hey YouTube I'm Jimmy in this video I'm gonna walk through creating a stock
portfolio for a beginning investor somebody who's in their 20s or 30s and
is just getting started in the stock market I'm gonna focus mostly on stocks
although I am going to bring out where bonds or alternate investments can come
into play so I believe the cleanest and simplest way to build a portfolio for
most investors is to use exchange-traded funds or ETFs for short and if you're
confident enough to pick individual stocks well I'll let you know where I
would throw that into the portfolio for me that's a good idea if what you're
trying to do is improve your total return or improve dividends or something
along those lines okay so let's get started
my first holding is almost always a large cap core holding I like SPY which
is a spider S&P 500 ETF they only charge nine and a half basis points for a fee
and just so we're all on the same page if a company were to charge one percent
fee well that would be a hundred basis points so 50 basis points is a half a
percent so one basis point equals one one hundredth of a percent so SPY
charges 9.5 basis points so SPY as you may have guessed owns the 500 companies
that are in the S&P 500 now this is good I like this because this gives us
instant diversification to the largest companies in the US stock market the
largest holdings are companies like Microsoft Apple Amazon Berkshire
Hathaway they have Johnson & Johnson's in there Exxon Mobil JPMorgan Chase so
basically it's the biggest companies in the US now I'm gonna save the weightings
how much I would assign to each individual ETF until the end because I
think we have some flexibility and stuff different things we could do to make the
portfolio better okay so now that we own SPY well now we have our large cap
companies 500 them actually but historically smaller companies typically
grow at a faster rate than larger companies since it's easier to grow
let's say a five billion dollar company it is to grow a five hundred billion
dollar company so now we should go after some smaller companies a popular broadly
diversified index that has many small companies in in it is the Russell 2000
index and the cheapest Russell 2000 ETF that I
could find is the Vanguard Russell 2000 ETF ticker symbol VTWO and they charge
just 15 basis points for their fee this ETFs companies like HubSpot Planet
Fitness five below and Etsy so right now I think we're right in line with where
we want to be as far as diversification with just two ETFs we have over 2500
holdings and that's plenty diversified in my mind but I'd like to add a little
more growth to the portfolio I like mid cap companies because I think
mid-cap companies are a great place to pick up some real growth and a mid cap
company has enough size to at least be a real player in the industry enough
stability because they're large enough but they still have some room for growth
so I really like going in the mid set mid cap space as well so to target the
mid cap space I like the iShares SP 400 mid-cap Growth
ETF ticker symbol IJK. IJK owns companies like Domino's Pizza, Six Flags, Transocean
or the Boston beer company they own Sam Adams now these companies I think are in
a good position because they have a decent amount of growth available to
them but they still have some size behind them so now we have a large cap a
mid cap in a small cap ETF and I like this these three ETFs as our core
Holdings but I think we could do a bit more to diversify so company size isn't
the only way to diversify we could diversify by growth rate value
characteristics geography volatility and all this goes on and on so I think would
be smart for us to add in emerging markets ETF to this since in theory this
will give us some diversification in both a geography sense as well as some
growth characteristics one ETF I like is called the Invesco emerging markets ETF
ticker symbol PXH. PXH has a fee of 49 basis points this is one of the highest
ones but it's somewhat of a specialty ETF a specialty ETF so i get it now i like
this because it's a diversified etf that invests in markets like China Taiwan
Brazil Russia India and so on they are well exposed to many of the emerging
markets now for me I'm happy with these companies
as our core holdings now it would actually make a lot of sense to add a
bond ETF here or bond mutual fund but since this video is designed for
building a stock portfolio I'm gonna leave it off but if you wanted to add
a bond component to this it would make a lot of sense okay now let's look
at some percentages if we wanted to stop right here and we were going to try to
build our portfolio with just these holdings I think that would be smart to
do about 40% of SPY 30% mid-cap Growth 15% of both small cap and emerging
market funds now if we stopped right here I'd be perfectly happy because we'd
be well diversified we'd have a solid stock portfolio and overall I would
expect our performance to be about in line with US markets with a touch of
some emerging markets but what if we wanted more so now if we wanted more
growth or more dividends a more value or more risk or less risk or whatever it
might be the adjustment to this portfolio is rather simple
imagine we took off 5% from each of these holdings and what we're left with
is 20% for us to work with so here's some ideas that I would have if we
wanted to make some adjustments to this one first thought is that these are all
equity holdings these are all stock holdings but it might make sense to add
some real estate holdings so I would look at something like vanguards real
estate ETF ticker symbol VNQ. VNQ has they charge 12 basis points and they
have a dividend yield of almost 5 percent so if dividends are something
that you like well this to be a good diversifier because it's in real estate
but it also adds to the dividend story another possibility would be to go down
the commodity road an ETF like PowerShares commodity ETF ticker symbol
DBC well this ETF invests in commodities futures so if we believe
that the price of commodities is going to move higher this could be a good
choice for us now of course we can combine these two into let's say to 10%
positions to our portfolio then we would have a bunch of different stock
investments well diversified and some commodities and some real estate that's
a pretty solid portfolio but for me what I like to do is something called a
satellite portfolio and I would take our 4 main hole
and we'll call those our core holdings they end up being in the middle and then
what we do is we take the other 20% outside of our 80% core holdings and we
diversify that into individual companies if you feel so inclined if you feel
confident enough to pick individual names well I would use these satellite
positions to go around the portfolio to try to get whatever after maybe it's
more dividends or more growth or better long-term capital gains I think that
those surrounding holdings the satellite holdings are the best way to do it so if
this are my main portfolio well what I would do is I'm more of a long-term
investor so I would be targeting improved returns trying to beat the
S&P 500 now the way I would do it is I would take four additional holdings to
go around our core holdings of 80 percent so each of them would end up
being about five percent per position now if you haven't seen I think if
you're new to this channel well we've been doing a series called the Dow 30
analysis or analyzing 30 all 30 companies in the Dow Jones Industrial
Average you can see a link to all those videos in the description below well
from the research we've done so far I really like Microsoft I like Chevron
they look good I like Disney I like what they're going
home depot looks pretty good I like AT&T they're not in the Dow of 30
but we've recently completed an analysis of that and I like the way they look and
they I believe that they have a solid dividend but I would love to recap all
of the analysis that we've done for those and we're gonna get to that
eventually when we build those portfolios but those are our more
advanced portfolio this is designed to be a simpler portfolio for a beginning
investor and for me I believe that this is a good way for beginning investor to
build a portfolio have a core set of holdings that keeps up broadly with the
market and it's diversified and has enough positions they don't have to
worry too much about it if you held just our core holdings well you're likely to
perform as the market did but if you wanted more let's say dividends well I
like a company like AT&T and if it's a small enough position in one of the
satellite positions it's likely not to hurt you too much if you have a couple
of them I would then throw in companies like Disney or Microsoft because I think
that they have a good amount of stability and some growth prospects
based on some things they've been doing lately but what
you think what companies would you add if we wanted to get better performance
than the market with our satellite Holdings and then we're actually one
final point is that if you are a beginning investor and you're trying to
pick your core holdings I think it's key to try to keep your fees low stay as
diversified as possible and do as much research as you can the advantage of
doing a satellite portfolio like this is that essentially you get to play with
the satellite positions which is great from a learning standpoint but also you
have your core holdings that sort of anchor you to do what the market does
which i think is a great way to not be not be too concerned with the overall
performance because it's unlikely that the market will go down and stay down
indefinitely the market has always recovered let me know what you think of
the comments below and if you haven't done so already hit the subscribe button
don't forget to hit the thumbs up so thank you very much for sticking with me
all the way into the video I appreciate it and I'll see you in the next video
thanks