Best 3 ETF Portfolio to make you VERY RICH (Simple Investing in 2024)

Summary

This video introduces a simplified, updated version of the three-fund portfolio, designed to maximize returns and minimize stress for long-term investors. The new strategy involves investing in a foundational ETF, a dividend ETF for consistent income, and a growth ETF to capture high-reward opportunities. The presenter emphasizes the importance of consistency, long-term commitment, and proper research in building wealth. With a focus on low-maintenance investing and updated ETF choices, the video provides practical guidance for those seeking financial freedom through smart, passive investment strategies.

Takeaways

• 😀 Investing in a 3-ETF portfolio is a simple and effective strategy for financial freedom and long-term growth.
• 😀 The new 3-ETF portfolio offers significantly higher returns than the old version, with average returns of 133% over the last 10 years.
• 😀 ETFs (Exchange-Traded Funds) allow you to invest in multiple companies with one share, simplifying your investment strategy.
• 😀 The foundational ETF, which tracks the S&P 500 or total US stock market, provides stability and consistency with strong historical performance.
• 😀 A diversified portfolio with one solid foundational ETF can weather market storms and offer positive returns over time, with 100% positive returns over 20 years.
• 😀 The second category focuses on optimal safety and cash flow, achieved through dividend ETFs that offer stable returns, like Schwab’s SCHD.
• 😀 Dividend ETFs like SCHD not only offer consistent dividends but also show consistent share price growth, unlike bond ETFs which have low returns.
• 😀 The third category replaces international exposure with a high-growth ETF, focusing on technology and AI-driven companies that are growing at a faster rate than international firms.
• 😀 Growth ETFs like QQQM (which includes companies like Nvidia, Microsoft, and Google) have shown impressive long-term growth, outperforming international ETFs.
• 😀 It’s important to align your investment strategy with your goals, whether you’re seeking rapid growth, consistent dividends, or a balance of both.
• 😀 Dollar-cost averaging and consistency are key to long-term success; staying committed to your investment plan through market ups and downs is essential.

Q & A

What is the main goal of the three-fund portfolio strategy discussed in the video?

The main goal of the three-fund portfolio strategy is to create a simple, consistent, and passive investment plan that ensures long-term growth and financial freedom, allowing investments to work even while the investor sleeps.

How does the new three-fund portfolio differ from the old version introduced in the 1990s?

The new three-fund portfolio updates the old version by replacing the international ETF with a growth ETF, which focuses on high-growth tech companies, and uses a dividend ETF instead of bonds, providing better long-term returns.

Why is consistency important when investing, according to the video?

Consistency is crucial because long-term investors who stick to their plan and avoid reacting to market fluctuations are more likely to make compound interest work for them, leading to greater returns over time.

What is the significance of the S&P 500 ETF (VU or VO) in this strategy?

The S&P 500 ETF serves as the foundational ETF for the portfolio. It offers stability and has a solid track record of positive returns, particularly over long periods, making it a reliable base for any investor.

What are the key benefits of investing in dividend ETFs, like SCHD or VYM?

Dividend ETFs provide steady cash flow through regular dividend payments, while also offering potential growth in share price. They are designed to be low-risk, making them an ideal choice for investors looking for safety and passive income.

What is the historical performance of bond ETFs like BND compared to dividend ETFs like SCHD?

Bond ETFs like BND have significantly lower returns (around 1.6% annually) compared to dividend ETFs like SCHD, which have delivered much better performance (around 11.5% annually), along with growing dividends.

What kind of companies does the Schwab US Dividend ETF (SCHD) hold, and why is this important?

SCHD holds companies with stable, consistent business models such as Home Depot, Chevron, and Coca-Cola. These companies are reliable and resistant to market fluctuations, making the ETF safer for long-term investment.

Why is it no longer recommended to invest in international ETFs like VXUS in 2024?

International ETFs are less attractive now because globalization and technology have allowed U.S. companies to dominate the global market, making international exposure less necessary for long-term growth.

What is the role of the Growth ETF in the updated portfolio, and how does it differ from the previous international ETF?

The Growth ETF focuses on investing in high-growth technology companies, such as Nvidia, Amazon, and AI firms. It offers higher potential returns but also comes with more risk compared to the international ETF, which was more focused on market diversification.

How should younger investors allocate their portfolio compared to those closer to retirement?

Younger investors may prioritize growth ETFs more heavily, seeking higher returns over time, while those closer to retirement might prefer allocating more to dividend ETFs for consistent income and safety.