Okay, that title isn’t completely serious. I don’t really expect you to wrap up all your investment planning for retirement in the next 10 minutes. However, I’m wielding a sledgehammer to help you shake loose one of your nagging fears. Getting your money in shape for retirement isn’t as hard as you may think.
In fact, as you’ll see in the next few minutes, it’s possible to construct a simple, but quite serviceable, retirement portfolio out of nine funds: five ETFs, three no-load mutual funds and one closed-end fund. My Ten-Minute Retirement Portfolio yields a plump 4.2%, too, providing enough income for many a thrifty investor to live on without ever selling a single fund share. In years to come, you can expect periodic increases in your “paycheck” to help offset inflation.
Here’s how the program works. I’ve allocated 60% of the portfolio to stock funds and 40% to bond funds — a reasonably comfortable balance, I believe, for a broad cross-section of retirees who dislike excessive stock market volatility.
International stocks and bonds account for about 17% of the total. While that’s a smaller foreign weighting than some theoretical asset-allocation models might recommend, I’m thinking (again) of the risk tolerance of the average retiree. I want to give you a plan you can actually execute.
The following table lists the funds that make up the current edition of the Ten-Minute Retirement Portfolio, with ticker symbol, portfolio weighting and current yield for each:
Is it acceptable to tinker with the fund choices and the percentages above? Of course! (Who’s the boss here, after all?) For instance, you might decide that you prefer to substitute Alerian MLP ETF or several individual MLPs for the Tortoise fund recommended in the Ten-Minute Retirement Portfolio. You could fatten your current income that way, although you might lose some long-term growth potential.
In the international stock area, you might make room for an emerging-markets dividend fund like WisdomTree Emerging Markets Emerging Markets SmallCap Dividend Fund (DGS). It’s more volatile than the portfolio’s DEFA fund, which focuses on developed markets. However, DGS’ dividend will probably grow faster over the long pull.
You can also play around with the weightings in each fund, as well as the overall stock-bond weighting. If you’re still a couple of years away from retirement, you may prefer to beef up your position in WisdomTree Total Dividend (DTD). DTD invests in familiar U.S. stocks like ExxonMobil (XOM), Apple (AAPL), Microsoft (MSFT), Johnson & Johnson (JNJ) and Wells Fargo (WFC). You may earn a lower going-in yield with such names, but they’re likely to sweeten their payouts at a faster clip than the market indexes over the full span of your retirement.
For best results, assemble your Ten-Minute Retirement Portfolio over a period of several months to smooth out your cost. Now is a good time to begin, since the headline stock indexes have pulled back from their 52-week highs.
Of course, my Ten-Minute Retirement Portfolio is designed as a quick solution to a persistent problem. It’s not right for everyone, and you may find you want some more in-depth allocation advice and advice on individual stocks to tuck into your portfolio. My subscribers to Profitable Investing have access to a range of portfolios designed for those looking for a low-risk approach to wealth-building, including my flagship Total Return Portfolio, which has quintupled in value since its inception in 1990, all while taking far less risk than the stock market indexes. You can get all of my portfolios, plus my monthly Profitable Investing newsletter issues, when you subscribe today.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won nine Best Financial Advisory awards from the Specialized Information Publishers Foundation.