My ETF Portfolio Review: Building a Foundation for Retirement in My SEP IRA
As a self-employed individual, building a robust retirement portfolio is crucial. For me, that means utilizing a SEP IRA and carefully selecting ETFs to achieve long-term growth while managing risk. Today, I’m opening the hood and sharing a detailed review of my SEP IRA ETF portfolio. This isn’t financial advice, but rather a glimpse into my strategy and reasoning. Hopefully, it can offer some insights and inspire you to review your own investment approach.
The Goal:
My primary goal is long-term capital appreciation. I’m decades away from retirement, so I’m comfortable with a higher risk tolerance to capitalize on potential growth opportunities. However, I also understand the importance of diversification to mitigate potential downside.
The Portfolio Breakdown:
Here’s a snapshot of my current ETF allocation within my SEP IRA:
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VTI – Vanguard Total Stock Market ETF (35%): This is the core of my portfolio. VTI offers broad exposure to the entire U.S. stock market, including small-cap, mid-cap, and large-cap companies. It provides excellent diversification and is a low-cost way to track the performance of the U.S. economy.
- Reasoning: I believe in the long-term growth potential of the U.S. economy. VTI provides a solid foundation for my portfolio, offering broad market exposure and minimizing the risk of picking individual stocks.
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VXUS – Vanguard Total International Stock ETF (25%): Diversifying beyond the U.S. is crucial. VXUS provides exposure to developed and emerging markets outside the United States.
- Reasoning: International markets can offer growth opportunities that are uncorrelated with the U.S. market. This helps reduce portfolio volatility and diversifies my exposure to global economic growth.
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QQQ – Invesco QQQ Trust (20%): This ETF tracks the Nasdaq 100, focusing on the largest non-financial companies listed on the Nasdaq Stock Market. It’s heavily weighted towards technology and growth stocks.
- Reasoning: I believe in the long-term potential of the technology sector. QQQ provides exposure to innovative and disruptive companies, potentially leading to higher growth returns. However, it also comes with higher volatility.
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BND – Vanguard Total Bond Market ETF (10%): While I’m primarily focused on growth, a small allocation to bonds provides some downside protection and stability to my portfolio.
- Reasoning: BND offers exposure to a broad range of U.S. investment-grade bonds. It acts as a ballast to my more volatile equity holdings, particularly during market downturns.
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VNQ – Vanguard Real Estate ETF (10%): VNQ provides exposure to U.S. REITs (Real Estate Investment Trusts), offering diversification into the real estate sector.
- Reasoning: Real estate can be a good inflation hedge and offers diversification outside of traditional stocks and bonds. VNQ allows me to easily access this asset class.
Performance and Analysis:
While I don’t want to focus solely on short-term performance, it’s important to track how the portfolio is performing relative to benchmarks. I regularly compare my portfolio’s returns against a benchmark that reflects a similar asset allocation (e.g., 60% U.S. Stocks, 25% International Stocks, 15% Bonds).
What’s Working Well:
- Broad Diversification: The portfolio is well-diversified across asset classes, sectors, and geographies.
- Low Expense Ratios: All the ETFs chosen have low expense ratios, minimizing the drag on returns.
- Passive Management: The passively managed ETFs track their respective indexes, minimizing active management fees and potential underperformance.
Areas for Improvement:
- Rebalancing: I need to commit to a regular rebalancing schedule (e.g., annually) to maintain my target asset allocation. Market fluctuations can skew the portfolio over time.
- Emerging Markets Exposure: While VXUS provides some exposure to emerging markets, I might consider increasing the allocation to a dedicated emerging markets ETF in the future.
- Factor Investing: Exploring the potential benefits of incorporating factor-based ETFs (e.g., value, growth, small-cap) could further enhance returns.
Future Considerations:
- Continued Contributions: Consistently contributing to my SEP IRA is crucial for long-term growth.
- Monitoring and Adjusting: I will continuously monitor my portfolio’s performance and adjust my asset allocation as needed based on my risk tolerance, investment goals, and market conditions.
- Tax Efficiency: As my portfolio grows, I’ll need to consider the tax implications of my investment decisions.
Conclusion:
Building a retirement portfolio is an ongoing process. My SEP IRA ETF portfolio is a work in progress, and I’m committed to regularly reviewing and adjusting my strategy to achieve my long-term financial goals. Sharing my portfolio breakdown is not about prescribing a specific investment strategy, but rather about encouraging you to take a proactive approach to your own retirement planning. Do your research, understand your risk tolerance, and build a portfolio that aligns with your individual needs and goals. Good luck!
Disclaimer: I am not a financial advisor. This article is for informational purposes only and should not be considered financial advice. Investing involves risk, and you could lose money. Consult with a qualified financial advisor before making any investment decisions.
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Thank you for another great content! I have a question I am in my mid 40s and just opened a new ROTH IRA. This is what I came up with:
VTI 50%
SCHD 15% (added for dividend purposes)
VXUS 15%
REITs 10% (custom portfolio with about 1o reits)
BND 10%
Please let me know what you think of this. Do I need SCHD/REITS? Allocation %? Thank you so much for all your videos!!!
Your Video is very informative. How often do you invest? Do you auto invest every month or biweekly? What's the strategy?
My Roth- Etfs and index funds- FZROX 1831 shares , FNILX 171 shares , QQQ 55 shares , SCHD 240 shares , SPLG 270 shares , SPHQ 285 shares. I originally only had 340 shares of QQQ in my Roth since 2001-2002 with a 2 time investment of $5000 and $4500 , and sold 285 shares for $78,000 6 weeks ago. I reinvested some of the 78K in all the etfs mentioned. I have 10 years till retirement. I have never added money to my Roth other than the original investment. I still have 18K in cash in my Roth to invest!
thanks for the sharing. We know Etf such as QQQ track the Nasdaq components' share price, and Nasdaq components list was reviewed periodically to ensure only the competitive companies are included as component, this will surely ensure only the strongest and fittest remain, may i know for Etf such as XLY, will there be adjustment from time to time to exclude the non-performing company to ensure the long term share price growth? Thanks in advance.
Thanks for sharing the information. Very helpful. What do you think about WCLD and ARKG ? I have QQQ, WCLD, ARKG and FZROX in mine.
Thanks
If you're interested in Chinese stocks, watch the China Hustle on Netflix, great doco.
Today all these etfs are on sale
It is funny how you don't like any of those stocks as individual investment, but as an ETF meh let's do it. I think it is a bit similar to 2008 when banks did those mortgage-backed securities. Some of them were very risky, but under a bundle of many, together with some good ones, no one cared. I am not saying that similar things can happen here, just that it is interesting how a different package changes ones perception. Thanks for the share!
Can I buy these funds from outside the US?
Dude how come you have only 13k subscribers? You need to self promote your channel across the web 😉
Good stuff. Thx for sharing!
This is the only video I've seen like this on Youtube
Every other video is like 3 ETFS (total market, total foreign, total bonds). Thanks so much. : )
Hi, thank you sharing with us your personal portfolio for free. There is my question, why you not considering health care sector in general and biotech as specific? Just want to know your opinion.
Good stuff you critiqued. I have QQQ and VYM on my radar. The REITs aren't doing so well right now but I'm not counting them out
Love QQQ as well.
Good info. I always like vanguard etf’s because they offer less fees and higher yields. I picked my best 3 etfs.
Good info Jeff as always!
Great video. Just started investing a little under a month ago and I have to say it’s pretty crazy in the beginning. I made a few hundred dollars at first, then I lost almost a thousand. I’m starting to go up a lot tho. The drop was because of Tesla a few weeks ago when they dropped ~21%. But I’m trying to save more and become more experienced in trading.
Great stuff Geoff! If I had an account like this I would have:
ARKW, VTI, VOO, QQQ, XLK
These are set it and forget it, like you had mentioned in the video. A lot less risky and less stressful LOL
Seems like a lot of overlap with three tech funds that hold very similar names. Same with discretionary, very similar names in both, with only slight differences and when it holds 100 names, the difference is minuscule on a percentage basis. ETF's already diversify a portfolio, so don't know why you would need several in the same sector. When u cover several sectors like that, with so many names in each, then u start to just mirror the SP500. Thanks for video though.