Simple, Low Cost Investment Portfolios for the Beginner Investor

Photo by Precondo CA on Unsplash

As a young twenty-something, most of my investing happens in my tax-advantage retirement accounts. I do not have any interest in day trading, playing the market, or selling my assets anytime soon.

I currently have two investment accounts: a Roth IRA with Fidelity and a 401(k) with my employer’s Charles Schwab plan.

My entire portfolio consists of low cost index funds because I believe this is the cheapest and most effective way for the individual investor to build wealth. I set my investment strategy once and never have to think twice about it.

Keep reading to see what my portfolios consist of, the considerations that went into building them, and some frequently asked questions I get about choosing investments.

Roth IRA

  • 70% Total U.S. Stock Fund
  • 20% Total International Stock Fund
  • 10% Total U.S. Bond Fund


  • 30% U.S. Large Cap Fund
  • 20% U.S. Mid Cap Fund
  • 20% U.S. Small Cap Fund
  • 20% Total International Stock Fund
  • 10% Total U.S. Bond Fund

How I Chose my Portfolios

When forming my portfolios, there were a few considerations that guided my choice: cost, risk, diversification, convenience.

Overall, the portfolios above are extremely low cost, relatively high risk, highly diversified and convenient.

The main driver of the cost of investing is something called the expense ratio. This is generally a small percentage (between 0% and 1.5% although some are higher) of your total investment that the fund will charge you to invest in it.

For example, if a fund has an expense ratio of 0.1%, it will cost $1 for every $1000 you invest. This may seem negligible, but higher expense can really eat away at your returns.

I generally aim to keep my expense ratios under 0.2%. This is why I opt to create my portfolios out of multiple index funds instead of using a robo-advisor like Wealthfront or buying a single target date fund. These options, while the most convenient, are a little more expensive.

Both of these portfolios would be categorized as high risk or aggressive. As you can see, they both have over 70% allocated to domestic stock.

Domestic stock is the highest performing asset class historically, but it also experiences large fluctuations. For example, in 2008 the Nasdaq dipped over 40% while in 2020 it gained 43%. Historically, it has gained around 10% each year on average.

These portfolios are best for younger investors in their 20s or early 30s.

The best feature of these portfolios in my opinion is that they are highly diversified.

Instead of betting on one or two stocks, I am exposed to every single stock both domestically and globally as well as every single bond domestically. Although I categorized my portfolio as high risk, the diversification actually makes my portfolio a lot less risky than if I were to invest in individual stocks.

According to financial research, highly diversified index based portfolios tend to over-perform actively managed portfolios that are not as diversified.

Frequently Asked Questions

The percentages may seem arbitrary and that’s because they are. I am more interested in how the different categories are weighted relative to each other.

For example, I always want domestic stock to be weighted much more heavily than international stock and debt because it has historically over-performed those two asset classes. I also have a long enough time horizon that any significant dips will have plenty of time to recover.

A quick google search will help you read about the pros and cons of different common percentage allocations.

The categories I gave here are common categories that a lot of specific index funds buy. For example, VTSAX is a very common total domestic stock market fund.

If you google the name of the category, you will get a list of funds from various investment companies that would work well!

If you are picking from a list your employer gave you for your 401(k), the name of the fund will most likely clue you in to what kind it is. You can also read the description for more details.

I choose to create my own portfolio because I find stuff like this to be fun! It is also marginally cheaper to buy individual index funds.

Further, my employer does not offer very good automated options, so I found that creating my own portfolio was the best option.

If this totally confuses you and you’d rather not take the time to learn more, using a robo-advisor or purchasing a target date fund is a perfectly good alternative!

Two Cents with Julia