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Can you have too many ETF's in portfolio?

At 27-years-old, how much should I invest in Bonds vs. Stocks or ETFs?

  • My overall portfolio is currently $26,000 (probably small potatoes for big-time investors), but I'm wondering how to best invest at the moment. We currently have about $3,500 cash and $22,500 in mostly ETFs, but I was told it might be a good idea to invest some of this in bonds or hedge funds. We can be moderately aggressive since we foresee a minimum 5-year continued investment, and considering our relatively young age. Any thoughts/suggestions? Thanks!

  • Answer:

    First, your investment choices should involve some assessment of current economic and financial conditions, some expectation about future events, and some assessment of specific investments and how they will perform in the future. Not "how much should I invest in this or that investment vehicle". Second, some disagree with John Bogle on the subject of ETFs, but I think he is right. In my opinion and experience, if Wall Street pushes a new product hard as they have done with ETFs, that is proof the new product is good for Wall Street, and not for the small investor. But, read the article referenced below, research it further, and decide for yourself. Third, when interest rates go down, bonds go up. Interest rates are at 30+ year lows. How much lower do you think they can go? Can they go lower? Sure, but is it a good bet? In my opinion, it is a bad time to be invested in bonds, but it is a good time to be selling bonds and investing the money in something that is a bargain. That leaves cash, stocks, real estate, and hard assets such as commodities, including precious metals. According to Jim Rogers, agricultural commodities and precious metals (the latter on dips) are the place to be right now. A blog that follows his public comments is given below. Research him yourself first; don't take my word that his advice is respectable. Lastly, I suggest that you increase your cash position. You never know when markets will unexpectedly tumble, your investments will get hammered, and you will come across a really great investment opportunity at the same time. Rogers likens it to coming across a bag of money sitting on the ground. You need some buying power when such opportunities arise. That's my advice.

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For young people, stocks is the best place to put your money for long term investment.

Tim Chen

There are ETFs that invest in bonds, stocks, commodities, REITs, currency... You can have a very well diversified portfolio holding nothing but ETFs. Hedge funds are for those with high net worth - something like $100k to start. There are some ETFs that try to track hedge fund indexes, but I would not recommend these for various reasons that I won't dive into here. The problem with traditional financial advice is that it is wrong. Do not take on more risk than you would normally be comfortable with just because you have many years until retirement. If you started an aggressive position in early 2007 you probably would have lost 60% over the next two years. Is this ok? The 'go aggressive now' logic would tell you it's worth the risk. If you can tolerate that loss then go for it, but do not be more aggressive than you feel you should just because an advisor tells you "you have time". No one knows which asset class is going to outperform of the next 20 years so the best bet is to spread it across a diversified portfolio of ETFs and then tilt the allocation more or less towards bonds to get the risk you're comfortable with. Here's a suggestion, the top two are bond ETFs. BND: 20% MUB: 20% DJP: 5% IGE: 5% RSP: 30% RWR: 10% VWO: 10%

Pk

Whom ever told you that you need a percentage of your investments in bonds and hedge funds was correct. While stocks and ETF's offer the best opportunity to grow, they also offer the best opportunity to loose it all. Bonds and Hedge funds insure that you will have something when you reach retirement age. When I was your age, I kept 20% in bonds and hedge funds. I was lucky I did, in 2008 I lost 65% of the money in stocks and ETF's. The bonds are what I am going to have to depend on for retirement.

ranger_co_1_75

No hedge funds. You don't have enough assets. I would recommend avoiding bonds. Their interest rates are terrible. Doing pretty well for 27 year olds. Keep it up and keep investing. I have a very small portion of my investments in ETFs. I generally do not like them at all. Sort of like taking the shaft with the wheat. That is a pun sort of. I think you would be better off investing in blue chip dividend paying stocks rather than ETFs generally speaking. Let me ask you this. How did they do this year? MCD +34% a stellar performance. Probably a tad overpriced currently. CVX +21%. PG +7%, KO +10, INTC +20%, ABT +22%, PEP +5%, CLX +8.5%

muncie birder

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JG

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