Before you deciding which funds to buy, consider the following facts:
- Stocks and bonds prices go up and down, no one can predict which stock or which bond will increase in value, or when will increase in value.
- Most of fund managers couldn't beat the benchmark indexes, even you pay them big management fees.
- In the long term, both stocks and bonds market will go up, although the extent and volatility vary.
What is the take away from the above facts?
The answer is simple - when you build a long term portfolio, aim to Own the Market, rather than beat the market!
Below are the 3 broad market-based index funds from Vanguard and Fidelity, respectively, that any investor could use to build a solid and market performing portfolio.
Composition of Model Portfolios
Total US Stock Market Fund
Total International Stock Fund
Total Bond Market Fund
You can also use ETFs, instead of the above low cost index funds, to accomplish the same goal. The following is a list ETFs you can purchase at any brokerage house to construct your long term investment portfolio:
Rebalance a Portfolio
After the risk-based portfolio is put in place, you can largely leave it to the market to dictate its performance. Except once a while rebalance the portfolio.
How to easily rebalance a portfolio? See our next blog post.