18 Mar An ETF Portfolio to Preserve Wealth (And Grow It)
An ETF Portfolio to Preserve Wealth (And Grow It)
Mar. 18, 2024
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It’s amazing how many of us just take regurgitated sayings as truth.
For example, in the tennis world, coaches and players both continue to correct strokes by saying, “Keep your eye on the ball.”
Of course, we all stop watching the ball three feet in front of our contact point so it’s a completely ineffectual statement. Further, what does keeping our eyes on it do? Does it fix a bad racquet face? Does it stop our arm pushing the ball into the net? Does it add spin?
No.
So why do people still say it?
No clue.
And those types of things are everywhere in trading, too. Especially in the buy-and-hold index fund industrial complex.
So this week we’re going to continue in our growth prong but take a different slant. (Remember, automated strategies and dividends are our other two prongs).
Instead of going for growth by trading breakouts on a long-term chart, we’re going to do it the easy way.
Why?
Because not everyone wants to take trades and take stopouts. And many people are still bamboozled by wise old sayings.
Today, we’re going to look at a very enticing topic. It’s a set-and-forget ETF portfolio for preserving wealth.
We’ll use ETFs because we can get exposure to many things with one click. We’ll set-and-forget because it’s easiest and anyone can do it.
We’ll also assume we have a good chunk of money to start. Or maybe we’ve come into a bunch of money and want to make sure that money grows but mostly preserves.
You could also call this “An ETF Portfolio For Our 50s”. But it can be used by any trader anytime.
I did some research and here’s a portfolio from the experts that apparently makes sense:
- VOO
- DIVO
- XLK
- XLV
- TLT
Do you see how perfect this is (on paper)?
We have an index fund for coveted diversification (VOO), we have dividends (DIVO), we have never-not-necessary health care (XLV), hotter-than-a-firecracker tech (XLK), and bonds-because-everyone-always-needs-bonds (TLT).
Now we have two choices.
We can smile at our portfolio, pat ourselves on the back for being so smart, and trade that blindly while not caring if a simple index fund would do better.
Or we can see if it actually beats the market.
We’ll choose Option #2.
Here’s that portfolio since 2014. We have equal amounts of all five ETFs. And we’ll substitute SCHD for DIVO because DIVO hasn’t been around long enough.
And here’s how it did when we compare it to just holding an index fund:
Hmm. Our preserve portfolio made sense and also made less money.
For the same amount of drawdown.
Not good.
So let’s eliminate bonds. I think bonds are the keep-your-eye-on-the-ball of investing. Bonds sound like they’re smart but they’re kind of awful.
Here’s the same portfolio without TLT:
Look at that. Getting rid of bonds allows us to beat the market by a decent amount and also lowers the drawdown.
And that’s exactly what we’d be looking for in a preserve-and-grow-our-wealth portfolio.
In our next Newsletter, we’ll get aggressive like a young whipper-snapper might.
Talk to you soon.
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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.