This is a sample investment portfolio designed primarily for a retirement fund in an account with Charles Schwab, which placed first in JD Power’s 2016 study for highest in investor satisfaction with full-service brokerage firms. A series of 7 Schwab OneSource ETF’s (exchange traded funds) form the portfolio. Each of these are passively managed, follow an index, and normally contain hundreds of different holdings. If you purchase them with a Schwab account, you don’t have to pay a commission.

The model is designed for an individual who wants to retire at the age of 66 when social security kicks in, starting with an aggressive allocation and adding a 10% bond investment every 5 years after the age of 40. I stopped the model 6 years early because at that point, you should probably take a closer look at your specific needs going into retirement.

I want to reiterate that this is meant to serve as a general example, one you can use as a model. This should not be considered investment advice; always perform your own risk analysis before investing and read the prospectus associated with each fund.

 

The Portfolio

The ticker symbol for each ETF is in the left column, and the allocation percentage during the given time frame is in the symbol’s row.

Ticker 20-40 40-45 45-50 50-55 55-60
SCHX 35% 35% 35% 32% 30%
SCHA 30% 26% 21% 18% 12%
SCHF 13% 12% 11% 10% 8%
SCHE 7% 5% 3% 0% 0%
SCHH 15% 12% 10% 10% 10%
CJNK 0% 5% 10% 15% 15%
SCHR 0% 5% 10% 15% 25%

vanguard-chart-cropped

 

Holdings

SCHX: Schwab US Large-Cap – This is an index fund covering large and midsize US stocks. I made it the core holding of the portfolio because it contains the strongest companies based in the most stable country in the world. The fund is led by blue-chips like Microsoft, General Electric, Wells Fargo, and Johnson and Johnson. However, it also holds positions in mid-cap companies such as Macy’s and Best Buy. SCHX covers the first 85% of the US stock market’s value.

SCHA: Schwab US Small-Cap – This is an index fund covering the smallest US stocks. They are the most volatile and contain higher risk because they aren’t as well established. However, these companies have far more room for growth. Investing in small businesses provides diversification benefits and can increase returns over the long run. Many of them aren’t household names, but some of them are still recognizable, such as Texas Roadhouse and Cabela’s. SCHA covers the 85% to 98% segment of the US stock market’s value.

SCHF: Schwab International Equity – This is an index fund holding stocks in stable foreign countries such as Japan, Canada, the UK, France, and Germany. Historically, international and US stock markets alternate periods of higher performance, so investing overseas can help increase the likelihood of gains even during times of poor performance in the US.

SCHE: Schwab Emerging Markets Equity – This is an index fund holding stocks in developing economies around the world. These markets aren’t nearly as stable, but they make up for that weakness with much higher growth rates, which is key because America is only growing at around 2% annually. Almost two thirds of SCHE’s holdings are in Asia, which includes China and Russia, and significant investments are made in Latin America and Africa.

SCHH: Schwab US REIT – Historically, real estate has been one of the highest performing investments. The problem is, you can’t invest in an apartment complex through a brokerage account. However, with a Real Estate Investment Trust, you’re basically buying shares of a company that purchases and manages rental properties for you, providing exposure to hotels, offices, health care centers, residential areas, and retail spaces.

CJNK: SPDR Crossover Corporate Bond – Because bonds don’t offer as high of returns as stocks, this example does not include them until the age of 40. The primary focus is to diversify away from riskier assets and smooth out fluctuations in the market. CJNK is a mixture of investment grade and high yield bonds, split evenly between BBB and BB ratings, so the dividend is pretty nice. However, because of this added risk, I used a higher proportion of treasuries on this model than some of my others to balance it out. With CJNK, you’re basically loaning money to American businesses and collecting interest.

SCHR: Schwab Intermediate-Term US Treasury – This is an index fund that invests in treasury bonds from the United States government. It has a lower yield than corporate bond funds, but it’s safer and less volatile. For that reason, it is a good addition for an individual nearing retirement age.

Final Thoughts

Hopefully, this model portfolio gives you some ideas to use with your own retirement account. Investing is never a one size fits all activity, so this model probably won’t be exactly what you’re looking for. It’s simply intended to provide a baseline to work from and to show you some of the funds you could use if you invest through Schwab.

Good luck!