RFoss5 wrote:Sorry, I noticed my own errors after I posted the info. Actually my current diversification is as follows :
20 % Vanguard VGSTX fund ( 60% stocks/40% bonds)
10 % Fidelity FSHOX construction/housing fund
15 % Fidelity FIEUX European large growth fund
10 % Fidelity FSRBX financial bank stock fund
15 % Vanguard VIVAX index large value stock fund
20 % Vanguard VWELX fund = 2/3 stocks , 1/3 bonds.
10 % Stryker ( SYK) individual stock
Is this a good diversification at may age ( 72) ? Thanks to anybody for an opinion or recommendation. I am very conservative risk-averse investror and cannot risk losing much of my principal/.
Here we subscribe to the Boglehead Philosophy:
Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Keep it simple
Stay the course
Your portfolio doesn't fit that philosophy for a few reasons, the most glaring is that you are taking too much risk. Assuming this is your total portfolio, you only have 14.6% of it in bonds (40% of 20 % Vanguard VGSTX + 33% of 20 % Vanguard VWELX). Stocks in general a riskier than bonds. A typical breakdown of stock/bond would be 60% stock/40% bond. A more conservative approach would call for age in bonds. In your case that would be ~70% bonds. So you are obviously to stock heavy.
Investing in a single stock is very risky. Most Bogleheads stick to diversified mutual funds or ETFs for this reason. Even those who invest in individual stocks recommend that you hold at least 20 different firms spread over different sectors of the market to achieve minimal diversification and therefore risk reduction.
You have a couple of sector funds (10 % Fidelity FSHOX construction/housing fund and 10 % Fidelity FSRBX financial bank stock fund). Again your concentrating your risk. Since we don't know the future with certainty, we can't know what sectors or individual stocks will outperform the market. That is why we buy the entire market and not try to guess what will outperform. This guarantees Market return - fees. Fees are why we invest in Index funds, because they typically have the lowest fees of all funds.
In order to diversify fully you would invest in the total market, if you could. Well you can invest in the almost the total market with a portfolio constructed of Vanguard Total Stock Market, Vanguard Total International Stock Market, and Vanguard Total Bond Market. Such a portfolio would give you the greatest diversification with the least effort. See: Three-fund portfolio
for more information. To give greater protection from inflation you could add TIPS as part of your bond holdings to create a Four-fund portfolio.
So in summary, if I were building your portfolio, I would increase the amount of bonds and invest in total market funds for the remaining equities.