This retirement stock portfolio is custom-made for millennials and anyone with decades left to invest
I look at a lot of retirement stock portfolios of millennials and one thing is almost always missing. They’ve got plenty of stocks and some even have a little real estate to balance things out but almost nobody invests in bonds. The millennials aren’t alone in their lack of fixed income investments. Many of my fellow GenX investors hold little or no bonds as well.
Even if you’ve got decades left until retirement, you still need an investment in bonds to smooth out your stock portfolio returns. It’ll put a consistent stream of cash in your portfolio and keep you from freaking out when stocks take a nose-dive.
After talking with a friend about the lack of asset diversification in most stock portfolios of the younger generations, I decided to share my own Ready-Made Retirement Fund I created on Motif Investing.
This is the third post highlighting four investing funds created on the Motif Investing website. Investing on Motif is a new way to buy stocks, giving you instant diversification and lower fees. See our earlier review of Motif Investing and how it’s changing the way people build their portfolios.
Check out the Ready-Made Retirement Fund on Motif Investing
to put this idea to work in your portfolio.
The Most Important Question for a Stock Portfolio isn’t which Stocks to Pick
Asset allocation is the single most important idea in investing. Asset allocation is simply deciding the right mix of stocks, bonds and real estate for your portfolio according to your needs. Bonds generally provide security and stable cash flow. Real estate provides a little more growth and cash flow while stocks provide higher return but can take a portfolio on a roller-coaster ride during a market crash.
Having the right mix of these three assets means some of your money is protected against recessions while some of it has a chance to grow during the best of times. It also means you don’t freak out and panic-sell your stocks when the market tumbles.
It’s too bad that the media fixates on stocks, giving investors the impression that stocks are all there is to building a retirement portfolio.
Deciding the right mix of assets for your needs is a matter of putting together a personal investment plan. This means looking at how much you need in retirement, how much you have now and what kind of return you need to get there.
A Ready-Made Retirement Portfolio of Stocks, Bonds and Real Estate
Younger investors with decades left to retirement can be more aggressive in their asset allocation decision. I put together the following stock portfolio as part of my retirement fund on the idea that I still have about 30 years to retirement. The portfolio includes a mix of stocks, bonds and real estate through exchange traded funds (ETFs) and individual stocks.
Your own investments will differ a little according to your specific needs. You may want to add more individual stocks and more sectors if this is your only stock portfolio. I invest in three other portfolios on Motif Investing which diversifies my overall exposure across all the sectors.
The portfolio holds 25% in two bond funds, the U.S. Aggregate Bond ETF (AGG) and the SPDR Barclays High Yield (JNK). The aggregate bond fund is a mix of government, corporate and other bonds designed to track the overall bond market. It’s a relatively safe investment with a 4.5% annual return over the last ten years. The high-yield bond fund is more volatile because it invests in bonds of less financially-stable companies. I like the fund because it is a good bridge between the safety of bonds and higher returns on stocks.
The portfolio holds 20% in real estate REIT investments through the Vanguard REIT ETF (VNQ) and shares of HCP Incorporated. The Vanguard fund is a great addition, holding hundreds of individual companies that own commercial real estate. I like HCP because it is one of the largest healthcare REITs, positioned to profit from the demographic trend in the United States.
A little over half (30%) of the remaining investments in the stock portfolio are in four ETFs that invest in stocks. The S&P 500 ETF is the broadest while the energy and utilities funds give me extra exposure to two sectors with strong long-term potential. While emerging markets have been slammed over the past year along with energy prices, these stocks provide great long-term potential as well through faster economic growth.
The rest of the stock portfolio is held in a mix of eight companies that I like for long-term growth. A few are in the agriculture, healthcare and energy sectors which is an idea I highlighted in my American Future Fund as the strongest three themes over the next several decades.
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The Ready-Made Retirement Fund has matched the return on the S&P 500 since I created it earlier this month. That’s pretty impressive for a fund that includes bond investments and less risk than the general stock market. Over the long-term, I expect the fund to do well as agriculture and energy rebound while the bond portion should help smooth returns during market crises.
FAQs
At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).
How much money do you need to retire with $100,000 a year income? ›
So, if you're aiming for $100,000 a year in retirement and also receiving Social Security checks, you'd need to have this amount in your portfolio: age 62: $2.1 million. age 67: $1.9 million.
How long will $1 million last in retirement? ›
Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.
How much will the average millennial need to retire? ›
A paradox at the center of millennial America's working life
They expect retirement to cost $1 million or more. Yet, they have saved only a small fraction of that sum. One recent report, from Northwestern Mutual, found that millennials believe they will need $1.65 million to retire comfortably.
Should a 70 year old be in the stock market? ›
If you're 70, you'd look at sticking to 40% stocks. Of course, there's wiggle room with this formula, and it's really just a way to get started. And for many older investors, a 50-50 split of stocks and bonds is what's preferred throughout retirement, and that's fine, too.
What should a 70 year old retiree asset allocation be? ›
While, again, this depends entirely on your individual needs, many retirement advisors recommend higher-growth assets around the following proportions: Age 65 – 70: 50% to 60% of your portfolio. Age 70 – 75: 40% to 50% of your portfolio, with fewer individual stocks and more funds to mitigate some risk.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
What is a good monthly retirement income? ›
As a result, an oft-stated rule of thumb suggests workers can base their retirement on a percentage of their current income. “Seventy to 80% of pre-retirement income is good to shoot for,” said Ben Bakkum, senior investment strategist with New York City financial firm Betterment, in an email.
How many people have $3000000 in savings in the USA? ›
How many people have $3,000,000 in savings in the USA? There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more. I very much doubt that any of them have that amount in savings. A good many of them reach that level because of a large equity in an expensive home.
How many people have $1,000,000 in retirement savings? ›
If you have more than $1 million saved in retirement accounts, you are in the top 3% of retirees. According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved.
Will millennials get Social Security? ›
If you're a millennial, chances are you will receive (at least some) Social Security benefits when you retire, but you will need to supplement it just to pay for essentials. With careful planning, budgeting, and investing now in your retirement, you can create a more financially stable life for your future self.
How much money do most Americans retire with? ›
Here's how much the average American has in retirement savings by age
| Age Range | Median Retirement Savings |
|---|
| 45-54 | $115,000 |
| 55-64 | $185,000 |
| 65-74 | $200,000 |
| 75 or older | $130,000 |
2 more rowsMay 5, 2024
The latest “magic” retirement number is $1.46 million, according to Northwestern Mutual's 2024 Planning and Progress Study. That figure has been circulating in the financial press for the past week, engendering conversation—and some dismay—online.
What is the recommended retirement allocation by age? ›
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.
What percent of retirement portfolio should be in stocks? ›
Key Takeaways:
The 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. If you're 60, you should only have 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.
How to invest $100k at 70 years old? ›
Consider these options to grow $100,000 for retirement:
- Invest in stocks and stock funds.
- Consider indexed annuities.
- Leverage T-bills, bonds and savings accounts.
- Take advantage of 401(k) and IRA catch-up provisions.
- Extend your retirement age.
Is the 60/40 Retirement Strategy Still a Good Idea for Retirees? Investment advisory professionals say the 60/40 portfolio management tool still has a place in a retirement saver's plan of attack – but it's not a cornerstone.
to put this idea to work in your portfolio.
Asset allocation is the single most important idea in investing. Asset allocation is simply deciding the right mix of stocks, bonds and real estate for your portfolio according to your needs. Bonds generally provide security and stable cash flow. Real estate provides a little more growth and cash flow while stocks provide higher return but can take a portfolio on a roller-coaster ride during a market crash.
