Sample Model Portfolios

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I get many readers emailing me asking me about how they should invest their money. Unfortunately, I cannot give investment advice on an individual basis since I don’t know the specifics of each of my readers financial situation. However, I can provide sample model portfolios to my readers as guidance for how to invest your money. (Be sure to read how to become a stock market millionaire as well.)

Before I lay out my sample model portfolios, I want to make it clear that everyone’s situation is different and that you need to sit down and assess your own risk tolerance, goals and objectives.

My sample model portfolios below will not cater to every reader. This is the same as any personal finance magazine you read or any talking head that recommends an investment. Just because they say XYZ stock is a buy doesn’t mean it is a buy for you. You need to have an investment plan and refer to your investment plan, goals and objectives to see if a particular investment has a place in your portfolio.

Table of Contents

Sample Model Portfolios – Background

I invest the majority of my money with 3 firms – Vanguard, Betterment, and Schwab. Because of this, I will be laying out model portfolios as if you were investing with two of these firms, Vanguard and Schwab. (Note that you can can build these model portfolios at other firms as well. Check out my online broker comparison chart to find one that meets your needs.)

I will not be detailing model portfolios for Betterment because when you start investing with them, you must identify the goal you are saving for – retirement, a house, college, etc. and they create a model portfolio for you. In fact, after you create your account, choose your goal and set up an automatic transfer you don’t have to do anything again. They take care of everything else for you. To read more on Betterment, read my full review.

Furthermore, I will be breaking out model portfolios for 3 investing groups:

Young and Risk Tolerant
Young and Risk Adverse
Retired Income Seekers

For each group, I will lay out a model portfolio with both Vanguard and Schwab. As time progresses and if I feel a change needs to be made, I will update these model portfolios. These portfolios are ideal for those with $25,000 or more to invest. If you have less than this amount, further down I list another set of model portfolios for you.

One final note about the portfolios, I picked Vanguard Exchange Traded Funds (ETFs) over Vanguard mutual funds because you need $3,000 to invest in each Vanguard mutual fund. With Vanguard ETFs, there is no minimum investment. You only need to open a Vanguard Brokerage account. If you have less than $100,000 invested with Vanguard, there is a $20 annual fee you will pay. Trading Vanguard ETFs in your Vanguard Brokerage account is free.

The same logic applies to Schwab ETFs. They have super low management fees and no minimums. They are free to trade if you have a Schwab Brokerage account. There is no fee for having a Schwab account.

Sample Model Portfolios

Young and Risk Tolerant

You fall into this category if you have a long time horizon and you can accept a moderate amount of risk. While everyone’s appetite for risk varies, this is how most people in their 20’s, 30’s and 40’s should be investing their money. With that said, if you are scared of the stock market, then you should dial back some of the risk and invest in the Young and Risk Adverse portfolio I suggest. I also encourage you to learn more about investing so that you become more comfortable with it. Understanding the stock market helps to reduce some of the fear many new investors have and it also helps to curb your emotions when the market gets choppy.

Schwab

Here is the Young and Risk Tolerant model portfolio if you choose to invest with Schwab:

Vanguard

Here is the Young and Risk Tolerant model portfolio if you choose to invest with Vanguard:

Young And Risk Adverse

You fall into this category if you are young and are comfortable taking less risk when investing your money in stocks. As I mentioned above, I urge you to learn more about the stock market so that you can be more comfortable investing in stocks. While it is not necessary for you to get to a point where you are investing in the Young and Risk Tolerant portfolio, the more you know about investing, the better.

Ideally, these model portfolios are good for those in their 50’s and early 60’s. If you find yourself younger than this and not comfortable with the riskiness of the Young and Risk Tolerant portfolio above, you can invest in these model portfolios as well.

Schwab

Here is the Young and Risk Adverse model portfolio if you choose to invest with Schwab:

Vanguard

Here is the Young and Risk Adverse model portfolio if you choose to invest with Vanguard:

Retired Income Seekers

You fall into this category if you are retired and need your portfolio to last you during your retirement years. This model portfolio should only be used for retirees. If you are still working, you should be investing in one of the above model portfolios.

Some question why I suggest a 40% investment in stocks at this stage in life. The reason for this is two-fold. First, this isn’t 1989 when you can easily live off of income from bonds and certificates of deposit. You need to be investing in equities still and earning dividends through those investments. Second, we live much longer than we previously have. Before, a person might retire at 65 and pass away by the time they are in their mid-70’s. Now we tend to live well into our 80’s and for some of us, our 90’s. Because of this, we need our portfolio’s to continue to grow so that we don’t run out of money. If we invest 80% or more in bonds, there is a good chance that we will be running out of money towards the end of our lives.

Schwab

Here is the Retired Income Seekers model portfolio if you choose to invest with Schwab:

Vanguard

Here is the Retired Income Seekers model portfolio if you choose to invest with Vanguard:

More Model Portfolios

The above model portfolios are perfect for anyone with at least $25,000 to invest in the stock market. But what if you are just starting off and don’t have enough money to diversify with 9-10 ETFs? Below are model portfolios for those with less than $25,000 to invest. In fact, you could easily invest in the below portfolios and be successful for a long time.

While the model portfolios below only contain 3 ETFs each, they encompass the entire spectrum of the stock and bond markets. In other words, you are diversified by investing in these 3 ETFs.