I get a lot of questions asking about the best stocks to invest in. Full disclosure: I have no idea.
The truth is, I’ve only bought one individual stock since 2010. I don’t have the patience or knowledge to beat the market consistently, so I don’t even bother trying.
My wife and I save a majority of our income, about 75%. We keep approximately six months of living expenses in our bank accounts and invest the rest. Last year we maxed out my 401k, her TSP, two Roth IRAs and an HSA. We put the remaining savings in a Vanguard taxable account.
I used to follow the Permanent Portfolio allocation and while I believe it is a solid strategy, it is meant more for wealth preservation, not wealth accumulation. We’ve only been working and seriously saving for about four years, so we are definitely still in the accumulation phase.
Therefore after much consideration, we decided to be more aggressive with our investments. Most of our portfolio is in VTSAX. As of January 2, 2017, this mutual fund has a .05% expense ratio (they take $.50 for every $1,000 invested) and is invested in 3,619 USA companies. Basically we have the entire USA public sector working for us for mere pennies! This strategy is popular in JL Collins’ stock series and book, both of which I highly recommend.
I’ve said it before and I’ll say it again, your savings rate is much more important than your portfolio performance. I’d rather have a 5% return on $50,000 saved than a 10% return on $10,000 saved.
We may become more diversified as the years go on but for right now we are in the accumulation phase of our wealth building journey and a total stock market fund is one of the most aggressive ways to build wealth. Once we have a seven figure portfolio, preservation will become much more important. But for now, we feel secure with diversified incomes and a healthy emergency fund.
Feel free to reveal your thoughts and personal asset allocation in the comments!