It's time to put theory into action and build a few hypothetical portfolios that reflect our preferred asset allocation breakdown. We begin with a simple, 2-asset portfolio, stocks and bonds.

Example 1. The 2-asset allocation scheme

For an investor who has a long term view and wants to keep things as simple as possible, this 2-asset scheme is ideal. We will fill out the actual securities later in this lesson.

Example 2. The multi-asset allocation scheme

For an investor who wants to spread their money across several asset classes to improve diversification and have a smoother ride, this 5 -asset scheme would do nicely. Alts refers to assets like private equity, direct lending, hedge funds, etc.

Example 3. The multi-asset allocation scheme using ETFs

The above portfolio is an example of how an investor might implement the multi-asset portfolio using publicly traded ETFs.

Example 4. The global equity portfolio

For an investor who wants to mimic the global equity portfolio, the above table breaks down the equity market cap by region. The investor can use ETFs, individual stocks, or a combination of both to achieve this allocation.

Final Thoughts

The allocation scheme you choose will be based on what is contained in your Investment Policy Statement. Using ETFs gives the investor an easy to implement solution to setting their asset allocation into an actionable plan with low maintenance.

Using individual securities involves much more work, and requires more time to maintain. The advantage of using individual securities is that the investor has more control over their portfolio, and a better chance to reach their goals on time.

Example Portfolios