Hey there, Tiffany Thomas with Wealthy Tiffany Dotcom, and in today's video,
I'm going to be talking about how to build a great investment portfolio.
And the reason this came up is because I got a comment on one of my videos asking
how to set up a great investment portfolio, how much to put in stocks or
ETFs or bonds, what percentage of that should we be doing?
So I wanted to create this video for you guys and keep it really simple so you can
create a really great investment portfolio.
And I'll be sharing how much I have
invested in stocks or real estate or bonds so you can get an idea on what I'm doing
and then apply what works for you to put into your investment portfolio.
So let's dive right in and talk about how
to build a great investment portfolio, because this can be really confusing.
And I really want to make it simple for you guys.
So you will actually do it. All right.
If you have already decided on whether or not to set up a Roth IRA or a traditional
IRA or a different type of investment account, and you're wondering what to put
inside of that account, then that's what I'm going to talk about,
what ETFs or funds to use or individual stocks, things like that.
So we're going to be really specific
in this video and hopefully it will help you create a great investment portfolio so
that you can eventually become financially free and retire if you would like to.
First off, let's talk about the different
types of investments you can have inside of the stock market.
Number one, you can have individual stocks.
This is purchasing a share or multiple shares of one company.
And you're investing in that individual company by buying a share of their stock.
That could be Google or Amazon or
Facebook, Netflix, all sorts of different companies.
But it's essentially buying that particular company.
So you're buying individual stocks, you're investing in individual companies.
And then there are bonds that you can
invest in individual bonds like a corporate bond or a government bond.
There's a very specific bond that you can invest in and then there are funds.
So there are stock funds.
And this is a whole group of companies or
stocks that you can invest in by purchasing one fund.
And the same goes for bonds.
You can purchase one bond fund and be invested in a whole group of bonds.
And if you need clarification
on the different types of funds you can invest in, like an ETF mutual fund index
fund, I have another video on that, clarifying all of those.
So I will leave the link below and you can
check out that video if you need more clarification as far as the percentage
of how much you should have invested in stocks or in bonds.
There are numerous ways to answer this question.
And one of the ways is taking the number
one hundred and ten and subtracting out your age.
And then that would be the percentage you should have invested in stocks.
For example, if you are 40 years old
and you subtract 40 from one hundred and ten, you're going to get 70.
So you would have 70 percent of your money
invested in stocks and 30 percent invested in bonds.
While this is one option to figure out a percentage on how much you should have
invested in stocks versus bonds, there's actually two questions that I feel
like you should ask yourself to determine this percentage.
The first question being,
how likely are you to sell your investments if the stock market were
to take a dip or even crash? Think about that for a minute. If you saw
your investments, take a dip or come away down, how likely would you be to sell
those investments? Would you be really scared and think, I need to get out
of the stock market right now? It's going to crash, I'm going to lose everything? Or
would you be not so fearful and think, OK, I know the stock market's going to come
back up, I'm just going to leave my investments alone?
Really think about that for a minute,
because this is going to come into play on how much you should have invested
in stocks which are riskier versus bonds which are still risky, but not as risky.
And you just won't make as much money with bonds as you would with stocks.
Here's how I try to look at this.
I think, OK.
Am I checking the stock market every day?
Am I worrying about my investments all the time, or am I not checking the stock
market every day and thinking I know what I've invested in is a good investment,
so I'll continue to invest in that no matter what happens.
And I also know that, yes, the stock market does come down.
It does take dips and even crashes sometimes, but it always comes back.
And I have talked about this numerous times, the stock market will go up
and down, up and down, but over time it will continue to rise.
So I like to keep that in mind and realize, OK, I'm OK with my investments.
I felt good about this when I bought the investment in the first place.
And I know the stock market will continue to rise over time.
So I am able to invest in riskier investments in stocks,
more so in stocks than in bonds, because I can handle that type of risk.
And this brings us to the second question to ask yourself, and that is,
how quickly are you going to be needing this money that you've invested?
Will you be needing to pull it out within two years, within a year,
or can you leave it in there a little bit longer, five years, 10 years or even more?
And that will help you determine how much
risk you want to take on how much you want to put into stocks.
Because if you aren't going to be needing
that money in a short period of time and maybe five years or less,
then you can afford to be more risky because you'll have a longer term,
a longer time frame to make up for any losses that might happen in the stock
market because you won't be needing to pull that money out in a year or two.
So think about those two questions.
When you are deciding on what percentage
to invest in stocks versus bonds, the more you can handle the risk and you
know, you won't be tempted to pull out your investments if it takes a dip.
And if you have a longer timeframe
to invest, then the riskier you can be and you can
invest more in stocks rather than in bonds.
And when you're thinking about that second
question, am I really going to need to pull this money out sooner than later?
Think about other investments that you
might have or other ways that you could create income for yourself.
Could you get a part time job for a little bit until the stock market comes back up?
Or could you create a side hustle
for yourself, maybe start a little small business on the side,
something you're passionate about that will give you some extra income
and you wouldn't have to do that for the rest of your retirement.
But just until that stock market rises
again, when it takes a dip, it takes about eight months to recover from that.
So kind of think, OK, well, maybe I can live off of my emergency fund,
that I have my savings for a little while or try to think of another way to create
a little bit of extra income for a little while.
Just being flexible just means that you
can take on more risk and potentially make more money over time.
Or is it really even going to hurt you
that much if you are withdrawing a small amount from the stock market?
Maybe it's not that big of a deal to you.
Maybe you have enough invested and you have a little bit of a buffer.
So you're OK to withdraw that money and still earn money in the stock market
because you're not withdrawing all of the money.
So just kind of think about that as you're
deciding what percentage to put into stocks versus bonds if this
information is making sense so far, just comment below, "making sense,"
so I know that my information is relevant
and you guys can understand what I'm talking about as far as my investments go.
I love investing in real estate,
so I have seventy four percent of my net worth in real estate investments and then
twenty three percent invested in the stock market.
And the rest is just cash or other assets that I have.
But that's how I've been able to invest my money.
But I understand people don't really want to invest in real estate or when they're
starting out with investing, they just want to keep it very simple.
So that's why I'm sharing this information about how to invest in the stock market.
And if you are interested in real estate, I have plenty of other videos on that.
You can check out my real estate investing playlist.
And to be honest,
if I didn't have investments in real estate, then I would still have the rest
of my money in stocks inside of the stock market.
I know I can always get a job sometime or
I can create my own side hustle or continue to grow my own business.
Therefore, I'm not really worried about having my money invested in stocks instead
of bonds because I still want to build that wealth and I'm OK with the risk.
As far as your investments go, think about those two questions and then
decide, OK, yeah, if I am willing to take on that risk and I don't need the money
within five years or less, then I could be invested in one hundred percent stocks.
And if that sounds way too scary and
you're thinking I'm going to pull my money out, if it takes a dip,
I'll be too nervous, then you can decrease that amount.
You would have invested in stocks and put some of it into
bonds, so maybe you'll do 90 percent in stocks and 10 percent in bonds.
And if you're going to pull that money out
within five years or less, maybe you want to do 50/50.
And that way you can still build wealth.
You can still have some money invested
in stocks, but you can be a little more stable by having half of it in bonds.
You need to feel comfortable with your investments.
So if you are not comfortable with what percentage you have in stocks versus
bonds, then change it so you feel comfortable.
And I feel like that's the most important part, because I know people get really
nervous and those that are really nervous will most likely pull out their money.
And we don't want that happening because
we know the stock market will continue to rise over time.
But if you know that, OK, yes, you're fearful.
But if I don't watch the stock market, then I'm OK being more risky.
So just set it up on autopilot,
transfer money automatically every month, have that set up and don't look at it.
Just continue to invest over time.
And that way you can invest more in stocks and continue to build your wealth.
All right.
And let's move into exactly what to invest in as far as stocks versus bonds.
Let's first talk about the stock portion.
And honestly, for myself,
I invest in individual stocks and also in stock funds.
So I know that investing in individual stocks is not for everyone.
So for this video, we're going to keep it
very simple and just talk about stock funds that we can invest in.
But if you are interested in investing
in individual stocks, I do have a course that I created.
So I will leave the link below.
It's called Buy Your First Stock in 48 Hours,
so you can check that out if you are interested in delving into your
investments a little more and purchasing some individual stocks. For stock funds,
the easiest route is to invest in a fund that invests in the total stock market.
This is the simplest route and you can just make it very, very simple because you
can invest in one fund and have a whole bunch of stocks inside of that fund.
So you're investing in the companies
that are in the total stock market, the total US stock market.
And you can just buy one fund to do
that and continue to invest in that fund over and over.
So you can just make your automatic
payments are automatic transfers, go to this fund directly.
And the one that I like best is actually
an ETF, an exchange traded fund, and it's the Vanguard Total Stock Market ETF.
The reason I like this is because it's
invested in the total stock market and it's just tracking that.
And so you are going to pay a really low expense ratio.
It is 0.03%, which is super, super low.
But yet you're still getting great returns
because it's just following the total stock market.
So companies that fall off, they will automatically get taken off.
New companies that come on will automatically get added.
And you just have to invest in that one fund.
And this way you can get started for about
one hundred and seventy dollars because you can just buy one share of this ETF
and you can continue to buy more shares over time.
And this ETF is a version of VTSAX,
which is the Vanguard Total Stock Market Index Fund.
That's also a really popular investment.
But I would just choose the ETF version.
You can get started for less money and has a lower expense ratio.
So that's why I like the ETF version.
And another thing that I talk about a lot
is keeping your fees really, really low, because even though they sound small,
one percent might not sound like that much point eight percent might not sound like
that much, but over time that adds up significantly.
And I have other videos about this so you
can check those out and I break down exactly how much you're losing
by investing in funds that have high expense ratios.
So you really want to keep that as low as possible.
So this, I think, is a great investment
and that could be it for your stock side of the investment.
All right. Let's switch over to the bond portion.
And for the bond portion,
I would say invest in a bond fund once again instead of individual bonds.
It's a lot easier to invest in one bond
fund and just continue to invest in that same fund over and over.
And I prefer the Vanguard total bond market ETF.
And you can get started by just purchasing one share for about eighty five dollars.
And this also has a really low expense ratio at point zero three five percent.
So super low.
We want to keep our fees as low as possible.
So that's a great investment.
And if you're wondering why I prefer
a bond fund, I have another video all about bonds, so I will link to that below.
You can check out that video if you want more information about bonds so your
investment portfolio can just be made up of those two.
Funds the total stock market and the total bond market fund, and then you can choose
your percentage for each of those based on those two questions from earlier.
And this creates a really great investment
portfolio that's very simple for you to invest in.
And you can adjust it over time as you get
closer to needing to pull that money out of the stock market.
So if you guys found this video helpful, please, hit the like button and share it
with someone else who would like to hear this information.
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And we can get this content out to more people.
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Thanks so much for watching and I'll see you guys in the next video.