Morningstar CEO Kunal Kapoor shares ETFs worth a long-term investment on ‘The Claman Countdown’.
Most people who put off investing don’t do so because they think it’s a bad idea to put their money in the market. They’re stuck in front of a confusing smorgasbord of options, afraid of piling the wrong things on their plate, and at least a little afraid of looking like they don’t know what they’re doing (especially if it’s true). So analysis paralysis is often the default.
Have no fear. There’s a quick and easy way to build a sensible portfolio using a small handful of exchange-traded funds (ETFs). So, without further ado, let’s get some clarity on what goes into this portfolio and how much of the allocation each ETF should get.
Here’s the simple ETF portfolio you’ve been looking for
For a portfolio to be considered both good and easy, it must be anchored with a good dose of market-tracking index funds. That way you get exposure to growth and quite a bit of diversification, which can protect you against all kinds of risks.
Traders work on the floor of the New York Stock Exchange in New York City, March 3, 2026. (Brendan McDermid/Reuters)
CAN S&P 500 ETFS ALONE FUND YOUR ENTIRE RETIREMENT?
Therefore, 65% of the portfolio could be allocated to the Vanguard S&P 500 ETF, and 20% to the iShares Core MSCI Total International Stock ETF.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| VOO | VANGUARD S&P 500 ETF – USD DIS | 647.30 | -4.24 |
-0.65% |
| IXUS | ISHARES TRUST CORE MSCI TOTAL INTL STK | 91.98 | -1.89 |
-2.01% |
The Vanguard ETF has an annual expense ratio of just 0.03% and tracks the performance of the largest publicly traded companies in the US, while the iShares ETF has an annual expense ratio of 0.07% and tracks the performance of the largest international companies, explicitly excluding those in the US.
The point of having both in the portfolio is that you are diversified across business sectors and across geographies, reducing the chance that problems in the US or any other specific country will dent the performance of your portfolio as a whole.
These two ETFs focus on stocks. A well-rounded and sufficiently diversified portfolio also needs some exposure to bonds to ensure it has a reasonably safe source of returns in tough times, and to cryptocurrency, as it isn’t well represented in any of the other ETFs.
GOLDMAN SACHS Completes Acquisition of Innovator Capital, Raising ETF ASSETS TO $90 Billion
So you can also allocate 10% of the portfolio to the Vanguard Total Bond Market ETF and 5% to the iShares Bitcoin Trust ETF.
In short, BND is accident insurance. It owns more than 17,000 U.S. investment-grade bonds, at an annual expense ratio of just 0.03%. The return over the last twelve months is only 3.9%, but this is not expected to be a major growth driver for your portfolio anyway.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BND | VANGUARD TOTAL BOND MARKET ETF – USD | 73.78 | -0.23 |
-0.31% |
| IBIT | ISHARES BITCOIN TRUST – USD ACC | 42.51 | -0.74 |
-1.71% |
The Bitcoin Trust position provides exposure to spot Bitcoin, as the name implies. The point of owning it is that it will help you take advantage of the cryptocurrency’s status as a scarce store of value, and it can also help protect your portfolio from inflation. It will cost you a little more than the other ETFs, with an expense ratio of 0.25%, but the potential growth it offers is worth the price.
Not much maintenance is required
This portfolio can hum along for years without any intervention from you. But there is one thing you can do to improve performance somewhat.
VANGUARD FUND EXCLUDES CHINA IN THE EMERGING MARKETS INVESTMENT GAME
Once a year, open your investment or retirement account and compare each fund’s current weighting to the allocation target described above.
Pedestrians walk past an American flag on display outside the New York Stock Exchange in New York, September 12, 2016. (Michael Nagle/Bloomberg via Getty Images/Getty Images)
If a position has deviated from the target allocation by more than five percentage points, it would be wise to sell a small portion of the winner and buy a small portion of the laggard. You sell high and buy low, and that is the entire (usually voluntary) maintenance obligation. Within a tax-advantaged account, such as a Roth IRA or a 401(k), rebalancing has no tax implications, and many brokers can even automate the process for target weight portfolios if that’s something that interests you.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Start with the amount of capital you have on hand, grow your holdings in appropriate proportions when you can, rebalance the portfolio once a year, and let time in the market do the rest of the work. The longer you are willing to let this money grow, the better off you will be.
Alex Carchidi has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool holds positions in and recommends Bitcoin, Vanguard S&P 500 ETF, Vanguard Total Bond Market ETF, and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.
