How to Build Your Investment Portfolio

This is apparently how Ted Aronson (who manages $28 billion) invests his family’s taxable money. I’m not sure I understand the logic behind some of its components. That said, if it is held for a long period of time, I’m sure it will work just fine. As of January 2025, it has 10-year returns of around 6.55%, which is 1.92% worse than Balanced Index Fund (see portfolio #4).

Liquidity risk

Risk diversification dictates that the risks of investing in high-growth stocks for optimum returns must be counterbalanced by low-risk, low-return assets such as market securities or bonds. The reality is that there is a large body of knowledge demonstrating the importance of dividends over long measurement periods. This argument that those who invest with a dividend strategy dont understand corporate finance, or that a dividend strategy is not the “best way to attain a value tilt” are both incorrect. If one does a deep dive into accounting research dividends are the purest forms of profit. Reasonable payout and growing dividends are two of the characteristics that should characterize investors equity portfolios because it demonstrates a larger quality tilt, as well as gaining exposure to value. But it should be noted that portfolios can be built where dividends are targeted separately from other factors.

• In reality dividend strategies, especially dividend growth strategies, are targeting the quality factor.
• In contrast, active investing involves trying to beat the market, though the odds of doing so are typically tough.
• I can’t tell you what the portfolios held (there were quite a few actively managed funds and the allocations changed from time to time), but I can tell you the performance wasn’t terrible.
• Of course, he seems to think gold will do well in three of those four situations, but it makes for pretty fancy charts.

Types of assets in an investment portfolio

Therefore, certain investments may be better suited for you depending on your age, goals, how long you wish to invest, and current financial situation. This asset class has made a lot of headlines in recent years, especially when Bitcoin’s value skyrocketed to $65,496 in 2021. But cryptocurrency is considered a very volatile investment, dipping to lows of $16,195 in 2022.

Fidelity Smart Money℠

To look at just two up years and say “ah” total return out performed is to not understand the problem. Just think what would have happened if last year was a 30% down year instead of an up year. Just stack another 5 years like the last five and you are broke!

Bonds

Did you honestly compare it, after tax and expenses and the value of your time to simply buying and holding a reasonable portfolio? I find most people (including me) just get sucked into trying to time the market and end up underperforming. If you want to do tactical asset allocation, it should be small moves at a low frequency at market extremes. If you’re changing asset allocation multiple times a year, I think you’re doing it wrong. In my case I was happy to apply it because frankly bonds are terribly overvalued, and they give you no guaranteed income growth.

Return on investment (ROI) is usually not as strong as the stock market, but bonds can add some much-needed stability to an investment portfolio. For example, the guaranteed return on series I bonds issued November 1, 2022 to April 30, 2023 is 6.89%. These types of government bonds are indexed for inflation every six months. An investor who purchased Vanguard Dividend Growth over the past decade would have received a return of 8.50% vs 7.62% for the S&P 500 index. What is particularly note worth however is that the dividend growth investor achieved this objective with 17.58% less volatility and 20.79% less beta, which led to a sharpe ratio which was 25% higher.

He wants you to send him $150 to tell you how to use Vanguard funds (or those of any other company) to implement the portfolio. If you’ve read https://vangoubergen.com/index.php/2025/12/05/arbivex-2025-datenbasierter-kryptohandel-mit-fokus/ this far, you know more about portfolio design than 95% of “financial advisors” out there. FPL Capital Management, one of the sponsors of this blog, has a whole bunch of model portfolios, made up mostly of DFA funds. This one is 60% stocks but there are nine more ranging from 10% stocks to 100% stocks.