Today we're going to cover the best vanguard ETFs for 2020
And the reason I'm making this video is often when I review my portfolio of individual stocks
I get questions like, well, what if I don't have the time to research individual stocks
Or what if I'm not comfortable investing in individual stocks and I want to use ETF funds
to accomplish a solid return over a long period of time and really make your portfolio more
passive in nature? And there's nothing wrong with that. Some people will say, well, you're not a serious investor if you don't invest in individual stocks
And that's simply not true. So the portfolio I set up today and the reason behind it, and we'll get into more detail
on this in a separate video, is it's getting harder and harder to find individual stocks
that meet the criteria I look for when investing in individual stocks
And when that's the case you really have two choices. You can stay on the sidelines in cash or money market accounts or CDs and things like that
and earn minimal or pretty much zero returns after taxes and inflation
Or you can, instead of buying a basket of individual stocks, you can buy ETF funds that
essentially cover a wide swath of the market. And that's what we're going to look at today
Okay, as you can see, we're here in my M1 Finance portfolio account
And this portfolio is something new I set up that doesn't have any individual stocks
in it. And as you can see, I only have just under $400 in it
And it's only been set up for approximately since the first of the year
And this portfolio is pretty much all Vanguard ETFs with the exception of one fund that we'll
look at here shortly. So let's dig into the individual funds in this portfolio
The first fund is the Total World Stock Market Index. And as you can see here, we'll go to the Vanguard website
So primarily, the Total World Stock Market Index buys a blend of large cap between value
and growth. So there's both value and growth stocks across the whole world in here
As you can see, it's broken down between emerging markets, Europe, Pacific, Middle East, North
America, and others. So it covers pretty much the whole world. And it has 8,400 stocks in it
So this has virtually no mid cap and small cap stocks. So it's virtually all large cap stocks across the world
Fee wise, very small, 0.09% fee. So again, you're paying very little fees to invest in this ETF
So we have our large cap and geographically diversified fund here. The next one is VBR, and this is Vanguard Small Cap Value
Now this fund is, again, it has low fees. It's from Vanguard
We would expect that. But it's only small cap US based stocks
We'll take a look here. So this website is moneychimp.com. And I'll move the window over here
And you can see that this article's a little bit dated. It goes from 1927 through 2005
But the part that I'm trying to illustrate is still, if you bring that forward to today
it's still pretty accurate. The numbers change a little bit, but overall, the overall gist of it is the same
So over that long period of time, large cap value returned 9%, growth 6%
Small cap value 12%, growth 5%. So the general theme I'm trying to portray here is, and again, it holds true today
Small cap value stocks tend to outperform the other classifications of stock, whether
large cap value or growth or small cap growth. And small cap value stocks, if we look down at this chart, so they're basically unknown
boring businesses. So you're not getting that insane growth. You're not finding the next Apple, the next Microsoft more than likely in the value stocks
because they're boring companies. But with those boring companies, they just kind of chug along and many of them become
large cap or mid cap, fairly value oriented, boring companies. And over the long term, you're getting a higher rate of return on average with value stocks
over growth stocks. When it comes to the small cap capitalization. By having VBR in this fund, it takes a portfolio that would probably have relatively disappointing
returns, all but less volatile. This will give you a little bit more returns
It'll bump up the total return of this package of funds, but still, the other ones will help
reduce the overall volatility of the grouping as a whole. Next is a Vanguard long term bond fund and a Vanguard short term bond fund
So being, I'm getting older, I'm almost in my 40s, so by having bonds exposure, it basically
takes some volatility out of the wider stock market. It'll take some volatility out of the wider stock funds here
If you're younger, you may want to consider, again, I'm not your advisor, talk to an advisor
but you may want to consider having a higher percentage in the stock funds and a lower
percentage in the bond funds. But you can adjust the percentages to whatever fits your time horizons, your risk tolerance
and obviously your age to what makes sense for you. This is kind of the Swiss Army knife, so to speak
It can do a little bit of everything type package of funds
And again, the goal here is to have a very passive portfolio that doesn't take a lot
of research and thought. So the next fund here, and this is the only non-Vanguard fund in the portfolio, is a gold trust
And this primarily is to get some exposure to gold. I started setting up this portfolio in early January before I knew of the fear that was
going to get into the market based on this virus that's going around that originated
in China. But as you can see here, year to date, so the stocks have been going down based on the
fear and uncertainty in the market. While bonds, people are piling into bonds, they're looking for safety
And they're piling into bonds, they're piling into gold, and they're piling into real estate
So all of these groupings, the stocks, bonds, gold, and real estate, they all behave differently
based on how the wider market is reacting to whatever events are going on in the market today
And what you will do over time is in M1 Finance, you can rebalance
Now this rebalance button can get you into trouble. If you're not in a tax deferred account like an IRA, rebalancing generates a taxable event
Because essentially what rebalancing does is take money from the funds that are overweighted
So it's hard to see in this portfolio because it's so new. But over time, some of these funds will get higher than the percentage we have set at
25, as you can see here, 15.2%. So if I clicked rebalance today, it would sell some shares in the long term bond fund
and it would take some of those funds and it would buy the stock funds which are down
So essentially you're selling something that's up and investing that in something that's down
With the theory here is that as these disparities, say the total world stock market index fund
went up 10%. It's highly unlikely that the gold fund would be up 10%
So if we hit rebalance, it would sell a percentage of the stock fund and put that percentage
in something that's lower, that's underweight, say the gold fund. So it's just a way of helping you and your portfolio sell when things are up and buy
some of the things that are down and trying to get you to what your benchmark percentages are
If you click this all the time, every time it's going to sell something that's up, so you'll pay taxes on those gains
So you don't want to go trigger happy with this. What I personally do in my portfolio, I say one time a year I'm going to do this
Doesn't really matter what time of the year. The key is that I have a systematic way of looking at it that says one time a year I'm
going to rebalance. So I'll say June I'll rebalance, and that's the only time I'm going to do it
It takes away the impulse rebalancing that will impact you come tax time
And it's just a good practice to do to try to get things back to the original percentages
that you set based on your goals, your risk tolerance, and your overall requirements for
your investment portfolio. All right, so moving on from the bonds, we'll look here
So the gold, I have absolutely zero gold exposure in any of my other portfolios
And do I think gold is a great long-term investment? No. Really having gold in this portfolio, it's just a hedge against uncertainty
When people are scared, they tend to invest in gold. So having a little bit of it will take some volatility out of a portfolio that otherwise
would be concentrated on stocks and bonds. And then real estate, I do have some real estate exposure in my other portfolios, but
this is a kind of a portfolio makeup that I learned from Rick Edelman, who is an independent
financial advisor. And before I got into stock market investing, I would basically put all my money into his practice
And you had a financial advisor you could talk to. And it's not a bad system for somebody who's unsure and needs somebody to bounce ideas
off of, but somebody like me that was building up my financial knowledge and more comfortable
investing on my own and not panicking when things go down, I didn't have a need to have
a financial advisor. I never talked to him. And through having financial advisors, there's either fee-based advisors or advisors that
would basically, they either charge you a percentage of assets under management, which
Edelman's practice did. It was something like, I think, 1.5% of your total portfolio value
And they didn't charge any fees, so that included fees for the funds you invested in
Other advisors will sell you funds with loads, where they get a portion of the selling you
that fund. By doing it yourself, you're essentially minimizing the expenses. All these Vanguard funds are really low when it comes to the expenses you pay to own the fund
M1 Finance, there's no minimum investment and there's also no individual transaction costs
So overall, you're getting a really diversified portfolio that you have a lot of control over
but you're not paying a ton to actually set that up like you would with a fee-based advisor
So this is what I'm going to be doing through 2020. It's something for you to consider
Again, talk with an advisor or another professional. This isn't financial advice
This is just what I'm doing. And this portfolio is something I will probably continue to do until there is a good buying
opportunity for individual stocks when I feel I'm getting a decent value for the money
I'm putting in. If that's not the case, I'm just going to buy a widely diversified swath of the market
and rebalance once a year and just keep doing this. It's actually a little bit freeing to have a more passive portfolio and it's something
that you can do if you don't want to invest in individual stocks
You can buy these six funds and leave it at that. Now I might add a natural resources type fund in here
It's not a priority for me. I think I have plenty of diversification in this collection of funds but this is what
I'll be doing for 2020 and I hope you enjoyed the video. If you do have any questions, make sure to post in the comments below and don't forget
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