Easy Index Fund Investing [5 Vanguard Index Fund Portfolio]


If you want a stress-free investing strategy,
stick around because I’m going to show you how to use just five Vanguard Index Funds
for your entire investing strategy. I’ll reveal the dangers in index funds and
how to get the return to beat your goals. We’re talking index fund investing today
on Let’s Talk Money. Beat debt. Make Money. Make your money work for you. Creating the financial future you deserve. Let’s talk money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. This is a widely requested video and I know
there are a lot of index fund investors out there. The idea of index fund investing is intuitive,
you buy a couple of funds that hold hundreds of stocks in each. You don’t have to worry about picking stocks
or the stress of trying to beat the market. So I’m going to show you how to use just
five Vanguard index funds to create your entire portfolio. We’re not talking about just stocks here. I’ll reveal the five index funds you can
use to get exposure to bonds, real estate, international companies as well as stocks. This is going to be a complete portfolio you
can use to beat your investing goals and never have to worry about stocks again. After we look at the five Vanguard index funds,
I’ll also show you a strategy to have the best of both worlds. How to get that stress-free index fund investing
but still get the opportunity for higher returns in a handful of stocks so stick around for
that strategy. First, I do want to point out one disadvantage
of index funds that most investors don’t know about. A lot of investors ask me why I don’t invest
in a broad market index fund like the S&P 500, why I invest in the individual sector
funds instead of just one fund for the whole market. The answer is in what you get in that broad
market index fund. If you’re buying the entire S&P 500 in one
fund, you’re getting more than a quarter of that in technology stocks. In fact, you’d have more than two-thirds
of your money in just the four largest sectors of IT, health care, financials and consumer
discretionary. Three of those four sectors are highly cyclical,
falling fast in a recession, so you’re pretty much at the mercy of the market when it comes
to a stock market crash. Even worse is that the size of the sectors
in the market fund have changed over the years, making it even harder to manage your investment
risk. Here we see that the size of those largest
sectors have increased while some of the safety sectors like consumer staples has become a
smaller part of the market. Shares of utilities companies, some great
dividend paying names, are less than 3% of the fund. So there is a risk to index fund investing. In the five-fund portfolio I’m going to
share, some of that risk is reduced because we’ll have different assets. I’ll also show you how to limit the risk
even more in that special strategy after I reveal the five funds. I’m going to be using the Vanguard index
funds here because the company offers some of the lowest cost funds available. The funds we’ll use here charge an expense
ratio of between 0.07% to 0.12% which means you’ll pay less than $10 a year on a portfolio
of $10,000 to get exposure to thousands of stocks, bonds and real estate companies. I’ve got no affiliation with Vanguard and
I get no commissions from recommending them. I’ve invested in the funds myself and recommended
them to private wealth clients throughout my career. The first Vanguard index fund in our portfolio
is the Dividend Appreciation ETF, ticker VIG. The fund holds shares of 182 companies across
sectors, some of the largest companies in the market like Microsoft, Walmart and McDonalds. The fund pays a 2% dividend yield which is
only a little above the market but is balanced by solid price growth. Over the last decade, the fund has produced
an 11.2% annual return which is one of the highest among the Vanguard funds. The fund also gives you better exposure to
some of those safety sectors like consumer goods and services so it’s not nearly as
overweight in tech or the other sectors you usually find in a growth fund. Our next fund is going to compliment the dividend
fund so we get a little more growth. Here we have the Vanguard Mega Cap Growth
ETF, ticker MGK. This fund holds shares of 120 companies and
has produced a 13.7% annual return over the last decade. The dividend yield here is only 1.4% because
the focus is really on stocks that grow faster rather than returning cash to shareholders. The sectors here are weighted to growth, so
you’ve got more in technology and financials and health care compared to the dividend fund. I really like the combination here from the
two Vanguard funds because you get solid dividends and price growth. Investing in the two funds gives you a more
balanced investment across sectors versus just investing in the broader market index
funds. Now a lot of investors avoid international
stocks and think they get all the exposure they need from those large U.S. companies. They’re missing out on a huge opportunity
for higher dividends and less risk though. Investing directly in international companies
takes a lot of the risk from the U.S. dollar and other economic problems. Any company based in the U.S. is going to
be exposed to these even if it has a lot of foreign cash flow so you really need to have
at least one international stock fund in your portfolio. For that, I’m going to suggest the Vanguard
International High Dividend Yield ETF, ticker VYMI. The fund holds shares in over 900 international
companies and pays a healthy 4% dividend yield. What I like about the fund, besides the solid
dividend and average 9.7% annual return since inception, is the ability to get exposure
to fast-growing emerging markets as well as developed markets around the world. The fund has half its exposure to relatively
safe companies in Europe but also 20% in EM stocks and Asian growth. Just those three Vanguard funds will give
you all the stock exposure you need. Now how much you have in these is going to
depend on things like your age and investing goals. Most people will want between half to 65%
of their portfolio in stocks but don’t neglect the bonds and real estate funds we’ll get
to next. These two funds for bonds and real estate
are going to smooth out your risk in stocks, provide some great cash flow and even give
you the opportunity to take advantage of lower prices when the next stock market crash does
hit. For the bond part of our portfolio, we have
the Vanguard Long-term Bond ETF or ticker BLV. Now bonds have gotten absolutely smashed this
year on the increase in interest rates but that means it could be the best time to be
adding to your portfolio. Even that 6% loss the fund has taken over
the last year is nothing compared to the 10% plunge stocks made in the month of October
alone or the potential for a 50% drop in a market crash. After dividends, this fund protected your
money completely over the year to March 2009 and would have been a great opportunity to
get stocks at bargain prices. The fund pays a 4% dividend and has 42% of
more than 2,000 bonds held in U.S. government debt. All the bonds are investment grade so extremely
safe credit ratings. Our real estate fund here is my favorite,
the Vanguard Real Estate ETF, ticker VNQ. Real estate is another sector that’s been
hit on rising rates this year but the fund has held up and pays a 4.4% dividend yield. There’s no better asset than real estate
for creating wealth. We’ve got another video on the channel covering
the seven real estate strategies I used after getting out of the Marine Corps to get started
with no money down that I’ll link to in the video description below. The problem is that even without having to
come up with tens of thousands down, property investing can still be a lot of time and work. REITs are a great opportunity to get that
growth and cash flow without all the work. The Vanguard real estate fund has produced
an 8.4% annual return since its inception in 2004 and holds shares of 184 real estate
companies. This is a must-own fund for its diversification
in every property type and in every region. You can create a complete investment portfolio
with just these five Vanguard index funds. That’s everything you need from growth to
dividends, international stocks, bonds and real estate. Now I want to show you a special strategy
you can use to get a little higher returns but still the safety of that diversified portfolio. The strategy is called core-satellite. It’s the strategy used by most wealth managers
and the strategy I use to invest my money. In the core-satellite strategy, you use the
majority of your money, around 75% to invest in these index funds we talked about. That gives you exposure to thousands of stocks
and bonds for stable returns. With the rest of your money, you invest in
a handful of individual stocks. The fact that you’re investing a much smaller
amount means you can only invest in the best picks you find and no individual company is
going to be a big part of your portfolio. That means you get the opportunity for an
extra return on picking a few winning stocks but none are going to tear down your portfolio
if it crashes. There’s nothing that says you need the core-satellite
strategy. You can go with these five Vanguard index
funds for that index fund investing strategy and still beat your goals. Both strategies are going to give you stable
returns and cash flows without the huge risks in a market crash or the stress of constantly
trying to pick stocks. We’re here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making more money and making your money work for
you. If you’ve got a question about money, just
subscribe to the channel and ask it in the comments and we’ll answer it in a video.

68 Replies to “Easy Index Fund Investing [5 Vanguard Index Fund Portfolio]

  1. Must Watch 😲 This 2019 dividend portfolio is at an 18% return, double the stock market return, and going higher! Check out the March update here https://youtu.be/WHaKQW6PAtk

  2. Very thought-provoking to consider the scope of the funds that one invests in. I started with the funds with the broadest scope, like VTI, VEU, and BND. I'll have to look at how a mix of more specific ETFs, sector-, cap-, and goal-specific ETFs might compare. Once I learned a little more, I built a collection of dividend growth stocks on top of the ETF-based foundational portfolio. The core-satellite metaphor makes sense.

  3. Vanguard has changed the world for the better. It has gives people the ability to invest in low-cost index funds and let their money work for them, and not the other way around. Great video, keep up the great content, Joseph!

    P.S: we sent you an e-mail!

  4. Investing in index funds will provide you with decent returns without requiring any effort from you; however, you can significant returns if you take the time to pick your own stocks.

  5. Thank you so much for your video, I have similar funds in my portfolio which is SCHG, SCHD, FREL and do not have any bonds right now.

  6. I read there are more etf's and index funds than there are individual stocks. Passive investing doesn't mean what it used to mean. I like the idea of equal weight etf's though.

  7. Incredible video Joseph. I currently have a broad total market etf, and then the bond and real estate etfs you detail. I’m going to rethink and assess my allocation re foreign investments based on your recommendations. Also, do you see any reason to allocate a portfolio differently if it’s for a Roth IRA versus a non retirement account?

    Thanks.

  8. Index funds are definitely a great way to get great exposure! Great quality info in this one that will help a lot of people! πŸ‘ŒπŸ½

  9. I would check Paul Merrimans research on small cap value fund beating out all asset classes in the long term. I'm big on viov and a little less on vss.

  10. Great information! I'm investing in low cost index funds through TD e-series funds in Canada. If you're interested in what's available north of the border you can search the Couch Potato portfolio strategy online πŸ˜€ I'm not quite ready to take on ETF's yet (95 percent of my investible money is automatically invested into my mandatory government pension, I'm just investing a small amount myself on the side). I appreciate these detailed videos with actionable steps. Thank youπŸ’™

  11. Love these videos Joseph. So i currently have an E-Trade account with only stocks. They have done pretty well but after learning and educating myself more about the markets, I want to build a portfolio similar to this video. My question is how often should i be investing in any portfolio? Should it be a consistent input from say my monthly paycheck or invest X amount from my savings (set aside to invest) into a new portfolio and just leave it?

  12. Hello from Greece. Dear Mr. Hogue, firstly congratulations for your amazing channel. Your videos and the information that you provide are simple and extremely educational. I am new on the field of invests and by watching you I have understood many things. Now as brocker i have chosen the Degiro ( Netherlands ) platform, which has low fees and is indicated for long term investments (buy and hold). I have buy the European versions of the Vanguard ETF for the S&P500 ( VUSA ) as well as the Vanguard FTSE ALL WORLD High Dividend Yield ETF (VHYL) and now I am interested to invest some money to a Vanguard Bond ETF.Β 
    Unfortunately the Degiro, does not provide many options and the only one that I can choose is the Vanguard USD Treasury Bond UCITS ETF ( VUTY ). Do you think that this Bond ETF ( VUTY ) is a good option that can fulfil the diversification strategy of my portfolio or is something that I should avoid.

    Thanks you very much for your time.

  13. Love your channel ! I currently have my Roth IRA invested in the Target Date 2040 Retirement index fund. Can i add these amazing 5 funds to my portfolio without overlapping? I do not wish to sell the target date fund as it has been doing very well with me – Total stock market index, total bond index and total international stock and bond index (4 funds it has in it) your thoughts please?

  14. Great video! I'm opening a Vanguard account in March. I have the majority of my 401k in a S&P Index Fund. It is a low cost fund, the issue is my company does not offer alot of choices for my 401k.

  15. Great video! I already own VIG and VNQ (admiral shares though). Love VNQ. I don't have exposure to bonds whatsoever (26 y.o.). May look into getting a position in BLV. Really enjoying the content – thanks!

  16. I’m very new to buying stocks. Are these worth investing one at a time or should I be saving to invest more at once?

  17. How many shares would you have to buy before you can see long-term success or do you just keep automatically investing like monthly or something in these funds? Thanks

  18. Thanks for the video. I just started investing a couple months ago in the basic Vanguard funds (VTI, VXUS, BND). Can you speak to how I should spread my money across these five funds you mention in the video?

  19. Fees will eat you alive if you are a small time investor, if you don't put in at least 3 digits at once per order its simply not worth it.

  20. thoughts please
    I just recently invested in a number of funds for myself and the kiddos

    vti vanguards total market fund

    bnd vanguards total bond market

    vnq vanguards real estate funds

    vxus total international funds

  21. Thanks for the info. What do you think of the Vanguard Balanced Fund 60/40 asset allocation or the Target Retirement Funds?

  22. Can I put these funds and a mix of stocks and some real estate stock into an Roth IRA account. I would like to open very soon . What you think Mr Joseph for an Roth IRA account on M1 finance. Carlos Rosas

  23. Currently looking at building my portfolio thru vanguard with VOO 70%, BND 10%, VNQ 10% and do 5% individual stocks. Any suggestions? Thanks for the great video and explanation

  24. Can you please give me some examples of capital gains investments and high-dividend investments? Love your channel! Thank you so much for your help!

  25. Hi, great video! I'm 17 now and want start investing in vanguard index funds. I was thinking of spreading my portfolio between VTI, VEU, and MGK. Do you suggest that I add any indexes/take any away from this portfolio? Also, because I am young, I feel that I should have a bit more risk tolerance now, and as I become increasingly older, I could move towards more conservative indexes. According to this portfolio, how would you suggest that I spread my investment funds? Thanks!

  26. Great content. I'm trying to understand what you mean by Yield and Return. Is Yield the dividend, while Return = (Dividend + End of financial year Stock Price) / Start of financial year Stock Price?

  27. Hi Joseph aren't the high yielding stocks/ETF risky, considering many of them have unique business structures, eg ticker OMP , which looks quite compelling with 9.03% return , but could be too risky of a ride. It's solely focused on gathering and processing oil and gas, which is more sensitive to changes in commodity prices. Thoughts much appreciated.

  28. Are ETF's better than the Admiral Shares, or do you just go with them because you don't have a high minimum entry?

  29. I was planning to do the Boglehead 3 fund portfolio, but this is the only video I've seen that's making me question it. I guess my biggest learning curve would be how to allocate the portfolio.

  30. Fantastic video..this is exactly what i was looking for . My only question is how would you break down in terms of % your investments into each one of those 5

  31. Any suggestions for a good vanguard etfs to invest in for International stocks. Is vanguard total International vxus enough for the International? Or the mix of vwo vanguard Emerging markets & VEA vanguard Developed markets.

  32. Semper fi! 96-00 Great information I currently am just starting learn about investing. I currently have ussbx and usnqx and would like to invest in VNQ and DVY around Oct 19 if able. What would be your advice on this set up? Currently I'm just saving with CDs as we want but a house in the next 18 to 24 months.

  33. As a new investor at 39 years old i wanted to know, if i have 1000$ to invest, what should i put it in to? I have a 401k with fidelity i started late about a year ago but i am contributing 20%.

  34. For someone who has a 457 with TDA, do you think it would be better to pay the commissions for the Vanguard Funds or purchase 5 funds that are similar? TDA fees are $6.95 and want to dollar cost average twice a month. I have about 4 years left before retirement and have some extra cash available.

  35. Hi I'm new ETFs and wanted to ask
    Are There a minimum amount of shares that has to be purchased or can I purchase one share and build from there and do you have to make monthly contributions to the fund thank you

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