My Retirement Portfolio

Investing is difficult.

Even when advisors try to keep advice simple, they tell you to use index funds. But which ones should you buy?

My goal today is to give you a model portfolio, one that I will use for my own Roth IRA, so that you have a guideline for your retirement account. I hope it helps!


Who the Portfolio is Designed For

I built this portfolio for myself. I’m in my 20’s, and I don’t plan on withdrawing from my retirement account to help fund a home purchase. Because of these factors, I shouldn’t have to use any of the money in my account until I’m 60.

If you intend to subsidize a down payment on your first house with funds from your IRA, or if you are much closer to retirement, then you should not use the same allocation.

My portfolio is designed for individuals under the age of 45 to use in a retirement account, such as a traditional or Roth IRA, as long as they don’t need to touch any of the money until the normal age of 59 and a half.

If you don’t fit within this category, consider using some of the same investments, but increase the percentage of bonds, gold, and cash equivalents to bolster safety and reduce volatility.

One final thought to add before I reveal the portfolio: the goal of this asset allocation is a high rate of return with manageable volatility and risk due to diversification. Even among individuals who won’t touch this money for 30 or 40 years, some people still don’t want the stress of watching an account balance drop significantly for years at a time. If you are part of this group, that’s fine. Just keep in mind that you should probably take a safer investing approach to reduce volatility.

With that covered, let’s take a look at my retirement portfolio:



Asset Allocation

Let’s break down the investments I’ve chosen in more detail.

Vanguard High Dividend Yield (VYM) – 30%: this contains US stocks from a variety of market caps that pay out generous yields. I like it because it offers exposure to each sector of the market, similar to the S&P 500, but this ETF provides more value during bear markets through consistent cash flow.

Vanguard Mid-Cap Value (VOE) – 5%: This ETF tracks midsize US stocks with great valuations compared to the market as a whole. I chose to dedicate a portion of my portfolio to small and mid-cap stocks because the High Dividend Yield ETF is skewed toward larger companies. Also, value stocks pay higher yields than their counterparts.

Vanguard Small-Cap Value (VBR) – 5%: Just like the mid-cap ETF, this index contains value stocks with good dividends, but the market caps are smaller.

Vanguard FTSE Developed Markets (VEA) – 12.5%: One of my primary focuses with this portfolio is safety through diversification. Part of that goal is achieved with index funds covering hundreds of different companies, but geographical diversification is vital as well. I love the United States, and I think it’s the greatest country in the world. However, our annual growth rate is only about 2%, and the national debt is higher than the GDP. For those two reasons, I think investing in other countries is a must. This ETF holds stocks from established nations around the globe, with 22% in Japan, 16% in the UK, 8% in Canada, 7% in both Germany and France, and holdings in an assortment of other areas.

Vanguard FTSE Emerging Markets (VWO) – 12.5%: This ETF provides stocks from less developed economies around the world. The chief advantage of these regions is their potential for explosive growth. 30% of the fund’s holdings are in China, 15% are in Taiwan, and significant investments are made in India, Brazil, and South Africa, among others.

Vanguard REIT (VNQ) – 20%: I love real estate as an investment class, so I wanted to reserve a considerable chunk of my portfolio for Vanguard’s Real Estate Investment Trust. VNQ holds shares in a variety of other REIT’s, providing exposure to hotels, offices, health care centers, residential areas, and retail spaces. Another benefit of this asset class is its excellent yield.

Vanguard Intermediate-Term Corporate Bond (VCIT) – 10%: Bonds are the traditional companion of stocks in a retirement portfolio. Since I shouldn’t need to tap into the account for several decades, I’m not necessarily holding bonds for the cash flow or safety net. My primary focus with this bond fund is to diversify away from riskier assets and smooth out fluctuations in the market. I chose corporate bonds because they have higher yields than treasuries, and most of the ratings in the fund are moderately safe at BBB or A. With this fund, I’m essentially lending money to American companies with good balance sheets.

SPDR Gold Trust (GLD) – 5%: This ETF simply mirrors the price of gold. I’m using it to protect against high inflation and smooth out the portfolio with its low correlation to stocks. Since interest rates have been at unprecedented low levels for almost a decade, inflation could become a problem, and gold provides a good hedge.


Alternatives to These Funds

If you don’t have a Vanguard account, then you might not have access to these funds, or they might cost you a hefty commission. For that reason, I’ve compiled a list of alternatives.

You can replace VYM with iShares Core High Dividend (HDV), Schwab US Dividend Equity (SCHD), or any low cost S&P 500 index fund.

Consider swapping VOE for SPDR S&P 400 Mid Cap Value (MDYV), iShares S&P Mid Cap 400 Value (IJJ), Schwab US Mid-Cap (SCHM), or another low cost mid-cap index fund.

Exchange VBR with SPDR S&P 600 Small Cap Value (SLYV), iShares S&P Small-Cap 600 Value (IJS), Schwab US Small-Cap (SCHA), or another low cost small-cap index fund

If you don’t have access to VEA, go with Schwab International Equity (SCHF), iShares Core MSCI EAFE (IEFA), or another low cost, international, developed market index fund that includes both Europe and Asia.

Similarly, replace VWO with iShares Core MSCI Emerging Markets (IEMG), Schwab Emerging Markets Equity (SCHE), or another low cost, international, emerging market index fund that includes at least Asian and Latin American countries.

Fill in for VNQ with iShares Core US REIT (USRT), Schwab US REIT (SCHH), SPDR Dow Jones REIT (RWR), or another low cost, diversified, US REIT index fund.

Substitute VCIT with iShares Investment Grade Corporate Bond (LQD), SPDR Intermediate Term Corporate Bond (ITR), or another low cost corporate bond index fund.

Exchange GLD for iShares Gold Trust (IAU). This is the only alternative I recommend because I have yet to find any other funds that hold real gold for you and track the precious metal’s price almost identically.


Final Thoughts

I hope this model portfolio provides you with baseline to work with. I’ve spent quite a while thinking about what investments I wanted to include, and I think this is a good combination.

With generous dividends, strong potential for principal appreciation, and diversification across multiple asset classes and geographic regions, this portfolio has an opportunity to excel.

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4 thoughts on “My Retirement Portfolio

  1. tirelessworker says:

    Great portfolio and nice allocation! I like how you provide alternatives to Vanguard, I don’t have a Vanguard account so these alternatives are just what I can look into.

    1. The Declassified Dollar says:

      Thanks! Giving advice to buy specific funds is almost impossible because the fees are different from broker to broker. But, I’m in the process of putting up sample portfolios for 4 different account providers, and each has a different set of ETF’s that they offer commission-free.

  2. EscapingtoFreedom says:

    I’m liking you asset allocation! I think that way too many young people shy away from stocks due to their volatility, but it’s hard to build wealth without them…

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