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Sample Investment Portfolio
Client Info: 30 years old
$10,000
Goal is…
Sample Investment Portfolio
Client Info: 30 years old
$10,000
Goal is to put a $25,000 down payment on a house in 10 years
The average annual return of the stock market is 9%. If this individual invests all $10,000 in the market and earns the market average, they will be $1,000 short of their goal.
Thus, we should develop a portfolio that gives broad market exposure that preserves capital while allowing for some potential upward growth.
Using Vanguard's Portfolio Allocation Models I would recommend this individual take a growth portfolio allocation strategy and be invested in 80% stocks and 20% bonds to receive an average annual return of 9.7%.
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Bonds (20%)
US Treasuries
One option for investing in fixed income would be to buy a 10 year US Treasury Bond. This bond will cost $1,000 and currently yield 1.2%. While this is below this investor's growth objective, it would preserve capital in the event of a bear market.
Corporate Bonds
Another option for investing in fixed income would be to buy corporate bonds, which provide a higher coupon rate than US Treasuries.
This individual could invest in Investment Grade and earn around 3-4% annual over the 10 years or take on more risk and invest in high yield, which may be in the 5-6% range.
GIGB (Goldman Sachs Corporate Bond ETF) SCHI (Schwab 5-10 Year Corporate Bond ETF) are two corporate bond options to consider so as to diversify across the entire bond market.
International Bonds
If this investor was interested in investing internationally, placing money in international treasuries or corporate bonds could be a third and fourth option. This is a riskier option, but may yield a higher return.
IGOV (iShares Intentional Treasury Bond ETF) CEMB (iShares Emerging Markets Corporate Bond ETF) are two options to consider.
Other Investment Options
Cyrpotcurrencies
Given this individual's investment profile and investment goals. I would not recommend investing in cryptocurrencies (Bitcoin). This is too much risk for the individual to take on, further, they do not have enough assets needed to properly diversify if investing in cryptocurrencies.
Commodities
If this individual were interested in investing in commodities, the average annual return on commodities since 1971 has been 10.64%. Gold has returned 10.44% in that same time horizon. These average returns are within the growth strategy for this investor.
Investing in a commodity ETF would give broad exposure to the commodities market. PDBC is a large ETF run by Invesco that could fit this description.
Invesco's DBP (precious metals ETF) is another commodity option to have exposure to gold and silver.