Portfolio #2: Ages 26 – 35

Portfolio #2 adds a few more ETFs and gives up nothing in performance.  In fact, the projected standard deviation (portfolio uncertainty) drops from 20.1% to 17.6%.  Diversity is increased from 8% to 29% and the Portfolio Autocorrelation drops two percentage points.

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General Guidelines for Investing Success

While it is rather early in the morning here on the West Coast, I'm still thinking clearly so take these ideas seriously.  When putting together a portfolio, follow these general guidelines.

  • Use index funds or index ETFs to build the core of the portfolio.

    • One should not need more than eight to twelve ETFs to build a well-diversified portfolio.
    • Only add individual stocks with your "mad" money.
  • Always follow the Golden Rule of Investing.  Search the blog if you missed this fundamental rule.
  • Be patient.
  • Develop a plan and then discipline yourself to stay with the plan.

    • The plan should include a model to avoid or minimize losses.

The last point – avoiding portfolio losses is essential if the investor is to end up with the necessary funds for retirement. Pay attention to, and learn from, the ITA Risk Reduction model I am using with the Maxwell and Euclid portfolios.  If only I had followed this advice over the last 50 years of investing.  I'm passing on my experience so young investors can avoid pitfalls that are going to come in the future.