I have been investing on M1 Finance for years and am a big fan of the new investing options on the website. Not only has Motif allowed me to create sample stock portfolios that are completely customizable but I’ve saved hundreds on investing fees.
The way M1 Finance works is that you pick stocks and exchange traded funds (ETFs) to group together in one portfolio. You can then buy the entire group in the percentages you set with the click of a button, and all commission-free! You can also set the platform to automatically invest your money in the portfolio. It’s as stress-free as investing gets!
As always, I have to note here that I’m not promoting these example portfolios as good investments for everyone. I like sharing the investments I hold and think will do well. I encourage everyone to make the case for their own sample stock portfolios in the comments section below.
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How to Create a Stock Portfolio of Your Own
What is a stock portfolio and how do you create one? It’s a question many investors ignore or don’t even know to ask and unfortunately destroys their chances at building wealth.
A portfolio is your group of investments, basically everything you’ve invested money in to get a return. It’s not just the stocks or investments you have on one platform but includes all your investments. It also includes all the assets you’ve bought including bonds, real estate and cryptocurrencies.
That means it’s the big picture for your wealth-building strategy, how are you putting all these investments together and why. We’ve talked about the importance of combining different asset classes in the past. Today I want to talk about creating a stock portfolio.
Just like your overall portfolio, a stock portfolio is just all the stocks you own and how they fit together. For example, owning only tech stocks would still be a portfolio but not a very good one. When tech stocks crash, that portfolio would go nowhere but down. Instead, focus on adding different types of companies together to limit your risk but keep the returns. That’s what I want to show you how to do with the stock portfolio examples below.
Overall Sample Stock Portfolios Performance
I created the first four M1 Finance portfolios between February 2nd through the 11th of last year while the fifth fund following pharmaceutical stocks wasn’t created until late October. This is why the market return comparison is different for each fund.
I’ve collected just over 2.1% in dividends over the year, about the same as the dividend yield on the overall stock market as measured by the S&P500. I would like this to be higher but a lot of the investments in my portfolios are growth stocks or in beaten-down sectors that have had to cut their dividends.
For example, the stocks in my dividend portfolio pay an average 2.8% yield but only six of the stocks in my pharmaceuticals portfolio pay any dividend for a portfolio total of 0.66% yield.
I’m fine with this lower dividend yield for now. I am heavily invested in energy and healthcare, two sectors that have faced a tough couple of years and many companies have scaled back on their dividend payouts. I love the long-term potential in these sectors, more on this below, and think that eventually the dividends will increase well above the rate paid on the general market.
I’m extremely happy with the returns on each portfolio. Across the four example investment portfolios set up last year, the average return was 30% against a return of 27% for the overall stock market. While a couple of the portfolios are broadly invested, I think all can continue to beat the stock market over the long-term.
Overall, just one of my portfolios failed to beat the stock market return over the period. I’ll look at each investment portfolio return versus the market separately.
My American Future Investment Portfolio
This is my favorite portfolio of the group and is invested in the sectors I think will drive the American economy into the future. These sectors are energy, agriculture and healthcare.
America has nearly reached energy independence and broken the OPEC oil cartel that has controlled prices for almost 50 years. While the price of oil has only recovered to half as much as it fetched in 2014, the outlook for the sector is excellent. The other two sectors, agriculture and healthcare, have both faced their own problems over the last couple of years but share in this strong long-term potential.
I detailed why these three sectors are the best long-term investments you can make in a prior article about the portfolio
The energy sector rebounded quickly after I set up the portfolio and it’s beaten the stock market non-stop over the year. Weakness in oil prices recently has cut the portfolio return to 31.4% but that’s still more than 6% over the market return.
Agriculture stocks have started to pick up as well and contributed to the high portfolio return. It’s really only healthcare that has been holding the portfolio back with a 13.7% return on the sector ETF and weak returns in the individual stocks.
I still love this investment theme going forward and will hold it for decades as the idea plays out. Government regulation or not, there is no stopping the demand for healthcare and the sector will eventually become a cash machine.
While oil prices have come down a little and I don’t think OPEC will be able to keep its production cuts, there is still a lot of long-term potential in energy stocks as well. Dividends are starting to come back up and it won’t be long before I’m making a huge yield on my original investment.
Warren Buffet’s Sample Stock Portfolio
I’ve followed Warren Buffett’s investment portfolio for more than a decade and read his annual report to shareholders every year. The Oracle of Omaha always offers great insight into investing and his Berkshire Hathaway has returned an average 20%+ for decades, way higher than the return on the rest of the market.
But I haven’t always agreed with Warren Buffett’s individual investments and wanted to create an investment portfolio that picks just those I believe have strong upside potential. I also didn’t want to weigh down the portfolio with nearly 100 stocks.
Tracking Warren Buffett’s best investments, the 13 stocks and two exchange traded funds (ETFs) are blue chip favorites for value and dividends. Just as with all my portfolios, I invest a large chunk in core ETFs that give me broader exposure and then invest individually in stocks I think have more upside potential.
This investing strategy is called the core-satellite approach and it’s one of the best ways for stress-free investing.
A few runaway stocks in the group really helped the portfolio return with the group posting a gain of 28.6% over the last year against a return of 25% for the stock market. A strong housing market has helped shares of USG Corporation nearly double and four of the stocks have returned 40% or more.
I like following Warren Buffett’s stock picks but the portfolio isn’t one of my favorites. It does well but there just seems to be less reasoning behind his recent investments, especially chasing shares of Apple higher and investing in airline stocks. I like the stocks in my portfolio and will hold them for another year but may trade some out for other investments Buffett has made.
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Dividend Stocks Sample Portfolio Update
I love dividend investing and use the dividend yield to screen most of my stock picks. Any time I go to invest in a specific theme or group of stocks, I’ll usually narrow the list down by those paying out a quarterly dividend.
With this sample stock portfolio, I started by selecting three ETFs that would pay out strong dividends. I then looked through each sector to pick the highest quality companies with good dividend yields.
One important point in dividend investing is not to just buy stocks with the highest dividend yields. Your investments have to be quality companies or they might not continue generating the cash flow that pays for those dividends.
The return on the portfolio has been one of the best in my example investments, gaining 36.6% over the past year against a 30.7% stock market return. Beyond the portfolio return, I’ve also collected a great dividend yield that has also beaten the yield on the stock market.
Apart from the investment in utilities companies, I’m extremely happy with this dividend stock portfolio. Were it not for the utilities ETF and the energy company in the portfolio, the return would have been higher still.
Dividend stocks have beaten the overall market for decades and will continue to do so, providing consistent cash flow and appreciation. I’ll be putting more money into this investment portfolio this year and for years to come.
Drug Stocks Investment Portfolio Example
I started this portfolio later than the others so we don’t quite have a year’s worth of returns but it is doing well so far. Just like the overall healthcare sector, I believe strongly that drug manufacturers benefit from unstoppable forces that will mean higher returns.
The returns on my pharmaceuticals portfolio have been good, beating an 11.4% gain in the stock market with a 12.7% gain since October. There have been a few laggards but I’m confident in the group as a whole.
But what about those high drug prices? Why do Americans pay so much for pharmaceuticals compared to the rest of the world?
Yes, I agree that Americans pay too much for life-saving drugs but it’s only because the rest of the world isn’t paying its fair share. It takes years and billions of dollars to research and develop new drugs. It’s only through patent protection and fair market prices that companies are able to afford to constantly develop new drugs.
If the U.S. government were to push drug prices artificially lower as is done in other countries, we would see a huge drop in new drug development. I don’t think that will happen and I think pharmaceutical stocks will bounce back quickly from the investor fear that has held them down over the last year.
Retirement Investment Portfolio Review
This is my most broadly-invested portfolio and includes investments in bonds and real estate beyond stock investments. It is meant to be an example of a diversified portfolio including multiple asset classes that can stand up well even if the stock market falls.
Investors are desperately under-invested in bonds with many investors holding no assets in fixed income. Spreading your investment risk with diversification means a lot more than just buying stocks of different sectors. Every investor needs to hold bonds and real estate investments as well.
Will an investment in bonds hold back your total portfolio return, especially when the stock market is booming? Of course it will but that diversified portfolio will also keep you from freaking out when the next stock market crash hits Wall Street.
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I’m not going to try predicting the next stock market tumble but there will always be one coming. When it happens, only investors that have investments in the safety of bonds and other asset classes will be able to sleep at night.
This retirement investment portfolio is the only one to not beat the overall stock market over the last year but for good reason. Bonds and real estate have both lagged the stock market as investors snap up stocks at higher and higher prices. Even with a loss of 1.1% on the bond market fund, the portfolio still managed to gain almost 24% last year and paid out a 3% dividend yield.
I’m continuously surprised at how high investors are willing to chase stock prices. The S&P 500 is now trading at over 27-times earnings made by companies over the last year, one of the most expensive multiples over a century of records.
You don’t need to copy the example portfolios above. In fact, you probably shouldn’t if they don’t fit your needs as an investor. More importantly is you use the post and these sample stock portfolios as guidance for how to create a portfolio of your own.
- Understand your goals and risk tolerance as an investor
- Think through which types of stocks best satisfy those goals and risk
- Create a portfolio of stocks in different sectors for a diversified mix that lowers your risk
- Automatically invest across the entire portfolio with a platform like M1 Finance
The power of M1 Finance goes beyond saving money on commissions though that’s a huge benefit compared to other sites. The ability to set up your own sample stock portfolios means you worry less about individual stocks and don’t stress out as much when one investment falls. Setting up your investment portfolios this way helps you reach your investing goals by not freaking out during the next stock market crash and not making the bad investing decisions that lose money. Get started on M1 Finance and get up to $350 cash back when you start investing!
Read the Entire Portfolio Investing Series
- Ultimate Guide How to Invest Money for Beginners
- Stock Market for Beginners 2022
- 9 Steps to Start Investing in the Stock Market
