t even know what a Roth IRA even is, much less actually have one opened up, and are actively using it!
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Seeking financial independence would have helped me enormously, to avoid the many traps and pitfalls that I fell into along the way.
Have you not looked at their prospectus yet? WHY are you contemplating investing in something that you know next to NOTHING about? You are convinced that investing in “everything” must be “superior”? Logical sounding. But false.
Nope.
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Thus, the whole target date scheme is inherently defective. Though, as I stated earlier, and this bears repeating for all of us lazy people out there, including myself, ANY plan is better than NO plan! In other words, NO plan is in fact, the worst plan of all, as even a BAD plan is better, even sometimes FAR better!
10% Financial Emergency Fund.
You NEED the 10%, 15% or higher tax breaks (depending on how expensive of a state you live in for income taxes), on your initial contributions! MANY of you won’t make ANY other money at all, your first year!
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Your investigations have led you to believe that 90% VT and 10% BND is a “good” blend, for a person of your age.
Don’t lose the money!
If not much longer!
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Okay, I am now going for level 2 financial independence, but the point is, I will ALWAYS have more work to do, more improvements to make, before I arrive!
30% to real estate.
I suspect that you don’t either, but you could change that at any second, making me totally wrong about this speculation.
Your tax breaks give you an enormous boost right away!
You will also!
ALL of those trash company customers failed the first rule of investing. They lost the money. They PAID good money for packaging, and then, they paid MORE good money to get RID of that packaging!
By simply eliminating even ONE dog from the list, the “average” of YOUR portfolio, with perform BETTER than your fund’s portfolio! Get rid of 10 to 20 dogs, and you will see a RAPID improvement over the so called “genius” portfolios of even the highly touted darlings of Wall Street!
Do this, by buying fractional shares at a broker who offers fractional shares. Buy everything on the list, in the same proportions as your highly prized fund does! No commissions, no fees! Current broker minimum investments (at the time that this was written) in each security range from $5 to $1 to as low as 1 penny, per transaction. The future will probably be even more flexible.
There is a saying, “You make your money elsewhere, you grow it, in the stock market.”
More throwing money on the ground, and walking away.
30% to paper based assets, (which includes the stock market).
It is far easier to lose the money, than it is to keep it. You will never know how hard, until you begin to PRACTICE the first rule of investing IN EARNEST!
Do your annual Roth conversion by December 15th each year, using your standard deduction, and pay no additional taxes on that money!
Why wait for retirement? For a 20 year old, that is still OVER TWO MORE LIFETIMES AWAY!
Look over the list again. Out of the dozens to hundreds of investments shown, read the financial statements of enough companies, that you discover some dogs, that are currently losing money.
Want to do even better?
Bonds are absolute shit. The only time bonds make more than the rate of inflation and taxes combined, is when interest rates are dropping continuously for a long period. If you are going to ever invest in bonds, then this is the only time in the investment interest rate cycle to ever do so.
Because microscopic investments that have gone badly, are really easy to recover from. Both from financial pain, and from emotional pain.
By this same logic, investing in TDF is a bad idea. They charge an exorbitant 1.1% in annual fees! Yikes!
They admittedly know LESS than nothing, (some of what you know, just ain’t so), and they are GUARANTEED to make mistakes, and will INEVITABLY lose the money, at least in the beginning, right?
What?
Play some stock market simulation games, in order to determine the validity of this point for yourself.
This is a blatant lie.
So, what is a beginner to do, then?
You make allowances for your ignorance, and you vow to never repeat any of your stupidity. Well, not more than 3 or 4 times, if you can help it… Heh!
So what, if you take a bit longer? It still beats TWO MORE LIFETIMES away!
Use a broker, to get competitive bids on nationally available rates on CDs. These will always beat your local banks and even your local credit unions by a far cry.
“Does ANYBODY just throw dollars down on the ground, and walk away?”
Each month, review your progress. Compare your initial expectations with reality. How many deals did you find? How many did you investigate? How many did you do? What is your annualized ROI (profit)? Adjust your expectations appropriately.
While you cover the bases, by making sure that you buy every winner, you wind up with mediocre returns, because such a strategy makes equally certain that you buy every loser as well. Winners plus losers equals “average blah”.
Your question assumes that the conventional “wisdom” of having mostly stocks in your youth, and mostly bonds in your old age, “is a good plan”. So pervasive is this notion, that ALL 401(k) target date funds use one or more variants of this philosophy. You are supposed to buy into a target date fund “maturing” around your “anticipated” retirement date, and let it automagically provide for your old age, by slowly moving out of stocks, and more into “supposedly safer” bonds.
This is why the first rule of investing is so painful and so powerful.
Deposit your funds over $1,000 into short term CDs, at the highest available rates. Funds under $1,000 go into Money Market Funds, for government obligations. You will lose at least 1/4 of a percent to annual fees on the MMFs, but you can get your money out tomorrow, and have the cash before the end of next week. Make it a practice, to NEVER take any money out for “financial emergencies”. Instead, learn how to deal with “surprises” more skillfully than that.
This investment portfolio will give you a broader education, and more diversification, which is always recommended when you are ignorant. After all, if you KNEW what was going to win, GUARANTEED, then instead of diversifying, you would pile EVERYTHING on one roll of the dice, right? Unfortunately, that ignorance we were blessed with at birth, never completely goes away. Prudent investors keep their egos in check, and protect against the biggest risk of all. TRUSTING yourself to know far more than you ACTUALLY do!
Simple!
(Be sure to be prepared WELL in advance! Open up that Roth IRA tomorrow, and fund it with even just $50! Or whatever you have in spare change! Just open it, and LEAVE IT ALONE! It will work off your initial, 5 year clock! Get your’s ticking today!)
Yes.
Thanks for watching, and keep up the great beginning you have made!
Walk down the street, of ANY neighborhood in America, on the night before trash collection day. Look at all of the trash bins, put out for pickup.
Look up my other, beginner related answers on many fine topics related to financial questions here on Quora! Navigate to my profile page. Tap or click on my answer count link. Browse a dozen or two topics of interest each week, until you begin to see an overall pattern worth copying and then follow it!
Secret trick #1: Invest in your traditional IRA, not the Roth IRA!
Will prices go up, or will prices go down, for companies that were once making money, and are now losing money?
Why do you think?
I am STILL not quite there yet!
Want to sample how hard it REALLY is?
Do you see where I am going with this?
Because, in the end, playing his OWN game, he lost it all!
Can’t be bothered to read the fine print on the prospectus, or do any investigations into the financial reports of the companies that you are investing in? Then get out of the stock market entirely. You are not investing, or even speculating. You are GAMBLING, and that never looks pretty, no matter how lucky you might get in the beginning!
Do MORE of the stuff that does work.
What else do you notice?
What do you see?
Why?
Almost every other trash bin, is open. The lid is propped up from the packing material that their latest toy was packaged in. And thrown away. Correction, PAID to be thrown away…
Americans reportedly throw out an incredible 40% of their food! I cannot confirm this number. Only that EVERY trash can smells horrible. That is where the smell comes from. Rotting leftovers.
Remember to stay under the $250,000 FDIC insurance limit on each bank, for ALL of your CDs with that bank combined. Don’t be foolish, like the idiots who lost their investment capital at SVB, by keeping amounts over $250,000 there, when that world famous, silicon valley company folded. Yes. They folded because they bought government bonds during a period of RISING interest rates, (the WORST possible time to buy bonds, ANY bonds), lost their asses on paper, and then for real, when the inevitable bank run started. Even geniuses, who gamble on “can’t lose” investments such as treasuries, are idiots! Don’t be one of them, and copy what they do, just because they are smarter than you!
The proof?
30% to small businesses, which YOU start up, and actively run.
We already discussed the problem with bonds. If an investment yields an inferior rate of return, then WHY would you want to risk investing even a PENNY into it? Wouldn’t you make more money, going with 100% VT? Remember, even a TINY improvement in annual yield, creates STAGGERING increases in final wealth over time!
Why?!
THAT is the most useful investment portfolio that everybody, of any age, could ever possibly hope for!