What is a good investment portfolio for someone starting in their 20s? 90% VT and 10% BND for a Roth IRA then 100% TDF for a 401k?
08.06.2025 04:19
Seeking financial independence would have helped me enormously, to avoid the many traps and pitfalls that I fell into along the way.
Yes.
You NEED the 10%, 15% or higher tax breaks (depending on how expensive of a state you live in for income taxes), on your initial contributions! MANY of you won’t make ANY other money at all, your first year!
If you could instantly cancel one social norm, what would it be?
DON’T buy ANY shares of companies that were once MAKING money, and are now LOSING money!
Read a copy of “What I Learned Losing A Million Dollars”. A top, professional guy, who belatedly realized, that he was merely LUCKY for DECADES!
It is SO obvious, that most investors ignore it immediately. “Why would you even have to be told such a perfectly obvious statement as that?”
Walk down the street, of ANY neighborhood in America, on the night before trash collection day. Look at all of the trash bins, put out for pickup.
Do this, by buying fractional shares at a broker who offers fractional shares. Buy everything on the list, in the same proportions as your highly prized fund does! No commissions, no fees! Current broker minimum investments (at the time that this was written) in each security range from $5 to $1 to as low as 1 penny, per transaction. The future will probably be even more flexible.
This is why the first rule of investing is so painful and so powerful.
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Look more closely.
You start with tiny, no, MICROSCOPIC amounts of cash. Each deal, must represent far less than 1% of your available cash.
What you MUST do, is to embark on a lifelong, self-educational journey, into the realm of finances, money, proper money management, investments, and do so, on a fairly wide range of topics. Crypto is crap, unless you are, perhaps, an exceptionally talented psychologist, with a deep understanding of human nature, and can exploit other people’s weaknesses sufficiently to make one or more big killings, and then get out.
Do the British people realize how much American people absolutely despise them?
Use a broker, to get competitive bids on nationally available rates on CDs. These will always beat your local banks and even your local credit unions by a far cry.
(Be sure to be prepared WELL in advance! Open up that Roth IRA tomorrow, and fund it with even just $50! Or whatever you have in spare change! Just open it, and LEAVE IT ALONE! It will work off your initial, 5 year clock! Get your’s ticking today!)
Secret trick #2: Make a conscious choice, TODAY, to get to financial independence as SOON as possible!
Is BPD real or just an excuse?
While you are young, and are to be commended for doing even minimal investigation into the whole retirement account and investment thing, and realize that investing in both an IRA and 401(k) is by far your best initial option, you do not have even a clue yet what will really work (well), and what won’t. Nobody is born knowing even a lick about money or investing. Nobody teaches us a thing about it in school either. Our parents CAN’T teach us, either because they don’t know themselves, or, like Warren Buffett, the kids just don’t want to learn, and are only going to want to play Santa Claus, by giving guilt money away at their “favorite charity”! Warren Buffett’s ex-daughter-in-law, was possibly the most avid student of his system, and she has made a small bit of money, writing books about her former family connection and what she learned from him! Smart girl!
ALL of those trash company customers failed the first rule of investing. They lost the money. They PAID good money for packaging, and then, they paid MORE good money to get RID of that packaging!
Your investigations have led you to believe that 90% VT and 10% BND is a “good” blend, for a person of your age.
While you cover the bases, by making sure that you buy every winner, you wind up with mediocre returns, because such a strategy makes equally certain that you buy every loser as well. Winners plus losers equals “average blah”.
If not much longer!
If he REALLY knew what he was doing, that would NEVER have happened, because the first rule of investing would have stopped him in time.
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Don’t lose the money!
Secret trick #1: Invest in your traditional IRA, not the Roth IRA!
30% to paper based assets, (which includes the stock market).
What's a joke you haven't used yet, but are dying to share?
Americans reportedly throw out an incredible 40% of their food! I cannot confirm this number. Only that EVERY trash can smells horrible. That is where the smell comes from. Rotting leftovers.
While ANY plan is better than “no plan”, allowing people to help themselves to your investment cash whenever they want, is a particularly foolish strategy. High annual fees guarantee sub-par returns, and even small drops in annual investment returns WILL result in dramatic end results, when compounded over sufficient lengths of time.
Why wait for retirement? For a 20 year old, that is still OVER TWO MORE LIFETIMES AWAY!
I am STILL not quite there yet!
By simply eliminating even ONE dog from the list, the “average” of YOUR portfolio, with perform BETTER than your fund’s portfolio! Get rid of 10 to 20 dogs, and you will see a RAPID improvement over the so called “genius” portfolios of even the highly touted darlings of Wall Street!
Do the experiment. Record the results. Record the results of EACH deal, each trade! EXACTLY how much did you make or lose?
Why is Harley-Davidson dropping diversity initiatives after the right-wing anti-DEI campaign?
The proof?
It is far easier to lose the money, than it is to keep it. You will never know how hard, until you begin to PRACTICE the first rule of investing IN EARNEST!
I don’t recommend a “good investment portfolio” for people in their 20’s. Why would I waste my time on such a thing? I am far older than that. I want something good for ME! RIGHT NOW! No matter how old I am, no matter how ignorant I remain! I need something good for ALL seasons of life!
A 14-year-old created an app that detects heart disease almost instantly - Boy Genius Report
You just got 1.1% MORE than your TDF units!
Why do you think?
Have you not looked at their prospectus yet? WHY are you contemplating investing in something that you know next to NOTHING about? You are convinced that investing in “everything” must be “superior”? Logical sounding. But false.
Why has no country adopted the SA80/L85 rifle?
Each month, review your progress. Compare your initial expectations with reality. How many deals did you find? How many did you investigate? How many did you do? What is your annualized ROI (profit)? Adjust your expectations appropriately.
Use your nose, as well as your eyes! Collect ALL the data that is available to your senses!
30% to real estate.
Because, in the end, playing his OWN game, he lost it all!
Look at their prospectus periodically. List their purchased assets on a sheet of paper. Do TWO simple things.
We already discussed the problem with bonds. If an investment yields an inferior rate of return, then WHY would you want to risk investing even a PENNY into it? Wouldn’t you make more money, going with 100% VT? Remember, even a TINY improvement in annual yield, creates STAGGERING increases in final wealth over time!
What?
Your question assumes that the conventional “wisdom” of having mostly stocks in your youth, and mostly bonds in your old age, “is a good plan”. So pervasive is this notion, that ALL 401(k) target date funds use one or more variants of this philosophy. You are supposed to buy into a target date fund “maturing” around your “anticipated” retirement date, and let it automagically provide for your old age, by slowly moving out of stocks, and more into “supposedly safer” bonds.
First, eliminate the annual fees.
Financial independence, on the other hand, comes to people who put in the time, self-study, and effort, in as little as 5 years! Whoa!
This is a blatant lie.
Simple!
Bonds are absolute shit. The only time bonds make more than the rate of inflation and taxes combined, is when interest rates are dropping continuously for a long period. If you are going to ever invest in bonds, then this is the only time in the investment interest rate cycle to ever do so.
What else do you notice?
Most people that I talk to, don’t even know what a Roth IRA even is, much less actually have one opened up, and are actively using it!
Okay, I am now going for level 2 financial independence, but the point is, I will ALWAYS have more work to do, more improvements to make, before I arrive!
Remember to stay under the $250,000 FDIC insurance limit on each bank, for ALL of your CDs with that bank combined. Don’t be foolish, like the idiots who lost their investment capital at SVB, by keeping amounts over $250,000 there, when that world famous, silicon valley company folded. Yes. They folded because they bought government bonds during a period of RISING interest rates, (the WORST possible time to buy bonds, ANY bonds), lost their asses on paper, and then for real, when the inevitable bank run started. Even geniuses, who gamble on “can’t lose” investments such as treasuries, are idiots! Don’t be one of them, and copy what they do, just because they are smarter than you!
More throwing money on the ground, and walking away.
Your tax breaks give you an enormous boost right away!
Look up my other, beginner related answers on many fine topics related to financial questions here on Quora! Navigate to my profile page. Tap or click on my answer count link. Browse a dozen or two topics of interest each week, until you begin to see an overall pattern worth copying and then follow it!
Why?!
Will prices go up, or will prices go down, for companies that were once making money, and are now losing money?
30% to small businesses, which YOU start up, and actively run.
Yep.
By this same logic, investing in TDF is a bad idea. They charge an exorbitant 1.1% in annual fees! Yikes!
Allowing you to learn surprisingly rapidly! Make TONS of experiments! Write down your rosy projections in advance in your trading and business journals.
Play some stock market simulation games, in order to determine the validity of this point for yourself.
This investment portfolio will give you a broader education, and more diversification, which is always recommended when you are ignorant. After all, if you KNEW what was going to win, GUARANTEED, then instead of diversifying, you would pile EVERYTHING on one roll of the dice, right? Unfortunately, that ignorance we were blessed with at birth, never completely goes away. Prudent investors keep their egos in check, and protect against the biggest risk of all. TRUSTING yourself to know far more than you ACTUALLY do!
Thus, the whole target date scheme is inherently defective. Though, as I stated earlier, and this bears repeating for all of us lazy people out there, including myself, ANY plan is better than NO plan! In other words, NO plan is in fact, the worst plan of all, as even a BAD plan is better, even sometimes FAR better!
Deposit your funds over $1,000 into short term CDs, at the highest available rates. Funds under $1,000 go into Money Market Funds, for government obligations. You will lose at least 1/4 of a percent to annual fees on the MMFs, but you can get your money out tomorrow, and have the cash before the end of next week. Make it a practice, to NEVER take any money out for “financial emergencies”. Instead, learn how to deal with “surprises” more skillfully than that.
You will also!
So, what is a beginner to do, then?
Look over the list again. Out of the dozens to hundreds of investments shown, read the financial statements of enough companies, that you discover some dogs, that are currently losing money.
One of the rare times that a young adult can have their cake, and eat it too!
“Does ANYBODY just throw dollars down on the ground, and walk away?”
10% Financial Emergency Fund.
Thanks for watching, and keep up the great beginning you have made!
Do your annual Roth conversion by December 15th each year, using your standard deduction, and pay no additional taxes on that money!
You make allowances for your ignorance, and you vow to never repeat any of your stupidity. Well, not more than 3 or 4 times, if you can help it… Heh!
STOP doing the stuff that doesn’t work.
Want to do even better?
What do you see?
They admittedly know LESS than nothing, (some of what you know, just ain’t so), and they are GUARANTEED to make mistakes, and will INEVITABLY lose the money, at least in the beginning, right?
Want to sample how hard it REALLY is?
This is my current portfolio allocations. When I eventually figure out a better system, I will immediately switch to it, but for right now, I am pretty ignorant, and this is the best that I have discovered so far:
They lost the money, not once, but TWICE, on the same investment. Guess what happens to the “old” toy, that is getting replaced with a “better” model?
So what, if you take a bit longer? It still beats TWO MORE LIFETIMES away!
THAT is the most useful investment portfolio that everybody, of any age, could ever possibly hope for!
There is a saying, “You make your money elsewhere, you grow it, in the stock market.”
Want to outperform ANY index in the world?
There is some truth to that. Figure out how much truth. For yourself.
This includes all real estate RELATED investments as well. You need to allow for this, so that you can get started with small amounts of money.
I suspect that you don’t either, but you could change that at any second, making me totally wrong about this speculation.
Why?
Can’t be bothered to read the fine print on the prospectus, or do any investigations into the financial reports of the companies that you are investing in? Then get out of the stock market entirely. You are not investing, or even speculating. You are GAMBLING, and that never looks pretty, no matter how lucky you might get in the beginning!
Do you see where I am going with this?
Yes, they do.
You will wonder why anybody gets excited by 7% annual “average” stock market returns, when practically any business that you pick, can often make 100% percent returns, EASILY?
Because microscopic investments that have gone badly, are really easy to recover from. Both from financial pain, and from emotional pain.
Nope.
Almost every other trash bin, is open. The lid is propped up from the packing material that their latest toy was packaged in. And thrown away. Correction, PAID to be thrown away…
(Content: DD FF 2024Jul30)
Do MORE of the stuff that does work.