How to Create a Complete "Lazy" Stock Portfolio With Just 4 BMO ETFs (2024)

FAQs

Is 4 ETFs too many? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at.

"You can get broad-based diversification with one ETF, commonly referred to as diversified ETFs, or you can build a portfolio of five to 10 ETFs that would offer good diversification," he says. The choice you make on the above depends on your investment goals and risk appetite, like any investment.

As part of your initial portfolio management approach, you should aim to invest in a minimum of four or five stocks—one from most, if not all, of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities).

The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

While each ETF offers a basket of stocks, buying multiple ETFs can offer diversification based on objectives. It's possible to buy shares in a growth-oriented ETF and allocate some of your capital toward an income ETF. However, not every investor needs to own multiple ETFs.

This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, fixed income asset classes with a target allocation of 70% equities and 30% fixed income. Target allocations can vary +/-5%.

A lazy portfolio is a set-and-forget collection of investments that require little or no maintenance. Most portfolios consist of a small number of low-cost funds that are easy to implement and rebalance.

What is the best ETF to buy right now? ›

Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.

How many different stocks should you own? The average diversified portfolio holds between 20 and 30 stocks. The Motley Fool's position is that investors should own at least 25 different stocks.

On side effects of having lower number of stocks in portfolio, Gang said that stock portfolio which is limited to 4-5 stocks can be hugely concentrated and again if your conviction or research is not spot-on, it could lead to increased volatilty and risk adding, "Ideally, limiting a portfolio to 10-12 stocks will give ...

Most studies use the fully diversified portfolio as a benchmark and then derive that a portfolio of 20-30 stocks achieves a 'similar' risk profile as the target portfolio.

Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.

SPY, VOO and IVV are among the most popular S&P 500 ETFs. These three S&P 500 ETFs are quite similar, but may sometimes diverge in terms of costs or daily returns. Investors generally only need one S&P 500 ETF.

Investors often wonder how much overlap is acceptable. While there is no universal threshold, a common guideline suggests keeping overlap between ETFs below 50%. In essence, if two ETFs share more than 50% of their holdings, it is deemed high overlap, which diminishes diversification benefits.

Key Takeaways

ETFs can be safe investments if used correctly, offering diversification and flexibility. Indexed ETFs, tracking specific indexes like the S&P 500, are generally safe and tend to gain value over time. Leveraged ETFs can be used to amplify returns, but they can be riskier due to increased volatility.