This is how I'd invest it if I had to start over with $20,000 today.
Key Points
-
All 11 key industries are represented by companies in the S & P 500.
-
International stocks should be included in a well-rounded portfolio.
Give yourself a pat on the back if you find yourself with a lump sum of money and are thinking about investing it. It's crucial to be deliberate with your finances because making wise choices now can frequently pay off tenfold in the future. If I had to start again with $20,000, this is how I would invest it.
Allow the S & P 500 to set the pace.
Undoubtedly, a sizable chunk of the $20,000 would be invested in an S & P 500 index fund. An S&P 500 fund, which invests in the 500 largest American corporations, is a must-have in any investment portfolio because it contains some of the best large-cap stocks (including blue-chips). One of the fundamentals of investing, diversification, would also be attained by an S&P 500 fund. iShares Core S&P 500 ETF (IVV 1.04 percent), for instance, invests across the following sectors:- Information Technology: 27.19%.
- Healthcare: 14.74%.
- Consumer Discretionary: 10.88%.
- Financials: 10.77%.
- Communication: 9.03%.
- Industrials: 7.67%.
- Consumer Staples: 6.82%.
- Energy: 4.21%.
- Utilities: 2.95%.
- Real Estate: 2.90%.
- Materials: 2.60%
An S&P 500 fund provides both types of diversity, which is important because you never want your assets to be overly dependent on one firm or sector.
Take a look abroad.
If you just consider investing in American businesses, you are limiting your options. Outside of the 50 states, there are many reputable businesses and well-known brands, and including them in your portfolio might be advantageous. However, researching and investing in individual companies can be challenging and may require taking into account different considerations than you do with American businesses, especially those operating across multiple countries (like local politics).
Rather than wasting time on that, I would invest in a global index fund that includes both established and emerging market companies. More than 7,800 businesses from the following markets are included in an index fund like the Vanguard Total International Stock ETF (VXUS-0.04 percent), which tracks them.- Europe: 39.6%.
- Pacific: 26.7%.
- Emerging markets: 25.2%.
- North America: 7.9%.
- Middle East: 0.5%.
Give yourself the opportunity for rapid advancement.
Many large-cap organizations have little to no room for hypergrowth due to their size. Small-and mid-cap stocks can be helpful in this situation. Smaller-cap stocks typically have greater upside than large-cap stocks because of their potential for growth. Large-cap stocks are typically more stable. However, because smaller businesses are more vulnerable to extreme volatility, this growth potential also carries larger dangers. Despite the risks, you should constantly expose yourself to small-and mid-cap companies in order to benefit from the potential gains.
By investing in the Vanguard Small-Cap ETF (VB, 1.41 percent) and the Vanguard Mid-Cap ETF (VO, 1.33 percent), you can spread your risks across an already risky group of stocks. They'd be the people I'd go to for small and mid-cap funds.
Invest in separate accounts.
I would divide up the $20,000 into smaller installments using dollar-cost averaging rather than invest it all at once. One of the greatest methods to reduce some of the emotions associated with investing is to employ dollar-cost averaging, which entails investing a certain amount at predetermined intervals regardless of how the stock market is performing. It's more crucial to be consistent and adhere to your investing plan than how frequently you execute it.
In this case, I would divide the $20,000 into ten weekly investments of $2,000 each:- Large-cap: 60% ($1,200).
- International: 20% ($400).
- Mid-cap: 10%6 ($200).
- Small-cap: 10% ($200).
With time on your side, that $20,000 can easily grow to be six figures in the future.
ALSO READ:The Sad Reality of Maxing Out Your 401(k)
Allow the S & P 500 to set the pace.
Undoubtedly, a sizable chunk of the $20,000 would be invested in an S & P 500 index fund. An S&P 500 fund, which invests in the 500 largest American corporations, is a must-have in any investment portfolio because it contains some of the best large-cap stocks (including blue-chips). One of the fundamentals of investing, diversification, would also be attained by an S&P 500 fund. iShares Core S&P 500 ETF (IVV 1.04 percent), for instance, invests across the following sectors:- Information Technology: 27.19%.
- Healthcare: 14.74%.
- Consumer Discretionary: 10.88%.
- Financials: 10.77%.
- Communication: 9.03%.
- Industrials: 7.67%.
- Consumer Staples: 6.82%.
- Energy: 4.21%.
- Utilities: 2.95%.
- Real Estate: 2.90%.
- Materials: 2.60%
An S&P 500 fund provides both types of diversity, which is important because you never want your assets to be overly dependent on one firm or sector.
Take a look abroad.
If you just consider investing in American businesses, you are limiting your options. Outside of the 50 states, there are many reputable businesses and well-known brands, and including them in your portfolio might be advantageous. However, researching and investing in individual companies can be challenging and may require taking into account different considerations than you do with American businesses, especially those operating across multiple countries (like local politics).Rather than wasting time on that, I would invest in a global index fund that includes both established and emerging market companies. More than 7,800 businesses from the following markets are included in an index fund like the Vanguard Total International Stock ETF (VXUS-0.04 percent), which tracks them.
- Europe: 39.6%.
- Pacific: 26.7%.
- Emerging markets: 25.2%.
- North America: 7.9%.
- Middle East: 0.5%.
Give yourself the opportunity for rapid advancement.
Many large-cap organizations have little to no room for hypergrowth due to their size. Small-and mid-cap stocks can be helpful in this situation. Smaller-cap stocks typically have greater upside than large-cap stocks because of their potential for growth. Large-cap stocks are typically more stable. However, because smaller businesses are more vulnerable to extreme volatility, this growth potential also carries larger dangers. Despite the risks, you should constantly expose yourself to small-and mid-cap companies in order to benefit from the potential gains.By investing in the Vanguard Small-Cap ETF (VB, 1.41 percent) and the Vanguard Mid-Cap ETF (VO, 1.33 percent), you can spread your risks across an already risky group of stocks. They'd be the people I'd go to for small and mid-cap funds.
Invest in separate accounts.
I would divide up the $20,000 into smaller installments using dollar-cost averaging rather than invest it all at once. One of the greatest methods to reduce some of the emotions associated with investing is to employ dollar-cost averaging, which entails investing a certain amount at predetermined intervals regardless of how the stock market is performing. It's more crucial to be consistent and adhere to your investing plan than how frequently you execute it.
In this case, I would divide the $20,000 into ten weekly investments of $2,000 each:
- Large-cap: 60% ($1,200).
- International: 20% ($400).
- Mid-cap: 10%6 ($200).
- Small-cap: 10% ($200).
With time on your side, that $20,000 can easily grow to be six figures in the future.
ALSO READ: