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Investing In 2.5 Funds Can Make You a Millionaire
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- Опубліковано 15 тра 2023
- A two-fund portfolio is a simple yet effective investment strategy that consists of just two investment funds: a total U.S. stock market fund and a total international stock market fund. This strategy is designed to provide broad, diversified exposure to the entirety of the stock market with just two funds.
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Let's break down these two components of a 2 fund portfolio:
Total U.S. Stock Market Fund: This fund aims to replicate the performance of the entire U.S. stock market. It typically includes small, mid, and large-cap stocks across all sectors, providing exposure to the broad U.S. equity market.
Total International Stock Market Fund: This fund, on the other hand, aims to replicate the performance of the global stock market outside of the U.S. It provides exposure to a wide range of international equities, including developed markets like Europe and Japan, as well as emerging markets.
Here's why this two-fund portfolio strategy can be so powerful:
Diversification: The strategy offers broad diversification by including a wide range of stocks from both the U.S. and international markets. This helps to spread risk, as the poor performance of any one company or sector will have a smaller impact on the overall portfolio.
Simplicity: Managing a portfolio with only two funds is much easier than one that includes dozens of individual stocks. This simplicity can make it more likely for an investor to stick with their investment strategy over the long term.
Cost-efficiency: Index funds, which the total U.S. and total international stock market funds typically are, tend to have lower expense ratios compared to actively managed funds. This can result in significant cost savings over time.
Access to Global Growth: By investing in both U.S. and international stocks, you are positioning yourself to potentially benefit from growth anywhere it happens in the world. If the U.S. market is underperforming, the international market might be doing well, and vice versa.
Flexibility: You can adjust the ratio between the two funds to fit your personal risk tolerance and investment goals. If you're more risk-averse, you might lean more heavily towards the U.S. stock fund. If you're willing to take on more risk for the possibility of higher returns, you might allocate more to the international fund.
Keep in mind that, as with all investment strategies, a two-fund portfolio comes with its own risks. It is subject to market volatility and does not include exposure to other asset classes like bonds or real estate, which can provide additional diversification. Always consider your own financial situation, risk tolerance, and investment goals before adopting any investment strategy.
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Disclaimer: This video is for entertainment purposes only. Everyone's situation is different so do your own research before making any decisions with your money.
I'm not sure I understand why anyone would want one those international index funds. They don't seem to ever bring a decent return.
I like about 3 to 4 different ETFs so I can always buy one on a dip when I contribute.
Me too, I have 7 ETFs, but have thought about pairing back more.
VOO, S&P 500
VIG, Dividend Stocks
VXUS, Foreign Stock
VNQ, REIT
VCIT, Corporate Bonds
BND, Agg Bonds
BNDX, International Bonds
@@matthewgilliland6864 I’m not a fan of bonds at all. I used to own VNQ, but sold it and purchased more S&P 500 because I wasn’t happy with the performance and fees.
Ah, a contrarian investor. I like your thinking.
good job
FXAIX 500 performs the exact same as the FSKAX, has a better dividend than the total market fund and has the same exp ratio. Ill stick to S&P
Same here threw fidelity ❤
70% in VT, 20% SLYV(or VIOV), and 10% in AVDV could be a simple massively diversified portfolio.
I haven't done enough research on intl small cap, but I don't mind the other two
@@JarradMorrow I know the data available on it isn’t much, but one of the articles I read on it was that from 1982-2014 it’s cagr was 14.3 vs S&P 500 at 11.8%… S&P has crushed it since 2015, but I think it along with US SCV add meaningful diversification that isn’t too correlated to the total market indexes.
VTI and wait!
Great video. I went with VT and VTI for my HSA. I have a question. So do you recommend staying with the same funds across all of your investment vehicles, such as 401 k, Hsa, Roth?
VT contains both us and foreign stocks. It's basically one fund that contains VTI and VXUS, the 2 funds Jarrad mentions. By holding VTI + VT you are holding more US (mostly US) than you may mean to. Either us 100% VT as an equivalent to the 2.5 fund portfolio, or use a VTI/VXUS mix
Also keep in mind you qualify for the Foreign Tax credit from capital gains with VXUS that you don't get with VT if you're using a taxed account.
I have VTI, SCHD, SCHF, and SCHG. I’m sticking with those and don’t really plan to add anything else. Started last month and got 30 years to go! Lol
Glad you found a portfolio mix that works for you 👍🏻
Try Berkshire Hathaway
I completely agree on the two (or three) fund portfolio but the closer you get to actually needing this money is when you may need to get out of all-stock funds. For example putting money you need over the next five years into very stable funds (or just put it into cash)
Yes, all stocks is very aggressive and should really only be used early on in your investing career (20-40).
@@BaconBearOfficial I'm in my mid 40s and still about 89% stocks. 1% bonds. 10% cash. Probably still too aggressive.
I feel a bond index fund should also be thrown in there eventually. 100% stocks is likely for someone young with time and can stomach bigger fluctuations. If someone feels they can be more consistent with investing with an additional bond fund, I would do that. It’s all about setting something up that you don’t have to ever worry about and have to check.
Agree
What if as you get older and have a small pension, spouse intends to work another five years, you take Social Security and have enough cash to weather out a downturn of several years? Oh, and I’m extremely risk tolerant in general. I stayed 100% in the S&P500 during my working years and after retirement and ending contributions nine years ago. My portfolio has almost tripled in the last nine years even with taking $54K a year the past four years.
I'm loving your videos, Jarrad ... thank you for offering what is, for me, an easy and digestible personal finance education.
None of this is as efficient as being a politician. Legal bribes. Print your own Monopoly money. Give yourself a raise.
I was thinking of the 2 fund portfolio for my Roth IRA retirement account. Going with VTI, VXUS. What do you recommend as far as pie allocation?
The only problem I see in investing in small cap stock funds is that any successful small company will eventually grow out of the market cap range. The fund would always be selling off its best performers.
Broadly, I agree with your thesis. However, you need to address Sequence of Returns Risk. Without that understanding, this investing style will get "screwed up."
How about investing only in VT. Isn't that supposed to be investing in US + international?
Yeah it's roughly 60% US (VTI) and 40% International (VXUS). I say roughly because there are ~2000 fewer international stocks in VT than VXUS.
VT ! 1 fund !
Love what VT provides, but also very curious to see AVGEs future performance.
I'm buying only VT currently
Jarrad: Good video and great advice. How about investing in VT, and BNDW. This will cover the entire world's stocks and bonds. Your thoughts.
I like that strategy a lot for someone who wants to simplify even further
What are the equivalent vanguard two and a half funds that will be suited best for the Canadians. Thanks 🙏🏽
What are your thoughts on bond diversification as someone is 5, 10, 20yrs for retirement? With all these being purely stock based mutual funds, what is your general rule of thumb for starting to mix in a bond funds? Obviously just opinion and NFA.
I’m extremely risk tolerant. I’m an engineer and ran a bunch of worse (worst?) case scenarios back in the 1990s at the beginning of my career and decided to keep it all in the S&P500 and have no bonds. It worked out fine, but I had a pension and pulled SS early. If your portfolio is just barely enough to allow you to retire, then I might start switching a portion to bonds about 7 years out. Many experts out there to give you a percentage. Best of luck! And remember time is on your side and NO trying to time the market and move funds around if there’s a big market correction!!! People usually screw it up and lose more money.
For my international I had a mix an emerging markets (VEMAX) and developed markets (VTMGX). For the 25 years I had VEMAX it did next to nothing. Emerging markets never seem to emerge. I dumped it all into VTMGX and am not looking back.
Neither does International. DO YOUR OWN RESEARCH!
@@brianG81 not true about intl. Anyway, calm down. Geez.
Hi Jarrad. Too much diversity. Most US comps do business overseas anyway. Why not one fund just for dividends? Would VOO & SCHD work well together? Any thoughts? Thank you Jarrad!
I’m here to find out what a half a fund is
I' surprised you don't go for a developed world index fund and yea, I agree Vanguard do well. A Developed world Index fund still has a large portion of U.S. stocks. It also gives a better spread and similar yields. Especially relevant as some think the U.S market is so expensive at the moment.
Hi, what do you recommend we do if we invested in some ETFs with a high expense ratio? Should we sell them to stop paying these high ratios or what should we do? Thanks!
I would sell them, no reason to pay anything more than you have to
What bond funds would you recommend to switch to when approaching retirement? Thank you for your excellent content!
Warren Buffett tells people to invest in a short term bond fund at any age.
What ratio of total US and international do you suggest in a portfolio? What are your thoughts of buying VT instead of VTI+VXUS?
Great video!! the stocks I am working with are VTI, VXUS & BND. Do you have any recommendations for any alternatives to swap out any of the stocks? Thanks for any response!
No, those 3 funds have you covered with everything you'll ever need. If you're young then the only thing you might want to do is drop the bonds until you're closer to retirement, but that's more personal preference. Either way, pick the 2 or 3 fund portfolio and ignore all of the noise about adding more funds beyond that. Focus on making more money and shoving it into these funds.
@@JarradMorrow Thank you of the information. I'm new to your channel!!
Hey Jarrod I know you're just a random guy on the internet but I was wondering what you think is the best way to sell off terrible high price funds to purchase index funds?
I hold all GWPAX in my IRA and am tired of the fees. Should I do it incrementally or all in one shebang? Thanks!
Find out from your tax preparer what the tax harvesting limit is per year. I would stretch it out as long as possible.
Great info! Can I choose both stock options on M1?
Glad it was helpful. Yes you can. VTI and VXUS are what I hold within my accounts on M1
Another great video, Jarrad!
I'd imagine coming up with new ideas for content can be challenging sometimes.
Here's an idea if you're ever drawing a blank.... How to read a Vanguard fund (web page). It can discuss expense ratio, market price, risk, performances & fees, composition, etc.
Thank you for all the great content you put out.
What is “closer to retirement”? 5 years away? 10?
What are the 2 funds VT AND VXUS ? they seem exactly the same what if we just pick VT and DCA every week ?
VTI and VXUS or VOO and VXUS. VTI and VOO are close enough so you can pick one or the other depending on your preference.
Limiting your upside VGT killed total stock market last few years plus a few single stocks
Great!
👍
What asset allocation do you recommend for these 2.5 funds? Also do you recommend having both the VTIAX (S&P 500) and VEXAX (Extended Market) funds instead of the VTSAX (Total Market) fund?
KISS=Keep It Simple Stupid. Total Stock Market fund will be enough.
What about the recent findings that dividend stocks outperform foundational stocks?
If uk...s&p 500 (Csp1) ishares core etf. Vanguard global all cap index fund.
I love SCHG!!
How many years from retirement do you invest in bonds?
Great video. Do you have any videos on how to "fire" your financial advisor in pursuit of the DIY method of investing?
No. Open an account wherever you want your money to go then just call him/her and tell em' you want to move your money there.
I just called my advisor last week and,said good bye, I'm moving all my money to Vanguard....stay strong as he tried to tell me I don't know what I'm doing....but thanks to watching Jarrads videos, I DO know what I'm doing!!
It is pretty funny how easy it is to become a millionare slowly over time in theory, but the implementation of it is the difficult part for most people. Same as losing fat, building muscle, and getting into shape. Pretty easy in theory, but you have to execute day in and day out with consistency.
i have SPLG, FTEC, SCHD and SCHY. I'll probably add VXUS or schwab equivalent at some point. This is my roth, my company goes through vanguard, so i only have their funds to choose from, so i took different companies for personal roth.
Vti or voo is all you need when you are young.
@@thedoor5442 I agree with that, it’s what I tell my kids that are in college.
Why not just own VT?
That would work as well 👍🏻
I’ve got VTI, VUG, SCHD and VXUS
Can I take my 401k and my IRA accounts from my financial advisor and invest these in the two fund portfolio myself?
Yes, you're able to do that with the IRA. If it's a 401k then it depends.
If it's a 401k from an old employer you're not actively contributing to then you'd either have to convert it to a IRA or roll it into a 401k you're actively contributing to with your current employer. If you do the 401k to IRA conversion then make sure to do the additional research so you understand the benefits of a 401k over an IRA.
If it's a 401k you have with your current employer and you're actively contributing to it then the 401k plan has to allow you to do a partial conversion to an IRA (not all 401k plans allow you to do this while you're actively contributing). Once again, you're going to have to do additional research on your own so you understand the ins and outs.
I am self-employed and I am the employer and it's a solo 401k
Oh well then yea you should be able to move it to a different Solo 401k provider with no issue. You'll just have to figure out which brokerage you want to use, open the account, then have them contact your current provider to get the money/investments moved. I know Fidelity, Vanguard, and Schwab all offer a Solo 401k.
Thank you
@@gottagowithjoe1Shouldn’t you be leveraging a SEP acct as self-emp?
Are you still buying ETF like VOO or VTI with the uncertainty of the debt ceiling issue looming?
Here's my response: ua-cam.com/video/HF3OIEYHKro/v-deo.html
@@JarradMorrow - "Even if the world is burning I am still investing!" Haha. Thank you
No problem! Long term investors who are confident in what they're holding should only worry about 1 button...and that's the "buy" button.
Does vanguard offer automatic payments for investing?
Yes.
I stick to VT and BNDW. DONE!
I like that strategy 👍🏻
Why not just buy VT then?
That's a good alternative to a 2 fund portfolio
i invest about 40% vti, 30% schd, 30% qqqm, total us index, growth dividend, and growth. im 18. any thoughts?
I think you'll do incredible in the long run. But his argument is only VTI and a VXUS or whatever you choose. But if you like it and are comfortable with it, i'd keep going.
Take a look at adding an allocation to small cap value. Small cap value has had the highest returns over ever 30 year period. SLYV is what I use. AVUV is another. If you prefer vanguard VIOV. It will provide good diversity since you’re currently tilted towards large growth.
Thoughts are you are doing great because that's a pure growth ETF portfolio. And you're 18. Feed it and let it grow.
Smart young man I wish I started at 18 you should be proud of yourself
@@kylel8954 I put SLYV on the dividenchannel return calculator and from inception in 2000, SLYV has earned an average return of 4.5% with dividends reinvested. During that same time, the S&P500 has earned 6.77%. How can you say it has had the highest return? Higher than what? Not the S&P. Not the Nasdaq.
Not to harp on a small point, but Occum's Razor is not about the simplest solution to a problem being best. It's about the simplest explanation for something that happened usually being the right one, rather than complication theories about what might have happened.
My 401k doesn’t offer a total stock market fund nor a S&P 500 fund.
I’m enrolled in a target date fund. Thoughts?
It is not bad at all.
Will that portfolio work for Molly?😊
As long as she gets her daily hike in the woods she approves of anything 🐶
how do you justify investing in international fund when USA stock has done better than international ?
Everyone invests for the unknown future and not the known past ua-cam.com/video/6vTtuVQtE6c/v-deo.html
@@JarradMorrow I like your videos. SWPPX and SWTSX is my go to funds for me. I added some SWVXX recently. I agree with you that it is not worth paying a financial advisor. I try to tell my friends but they don’t listen.
Would this apply to roth ira or just 401k?
The 2 fund portfolio works well for any investment account since both types of funds are on the "more tax efficient" spectrum
I like the 1 Fund Portfolio. Just one ETF and it's available for Europe: Vanguard Developed World ETF.
Your content really helps me to stay focus and simple with just me an my Dev World ETF.
Thx for your great work and your videos!
Thank you for posting this, I never knew this one existed, I was about to invest in VWRL (All-World) before you mentioned the one you have. It's half the management fee, and pretty much all the same return on investment. Thank you, possibly saved me thousands for my retirement. Going to start my journey with VEVE on payday
Don’t you get hit fairly substantially with income taxes when you “sell out” of the total US stock market and total international funds when you want to buy into a bond fund?
Only in a taxable brokerage account. This can easily be avoided by swapping from stock funds to bond funds in retirement accounts and moving contributions more towards bonds as you move closer to retirement.
@@JarradMorrow So if you have a Roth IRA with 2 funds and sell from those funds in order to establish a bond position, you will not be taxed or penalized by the sale of the stock funds? Just making sure. Thx.
No, you don't pay taxes/penalty when selling any position within a Roth.
@@JarradMorrow So not selling, just withdrawing early. Got it. Thanks. Love the content man. Well done.
automatic bowling machine changers/steel/electronics/computers nothing changes
Just have VOO and schd 🙏
Ok. But please be specific as to why? I THINK I agree but need more encouragement.
Over the last 13 years, VTI has outperformed Vanguard Total Intl Stock Index Admiral 13% to 4.6% so WHY not 100% Total US Stock Market?
The point of holding those two funds at the same time is to have yourself covered no matter which companies or countries do well in the future. Remember that we're investing for the unpredictable future and not the known past.
So how much should i invest each month?
Depends on where you're at in regards to saving for retirement. My general answer is as much as you can
@Jarrad Morrow ok cool! I'm definitely new to this but I'm trying to get to that million dollar amount tho! Lol? So what you thinking would be a good start??
@@marlonreed773315% is what most exports recommend
@JarradMorrow - what’s your take on running a two fund portfolio with just VT and BNDW?
I like it
You must be from the Midwest
😂 what gave it away?
Never mind that Vanguard has it's hands on everything. I was reading some company stocks to see who the major share holder/owner is and it's almost always them and Blackrock.
What’s your point with this statement in regards to Vanguard?
Great video, do you have any videos on how to determine percent of stocks should be allocated to international?
I touched on international allocation within this video: ua-cam.com/video/cNvqUszP8Jo/v-deo.html . I believe I addressed international specifically somewhere in the second half of the video.
Thanks!
ZERO. Over the long haul international funds average 5% annual returns. S&P500 averages 10% over the long haul and about 40% of these companies are selling in the international market. So, tell me again why you’re interested in an international fund?
I wouldn't want to look at my portfolio
I dunno I have 9 ETFs that I invest in and I’ve been seeing great performance. DGRW VXUS SPYD SPLG SCHB SCHD DGRO OUSA & OUSM.
Holy actively managed and dividend ETF, Batman. With all of those dividend funds, I'm guessing you're either close to retirement or in retirement?
Dude: there is so much overlaps among all your nine funds you can reduce the number of ETFs to just 3.
@@JarradMorrowprobably 5-10 years out. Just nervous about retiring too young (retirement age will be around 47-52 years old) which is the only reason why I’m potentially stretching to 10 years.
I think I have that jacket
I was stupid and took the money out of my roth last year.
Im 33 and i have $5,500 in my 401k and im taking advantage of the 4% match. I just put $100 in my roth split between SCHD, FXAIX, AND FTIHX.
Gonna keep piling into my roth IRA as much as I can. Ill probably invest some into these funds every paycheck and let some cash sit on the side just incase we get some kind of black swan event to take advantage of.
I know its about time IN the market rather than timing the market, but i feel like DCAing regularly and still trying to catch the dips when they come. It is an election year so who knows whats gonna happen in the next year.
Sorry to hear that. My brother also took a big chunk of his Roth to buy a ‘damn’ boat. The forced investing in a 401K is the best unless you can do a Roth 401K. You have plenty of time, but be sure to up your contributions each time you get a raise til you are maxed out. Also, NO timing the market with stocks already in the fund! Best of luck!
I use a one fund portfolio. Worked pretty well over the past 25 years.
Whoever created your charts gets an "F" in percentages.
I’m dig it but I’ll stick to my 3 fund portfolio SCHD VONG SOXX
Im 100% in VNQ currently hold 13 shares and been picking up a share each paycheck.
😂
If I am already with Fidelity, do I need Vanguard too?
No, the fidelity versions work just fine.
@@JarradMorrow Thank you. I invested part of my IRA into mutual funds too.
I have my money at Fidelity, but if Vanguard has cheaper fees you can by them at Fidelity. I own many several different ETFs in our Fidelity accounts.
I have 67% in VT, 30% in IEF and 3% in IAU
Glad we can still be friends since I use Schwab 😂😂😂
Schwab investors will always be ahead of my weirdo stock picking friends
@@JarradMorrow 😂😂😂
First comment!
I will be 3rd. Please notify others
👍🏻
When you just own every stock in the world, arent you owning a lot of losers with the winners? Wouldn't you be better off having some sort of screen that weeds out many of the losers?
Beating the market consistently isn't something most investors can do. Owning the whole market gives you the average return. It's a return most investors can't beat anyway, so it makes sense to just take it.
“Beating the Market” means outperforming the S&P500. The S&P is the 500 largest U.S. companies on the stock exchange that comprises 2,363 companies. Weeded out are many US companies that are too small or are in financial difficulty. As for the international funds, I have no idea how they are selected, but probably a similar method. (actually, considering corruption in foreign countries, I could see some bribes being paid) Personally, I’d forget international funds as historically they have returned half of what the S&P 500 has done over the long term. There are many funds that mirror the S&P500 index and return the same results.
try backtesting this portfolio compared to the S&P 500 VOO.... then do another video
Why would you like me to compare this portfolio to one that only holds an S&P 500 fund like VOO?
@@JarradMorrow S&P is the benchmark to beat…. If you can
When showing portfolio suggestions
It would be wise to compare it to the S&P…. Plus Bonds and International stock when add to a portfolio always bring down the returns.
Who said the point of a 2 fund portfolio was to outperform the S&P 500 (in the past)? Same question with a 3 fund portfolio (since you're bringing bonds into the conversation)? By the way, adding an international stock fund has not "always" brought down returns. There have been many time periods in the past where international and U.S. swapped between outperforming/underperforming. You sound like an investing nerd like myself (😂) so I'd recommend reading more about asset allocation and portfolio construction. A great book to start with is called "The Intelligent Asset Allocator"
@@JarradMorrow sorry didn’t mean to make you upset ….. I’m old and have been investing for 50 years…. Your video came up on my feed… I have only S&P and aapl…..that’s it…. I see people on UA-cam making it so hard…
I wish you all the best ! Time is on your side 😎
Oh I wasn't upset and didn't take offense to it so no worries. I'm all about simplicity as well which is why I promote low cost diversified portfolios like a 2 or 3 fund portfolio.
Liberal pregnant men took offense and went into labor😂😂😂😂
Sometimes I feel like I live in an episode of Black Mirror 😂
@@JarradMorrow when I went overseas for vacation back in November of 2022 and I saw news from US where fat dude won beauty pageant, I thought I was being pranked… News from US look like some notes from a mental institution under Brandon’s rule
Now calling them losers is name calling and you're losing respect from people LOL I have friends that manage money I personally vtsax
Individuals who rip people off with high fees based on AUM are losers. I may lose respect from the small amount of people who don't matter, but gain it from the large amount of people who appreciate me calling out the bullshit that goes on in the financial industry.
What’s your thoughts on VIOV
Here's my quick thoughts on small cap funds ua-cam.com/video/hlWuryxUupE/v-deo.html