- Pick a retirement account type: Roth IRA.
- Chose an account provider: Vanguard.
- Choose which assets to invest: ETFs.
- Create a portfolio: All-Weather Portfolio
- Setup automatic contributions/investments if you can.
I chose IRA because my company doesn't offer a 401(k) plan and I chose Roth IRA over a traditional because if you have enough money to contribute the full amount every year ($6000 as of 2019) and pay taxes on it upfront (Roth) then it will benefit you greatly later when you pull that money out and you don't have to pay any taxes on it. There are a lot of other benefits with Roth IRAs over Traditional such as penelaty free borrowing and no rule forcing you to take your money out at a certain age (required minimum distributions).
I picked Vanguard because it has very low fees for ETF funds which are the exact type of investments I am targeting.
ETFs are best for retirement accounts because they perform best over the long term with low risk. They also charge far less fees than a mutual fund. This seemingly small difference in fees can make a huge difference given a long time span such as in a retirment account.
The All-Weather Portfolio
This portfolio is the one that was create by Ray Dalio the founder of investment firm Bridgewater Associates, one of the world's largest hedge funds. This portfolio is laid out in great detail in Tony Robbin's book "Unshakeable: Your Financial Freedom Playbook".
30% in U.S. stocks
40% in Long-term U.S.Treasury Bonds
15% in Intermediate-Term U.S. Treasury Bonds
7.50% in Gold
7.50% in broad Commodity basket
Portfolio mapped to real world ETFs
30% Vanguard Total Stock Market ETF (VTI) +7.21% YTD
40% iShares 20+ Year Treasury ETF (TLT) +15.96% YTD
15% iShares 7-10 Year Treasury ETF (IEF) +7.26% YTD
7.50% SPDR Gold Shares ETF (GLD) +25.71% YTD
7.50% PowerShares DB Commodity Index Tracking Fund (DBC) +9.81% YTD
Year to date total return through 09/26/2018 +12.30
Ideally you would have some sort of automation on your Vanguard or other IRA providers website that pulls money from your account every month and invests automatically in the exact assets & percentages in your portfolio.
However, Vanguard doesn't currently let you set up automatic investments for ETFs that functionality is only provided for mutual funds (which I am stearing clear of).
Vanguard has another service called automatic contributions, which can automatically pull money out of your bank account every month. It still up to you to go onto the Vanguard website once a month and buy the assets you want based on your portfolio. Doing it this way is a pain, but it is better than procrastinating on your retirement or paying exorbitant mutual fund fees anyday.
I just split up my max allowed contributes of $6,000/year into 12 months so $6,000/12 = $500/month and had Vanguard pull $500 out of my bank account on the 1st of every month using their automatic contributions service.
Account Type: Roth IRA
Account Provider: Vanguard
Max Contributions: $6000/year
Investement Types: ETFs
Automation: Automatic Contribution $500/month
Portfolio: All-Weather Portfolio
- 30% VTI ($150/mo)
- 40% TLT ($200/mo)
- 15% IEF ($75/mo)
- 7.50% GLD ($37.50/mo)
- 7.50% DBC ($37.50/mo)
Defining some of the terms above.
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature. Mutual funds have advantages and disadvantages compared to direct investing in individual securities.
To define what an ETF is, let's break down the term.
ET = "exchange-traded"
An ETF is traded on a major stock exchange—like the New York Stock Exchange or Nasdaq.
If you've ever traded an individual stock, then buying and selling an ETF will feel familiar because it's traded the same way.
F = "fund"
An ETF is a collection (or "basket") of tens, hundreds, or sometimes thousands of stocks or bonds in a single fund.
If you've ever owned a mutual fund—particularly an index fund—then owning an ETF will feel familiar because it has the same built-in diversification and low costs.
A Treasury bond (T-bond) is a marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds are known in the market as primarily risk-free; they are issued by the U.S. government with very little risk of default.
Broad Commodity Basket
A commodity ETF is an exchange-traded fund (ETF) invested in physical commodities, such as agricultural goods, natural resources and precious metals. A commodity ETF is usually focused on either a single commodity — holding it in physical storage — or is focused on investments in futures contracts.
- All Weather Portfolio: 5 questions (and answers) about the mix
- APRIL 9, 2018 all weather portfolio killer year
- 7 Vanguard Funds to Build an All-Weather Portfolio
- Why The 'All-Weather' Portfolio Has Stumbled
- Starting an automatic investment plan at Vanguard
- Account conveniences
- ETFs vs. mutual funds
- ETFs outperform mutual funds
- What is a Commodity ETF