Four Investments to Build a Rock-Solid Foundation for Your Portfolio
All investors need a rock-solid foundation…
We’re talking about a base portfolio so strong that it enables us to swing for the fences with our shorter-term stocks and options plays.
But here’s the thing… just because we’re talking about bigger, long-term investments doesn’t mean we have to sacrifice growth.
Our rock-solid foundation isn’t composed of certificates of deposit (CDs) or fixed-rate annuities.
As you’ll see, the four tickers below offer plenty of protection… and upside. They’re the perfect complement to any active trading portfolio. And if you’re just getting started investing, these are the ideal stocks and funds to check out first.
We’ll start with a benchmark investment that 90% of professional traders can’t beat…
Rock-Solid Investment No. 1: Buying the Biggest and Best
Everyone knows the S&P 500. It’s the index that all other investments are compared with. And for good reason – the S&P comprises the biggest and best companies in America.
And those are exactly the kinds of companies you want to own if your goal is to generate reliable, long-term wealth.
That’s why we’re allocating 50% of our base portfolio to the SPDR S&P 500 ETF Trust (NYSE: SPY).
Since 1993, this specialized fund – the largest exchange-traded fund (ETF) in the world – has closely tracked the performance of its namesake.
Over the past decade, shares of the SPDR S&P 500 ETF Trust have more than tripled as blue chip stocks enjoyed a massive bull run. And as an added bonus, the fund can be traded without commission on many online platforms, including E-Trade and TD Ameritrade.
So if you decide to pick up shares today, you’ll be out only the cost of the actual investment. An expensive commission won’t have you starting off in the red.
That said… the SPDR S&P 500 ETF Trust isn’t totally without its fees.
Like all of the funds we’ll cover in this report, it does carry some fees – measured by an expense ratio. That’s the total percentage of fund assets spent on things like advertising, administrative costs, management, etc.
With funds, the expense ratio is just a cost of doing business (literally). But the SPDR S&P 500 ETF Trust’s ratio of 0.09% is well within an acceptable range.
And the quick-and-easy exposure it offers to the top companies in America makes it well worth the nominal cost. Top holdings include powerhouse businesses like Visa, Berkshire Hathaway, Johnson & Johnson and more.
Next up we have another proven growth play… with even more explosive potential…
Rock-Solid Investment No. 2: Profiting From the Future of America
While the SPDR S&P 500 ETF Trust has steadily grown investors’ money over the past decade, the Vanguard Information Technology ETF (NYSE: VGT) has absolutely supercharged it.
Shares of the Vanguard Information Technology ETF – which, as its name suggests, comprises the biggest names in tech.
After all, technology is the future of America. The sector has led the charge over the past decade and has exploded over the past year.
It’s also an ideal place to invest as the world accepts financial stimulus and quantitative easing as the norm. Since these companies have relatively few tangible assets, they can absorb higher valuations without investors stopping to ask why (see Tesla).
In short, the Vanguard Information Technology ETF is an ideal play for today… and an even better play for tomorrow. Through this fund, you’ll get exposure to big-name tech giants like Intel, Nvidia, Apple, Cisco Systems, PayPal and many more.
And with an expense ratio of 0.1%, like the SPDR S&P 500 ETF, its cost is cheap compared with other large cap funds.
That’s why it makes up 25% of our base portfolio.
Now let’s turn our attention toward another key trend for growth investors…
Rock-Solid Investment No. 3: A Key Play on One of History’s Greatest Growth Stories
If you’ve been paying attention to the news in recent years, you understand that China has emerged as a top global superpower. Business is booming in the Far East… and we’ve got the perfect way to play the trend…
The Schwab Emerging Markets Equity ETF (NYSE: SCHE) tracks the FTSE Emerging Index, which provides exposure to the most liquid companies in emerging markets.
Recent years have seen the rise of megacorps like Alibaba and Tencent. With the help of these and other Chinese success stories, shares of the Schwab Emerging Markets Equity ETF have flown as high as 59% since 2016.
They took a significant hit in the wake of COVID-19. But that doesn’t change the long-term story. If anything, it makes this an ideal time to get in on this fund while prices are down.
Just one final thing to note… there are other emerging market ETFs with lower expense ratios (the Schwab Emerging Markets Equity ETF’s comes in at 0.11%). But we expect that this fund’s focus on bigger companies in healthier countries will more than make up for the slightly higher expense.
Having exposure to emerging markets is key to proper diversification, which is why the Schwab Emerging Markets Equity ETF makes up 15% of our base portfolio.
And lastly… we wrap things up with an old standard that’s in the middle of its own bull run…
Rock-Solid Investment(s) No. 4: This “Old-School” Safety Net Is Headed to New Heights
You can’t talk about rock-solid investments without mentioning the original rock-solid investment… gold.
For literally thousands of years, gold has been a store of value for countless civilizations. It’s the ultimate insurance policy… and, even today, it should be a cornerstone of your base portfolio, making up 10% of your overall holdings.
Here are just a few of the underlying “big picture” fundamentals that explain why we’re so bullish…
- Government spending policies across the world are expansionary and inflationary, which tend to help gold prices.
- Several key global players – with China and Russia leading the pack – seek an alternative to the dollar and/or petrodollar. Gold is clearly part of that scenario.
- Geopolitics are flaring up – hyperinflation and chaos in Venezuela, tensions with North Korea and Russia, and the U.S.-China trade war, to name a few. This kind of risk favors gold.
- Gold discoveries in the past 20 years are fewer and fewer. Supply is tightening.
- Gold demand is growing from China, Russia, India, individual investors and more.
Overall, it’s all positive for gold and, by extension, for gold miners.
Our preference would be to invest in physical gold, but you could also pick up shares of the SPDR Gold Shares (NYSE: GLD). This specialty fund tracks gold’s spot price, and it has less expenses and liabilities (its expense ratio is fairly high at 0.4%).
Whichever option you choose, just be sure to fortify your base portfolio with gold.
You’ll be glad you did.