Building the Perfect Portfolio
We're always told to build a diversified stock-fund portfolio, but we're rarely shown how. We tried our hand at it earlier this year, so let's see how we've done.
funds because I'm using my own counsel in putting them together. In the wake of the Nasdaq Composite's
collapse over the past year, the tide of email from folks asking for help building a less aggressive and tech-heavy portfolio has steadily risen. As a scribbler for TheStreet.com I'm not allowed to offer specific financial advice, but maybe a fresh look at these portfolios will give you some good ideas of where to go from here. The first portfolio, with the not so humble sobriquet "The Perfect Portfolio," blends a core indexing strategy ((VTSMX Quote)Vanguard U.S. Total Stock Market fund) with a roster of growth, value and sector funds. The idea here is to get cheap, broad access to the market without making an outsize bet on any single sector or investment style relative to the S&P 500
. | The Perfect Portfolio | ||
| 35% | Core U.S. Stock | (VTSMX Quote)Vanguard Total U.S. Stock Market |
| 15 | Core Foreign Stock | (VWIGX Quote)Vanguard International Growth |
| 10 | Growth | (GABGX Quote)Gabelli Growth |
| 5 | Growth | (FIDYX Quote)Invesco Dynamics |
| 10 | Value | (LMVTX Quote)Legg Mason Value Trust |
| 5 | Value | (OAKMX Quote)Oakmark |
| 10 | Small-Cap | (MGSEX Quote)Managers Special Equity |
| 10 | Sector | (DRGTX Quote)Dresdner RCM Global Technology (FSPHX Quote)Fidelity Select Health Care (FSFSX Quote)Invesco Financial Services |
| Source: Morningstar. Data through May 31. | ||
| Above-Market Gains ... | ||
| ... Without Excess Volatility | ||
| Perfect Portfolio | S&P 500 | |
| Worst Year | -21.8% | -21.6% |
| Best Year | 47.0 | 52.0 |
| Five-Year Beta | 0.97 | 1.0 |
| Source: Morningstar. Data through May 31. | ||
| Under the Hood | ||
| Perfect Portfolio | S&P 500 | |
| Technology | 20.1% | 20.0% |
| Financials | 22.2 | 17.8 |
| Services | 16.7 | 11.7 |
| Health | 14.6 | 13.0 |
| Industrial Cyclicals | 8.9 | 12.1 |
| Consumer Staples | 3.4 | 6.4 |
| Energy | 3.4 | 7.5 |
| Retail | 6.1 | 6.5 |
| Utilities | 2.2 | 3.4 |
| Consumer Durables | 2.5 | 1.8 |
| Source: Morningstar. Data through May 31. | ||
| The Low-Maintenance Portfolio | ||
| 80% | Core U.S. Stock | (VTSMX Quote)Vanguard Total U.S. Stock Market |
| 20 | Core Foreign Stock | (TBGVX Quote)Tweedy Browne Global Value |
| Source: Morningstar. Data through May 31. | ||
| A Less-Bumpy Ride | ||
| Volatility | ||
| Low-Maintenance Portfolio | S&P 500 | |
| Worst Year | -19.1% | -21.6% |
| Best Year | 44.7 | 52.0 |
| Five-Year Beta | 0.90 | 1.0 |
| Source: Morningstar. Data through May 31. | ||
| Under the Hood | ||
| Low-Maintenance Portfolio | S&P 500 | |
| Financials | 20.2% | 17.8% |
| Technology | 16.2 | 20.0 |
| Services | 14.2 | 11.7 |
| Health | 13.6 | 13.0 |
| Industrial Cyclicals | 11.5 | 12.1 |
| Consumer Staples | 8.4 | 6.4 |
| Retail | 5.4 | 6.5 |
| Energy | 5.1 | 7.5 |
| Utilities | 3.0 | 3.4 |
| Consumer Durables | 2.4 | 1.8 |
| Source: Morningstar. Data through May 31. | ||
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