In response to questions that continue to emerge from readers regarding asset allocation breakdowns for various portfolios, I put together the following data table. The first think I did was to select seventeen (17) commission free (free to TDAmeritrade clients) ETFs that can be used to populate all the asset classes one might need to put together a portfolio. If a user so desired, the number of asset classes is expandable. I then broke the Stock vs. Bond ratio down into five different portfolios running from Low Risk to High Risk. For example, a Low Risk portfolio has only 20% invested in stocks and 80% in bonds, whereas a High Risk portfolio is 100% in stocks.
The table shows example percentages one might use with the different ETFs. I chose not to invest anything below 3% in a particular ETF as anything below 3% does not contribute all that much to the portfolio. Please note that I do not follow this rule in a number of the portfolios tracked here at ITA Wealth Management. Most of the portfolios I track hold between 8% and 40% in bonds.
What does a Low Risk portfolio look like when placed under the microscope of a Quantext Portfolio Planner analysis?
Platinum readers can quickly see why one would not be satisfied with this conservative portfolio. The returns are too low and the diversification minimal. Yes, the projected portfolio is a very low 7.47% or 7.5%. If I wanted to hold a Low Risk portfolio, at least I would split the 40% allocated to BND into a variety of bond ETF such as JNK, HYG, BIV, and BSV.