5 Stocks And ETFs For A Diversified Retirement Portfolio

In today’s Juice, we do two fun and constructive things:

• We tie together a handful of our recent discussions on retirement with a focus on diversification (You’ll find links throughout). 
• We present five stocks and ETFs we would start with if we had $10,000 to invest today and $1,000 monthly thereafter. 

We stress start with because, for most individual investors, diversification takes some time if you ever even get there. And even if you do — or get super close — you’ll need to rebalance your positions and approaches along the way. 

We stress rebalance your positions AND approaches because as we have noted in recent installments, it doesn’t make sense to go all-in on one investing approach, other than long-term buy and hold. While it’s not the end of the world if you start and stop with two index ETFs, you ideally want to round things out with other ETFs and a solid (and diverse) basket of individual stocks. 

At this point, we won’t even get into other types of investments, such as bonds and alternatives like crypto. 

So, today is one good way to kick off a work in progress. One we’ll evolve, expand and update throughout our 2024 focus on retirement investing. 

As we introduced the other day: 

… we need a more diverse view of diversification. 

An ideal portfolio diversifies within specific parts of specific sectors and types of stocks. 

This is why we love ETFs. You can buy SPY, QQQ and a couple different dividend ETFs and be exposed to a wide-ranging assortment of high-flying names that don’t pay dividends, some that do and longer standing, slower-growing dividend aristocrats, which are stocks, like WMT, that have increased their dividend payment for at least 25 consecutive years.

A More Diverse View Of Diversification

We’re also starting this way to explain in greater detail what we mean by this. 

All of the names we suggest populate today’s Trackstar top five (at the top of the page) so you can see the search interest they generate, relative to one another, across the platforms of our 100+ financial media partners. 

SPDR S&P 500 ETF (SPY)

• Broad market, low-cost index ETF approach 
• $2,500 initial investment / $250 monthly 

Invesco QQQ (QQQ)

• Broad market, low-cost index ETF approach
• $2,500 initial investment / $250 monthly

One of our main focuses in The Juice is on SPY and QQQ. If you do nothing else, invest in these two names. They represent the definition of taking the guesswork out of retirement investing. 

Here’s a solid summary of why: 

Interestingly, QQQ markets itself as a superior alternative to SPY. And, to some extent, it has a point. 

Invesco, the firms that offers QQQ, tells us not only that a $10,000 investment in the ETF 10 years ago would be worth about $56,788 today, but that, over the last year, QQQ has produced 1.67X the returns of SPY (+32.86% versus 19.56%). 

SPY … focuses its marketing on the idea that an investment in the ETF gives investors access to the broad U.S. economy. It also points out that information technology stocks compose nearly 28% of SPY’s holdings. 

No doubt, an investment in SPY gives you exposure to many of the same stocks as tech-heavy QQQ. We’re talking about Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Tesla (TSLA) and Nvidia (NVDA). 

With SPY, you get exposure to roughly five times the number of stocks, including names you won’t find in QQQ, such as Exxon Mobil (XOM), Visa (V), Walmart (WMT) and McDonald’s (MCD). 

While there’s no doubt, QQQ has produced superior returns over time, this is largely because of its tech-heavy concentration. We believe tech will continue to lead this market, in part because of the AI boom, but this doesn’t mean you should ignore all other sectors. 

So there’s sense in both marketing approaches. Yes, QQQ has been prolific. However, this doesn’t mean this will always be the case. With SPY, you do have a one-stop shop for the names that help drive the economy within and outside of tech. An investment in both gives you out-sized tech exposure without disregarding other sectors.

Yes, these ETFs give you exposure to the entire U.S. economy, going overweight the powerhouse corporations. 

And both ETFs pay dividends you can reinvest: 

• SPY yields 1.30% and paid out $6.72 per share over the last year. With $2,500 invested, as of Wednesday, you’d own roughly 4.8 shares of SPY, which, as of last year’s payout, would generate about $32.50 in dividend income. 
• QQQ yields 0.60% and paid out $2.64 per share over the last year. With $2,500 invested, you’d own about 5.7 shares of SPY, which, as of last year’s payout, would generate about $15.04 in dividend income.

Target (TGT)

• Dividend aristocrat approach 
• $1,666 initial investment / $166 monthly 

TGT is a solid choice for a legacy dividend stock. It has increased its dividend payment every single year for 53 consecutive years. So, technically, it is a dividend king (50 years plus of dividend increases) and an aristocrat (25 years or more). 

This fills the more conservative area of your portfolio, but, by no means is TGT sleepy. 

• Over the last year, the stock is up just 3.3%, but it’s up approximately 40% over the six months and about 115% over the last five years. 
• TGT yields 2.6% and has an annual dividend of $4.40 per share. While its annual dividend growth rate is relatively low, this is common of more mature dividend payers. Your $1,666 buy gets you just under 10 shares of TGT and, as of the current payout, yields about $44 in annual dividend income. 

Costco (COST)

• Almost a dividend aristocrat approach
• $1,666 initial investment / $166 monthly

You’re not buying Costco because it has a history of paying special dividends. However, if it happens again, call it icing on the cake. You’re buying Costco because, unlike Altria Group (MO), which we highlighted yesterday in a must-read Juice, its stock is going up alongside its dividend. 

So Costco fits the category of dividend investing between legacy name TGT and our next pick, a new and relatively aggressive dividend payer. 

• Over the last year, COST is up a solid 50%. Over the last five years, 210%! 
• COST yields 0.55% and has an annual dividend of $4.08 per share. While its annual dividend growth rate is anticipated to slow to around 3.0% annually, this is common maturing dividend payers. Your $1,666 buy gets you about 2.2 shares of COST and, as of the current payout, yields about $9 in annual dividend income. 

Meta Platforms (META)

• New dividend payer with tons of room to grow both its stock price and dividend payment
• $1,666 initial investment / $166 monthly

For everything about our rationale on buying META now as a lifelong dividend payer for retirement, see yesterday’s Juice (just linked above) and The Perfect Dividend Stock For Your Retirement Portfolio. 

In a nutshell:

52 years ago, WMT was one of those stocks you bought for your newborn baby and forgot about. If it wasn’t already there prior to the dividend, META looks to be now.

The Bottom Line: Today marks the beginning of the construction of our diversified retirement portfolio. It covers two major areas: broad market index investing and a few categories of dividend growth investing. So we’re talking not only diversification in assets and sectors, but also approaches. 

Next week, we continue rounding out our approach with a few more stock and ETF picks. As this thing comes together, we hope to give you a good idea of what we mean by A More Diverse View Of Diversification and why it matters.

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