Start With Your Goals

Before picking stocks or ETFs, define what you're investing for. A portfolio designed for a 25-year-old saving for retirement looks completely different from one for a 55-year-old planning to retire in 10 years, which looks completely different from one for someone saving for a house down payment in 3 years.

Your time horizon is the most important variable. Money you need in less than 5 years should not be in stocks — the risk of needing to sell during a downturn is too high.

The Core-Satellite Framework

Most professional portfolios use a core-satellite approach:

Core (70-80%) — Low-cost, broad-market ETFs that provide diversified exposure. This is the steady foundation that captures the market's long-term returns. Examples: VTI, VXUS, BND.
Satellites (20-30%) — Individual stocks or thematic ETFs where you have high conviction. These are your attempts to beat the market. They might outperform, or they might not — but the core ensures you're protected either way.

Asset Allocation by Age

A rough rule of thumb: 120 minus your age = percentage in stocks. The rest in bonds. So a 30-year-old would be 90% stocks / 10% bonds. A 60-year-old would be 60% stocks / 40% bonds.

This isn't a law — it's a starting point. If you have high risk tolerance and a long horizon, you might stay more aggressive. If market volatility keeps you up at night, a more conservative allocation might be better.

A Sample Starter Portfolio

60% VTI (Total US Stock Market) — Broad US equity exposure across all sizes and sectors.
25% VXUS (Total International Stock) — Global diversification. US stocks have dominated recently, but history shows leadership rotates.
10% BND (Total Bond Market) — Stability and income. The ballast that keeps your portfolio from capsizing in storms.
5% Individual picks — If you want to own specific companies you believe in. Keep individual positions small (under 5% each).

Rebalancing: Why It Matters

Over time, your winners grow and your losers shrink, shifting your allocation. If US stocks go on a 5-year tear and your 60% VTI allocation becomes 78%, you're taking more risk than you planned. Rebalancing — selling some winners and buying more of the underweight assets — brings you back to target.

Rebalance once or twice a year. More than that is unnecessary and can create tax headaches.

Key Takeaways

Define your time horizon first. Short-term money doesn't belong in stocks.
Use a core-satellite approach: 70-80% in broad ETFs, 20-30% in conviction picks.
Asset allocation (stock/bond mix) matters more than individual stock selection.
Rebalance annually to maintain your target risk level.