As many of you know, I previously had a small investment portfolio that I emptied out in order to make a house down payment and also for some furnishing costs (painting, some inexpensive kid-friendly furniture, etc.). This puts me back at square one, which means that I get to decide all over again what my investment portfolio will look like. Remember, this portfolio is intended to be an investment for a country home purchase in about fifteen years – my wife and I are dreaming of paying cash for this purchase.
The portfolio This is what we’re looking at for investments.
20% domestic large cap stocks via the Vanguard 500 index fund
20% domestic small cap stocks via the Vanguard Small Cap Index fund
20% international stocks via the Vanguard Total International Stock Index Fund
20% diversified target retirement fund via the Vanguard Target Retirement 2050 fund
15% individual stock holdings – my wife and I have been doing extensive research into individual stock holdings and we’re both interested in directly investing in a small handful of companies that look like strong businesses on paper and that we personally use as customers.
5% bonds via the Vanguard Total Bond Market Index Fund
Why no ETFs? If I invest directly with Vanguard, I don’t have to worry about fees associated with trading ETFs.
How will I build it? I have an investment savings account set up. Each week, I put a certain amount into that account.
When the account hits $3,000 (the minimum buy-in for the Vanguard 500), I’ll buy the appropriate amount of shares on that day, emptying the account. I’ll then repeat this for all portions of the portfolio – when the account reaches $3,000 again, I’ll buy that portion. This will devour the first $18,000 in savings in that account and will take a year or two (at least).
Once all of the portions are purchased, I’ll save in that account and, once a month, put money into the portion of the portfolio that is the furthest below the target percentage. This is effectively a monthly rebalancing of the investment, so I don’t have to sweat rebalancing unless I make a change in my investing philosophy.
What about the individual stock portion? With my first buy-in, the $3,000 is going entirely to one company that my wife and I believe in very much (I’ll talk about this company when the time comes – it’s months down the road, though). With future buy-ins, my wife and I will do one single buy with that amount which we’ll discuss in detail when it comes around. I have a feeling we’ll buy several companies over time, but there’s one we both feel very strongly about. These are going to be almost entirely buy-and-hold investments.
What about paying ahead on your home mortgage? Aside from this investment money, we are debt snowballing our remaining debts (most of our student loans, then the home, then one final absurdly low student loan). Why in that order? Our home mortgage is actually our lowest interest debt – and nothing’s above 7%. We’ve already eliminated everything that was very high – automobile payments and credit cards. We also have an automobile replacement fund.
How can you afford all of these funds? Frugality. That’s the key to everything.