Stock Strategies

Getting Started with Stocks

The most effective starting point for any investor is a broad, low-cost index fund. While many people immediately point to the S&P 500, investing solely in large US companies leaves you completely exposed without international diversification. Your default portfolio anchor should be a fund like VT (Vanguard Total World Stock ETF), which essentially buys a slice of every public company on the planet. Any deviation from this total-world approach requires a specific, logical reason.

As of early 2026, VT’s holdings are roughly 60% US stocks and 40% international stocks, reflecting the actual global market weight. However, it is entirely reasonable to feel uncomfortable being so heavily concentrated in a single country. If you want more refined control, you can split this into two separate funds: VTI for the US market and VXUS for the international market. My personal recommendation for a balanced, globally diversified portfolio is a 50/50 split between VTI and VXUS.

The Efficient Market Hypothesis

Before you attempt to pick individual stocks or sectors, you must understand the Efficient Market Hypothesis: asset prices reflect all available information, meaning assets are always perfectly priced.

A more realistic interpretation is that assets are actually always priced incorrectly, but no one knows what the true price is. The moment new information becomes available, the market collective reacts instantly: if a stock looks undervalued, millions of algorithms and analysts buy it until the price rises too much, while if it looks overvalued, they sell it until the price falls too much.

Future expectations are already built into the current price, also known as information being "priced in." If everyone knows a tech company is going to release a revolutionary product next year, the stock price has already gone up today to reflect that future success, and anytime a pundit says a specific company, sector, or country is expected to perform well, that information is already priced in.

This does not mean it is impossible to make money picking stocks, but it does mean you require information that is either not yet public, impossible to know, or highly risky. You are competing against institutions with supercomputers, insider access, and teams of PhDs. If a stock seems obviously undervalued to you, ask yourself, "Why isn't Wall Street rushing to buy it?" You might know something the market doesn't, or more likely, the market knows something you don't.

Diversification

It is often said that diversification is the only free lunch in investing. If you hold a single stock, you are entirely at the mercy of that one company's fortunes. If you hold a basket of stocks across different sectors that do not move in tandem, you smooth out your overall returns, drastically lowering your risk. Let's look at an example where each stock has a 50% chance of going up by 20% and a 50% chance of going up 10%, and five portfolios hold either 1, 20, 50, or 100 stocks.

As you can see, you get much more reliable results by holding a diversified portfolio rather than a concentrated one. Diversification protects you from the statistical reality of the stock market: stock returns are positively skewed. This means that historically, the vast majority of stocks underperform, while a small handful of stocks generate the vast majority of the stock market's returns. Because it is impossible to predict which specific companies will be the massive winners of the next decade, broad diversification is the only mathematical way to guarantee you own them. In other words, you have to buy the whole haystack to ensure you get the needle.

Beta vs Alpha

Every stock's return is driven by two components: Beta and Alpha.

Beta measures how volatile or sensitive a stock is relative to the overall market. Think of beta as the compensated risk you take simply by being invested in equities. If Stock A is significantly riskier and more volatile than Stock B, investors will demand a lower current price for Stock A to compensate them for taking on that extra risk.

Increasing your portfolio's beta (by gaining more exposure to the broader stock market) is the most reliable way to increase your expected returns over time, but it comes at the direct cost of having to endure steeper drops during market downturns.

Alpha is what people are talking about when they claim they can "beat the market." While beta represents the return you get just for riding the waves, alpha is the return generated completely independent of the market, usually attributed to a manager's stock-picking skill or a company massively outperforming expectations.

The problem with chasing alpha is that it requires you to concentrate your portfolio into a few specific stocks, forcing you to take on idiosyncratic risk (the risk of a specific company underperforming). Unlike beta, idiosyncratic risk is uncompensated, as the market will not reward you with higher expected returns just because you decided to take a gamble on a single company. The efficiency of the market makes consistently generating positive Alpha nearly impossible, so trying to beat the market usually just results in taking on more risk for lower returns.

The Hidden Drags: Fees and Taxes

When you invest in passive index funds, your two biggest enemies are not market crashes, but fees and taxes:

• Expense Ratios: This is the annual fee a fund charges to manage your money, expressed as a percentage of your investment. While a 1% fee might sound tiny, compound interest works in reverse when it comes to costs. Over a 30-year investing lifetime, a 1% expense ratio takes away roughly 25% of your total potential returns. This is another reason why low-cost index funds like VTI (0.03% expense ratio) consistently outperform expensive, actively managed mutual funds. Keep your fees as close to zero as possible.

• Taxes: Every time you sell a stock for a profit, or a fund manager sells a stock within a mutual fund, it triggers a taxable event (capital gains). Active funds constantly buy and sell, creating a massive "tax drag" that eats into your actual take-home return. Passive index funds rarely sell their holdings, making them incredibly tax-efficient vehicles that allow your money to compound uninterrupted.

Regional Breakdown

Geographic diversification is one of the most fundamental decisions you make when building a portfolio. Many investors suffer from home country bias, which is the tendency to over-invest in the country one lives in. The United States represents only about 60% of the total global stock market, and ignoring the remaining 40% means missing out on thousands of world-class companies. This is much more significant for every other country, and lacking global diversification leads to taking on concentrated, uncompensated risk tied to a single nation's economy. By spreading your investments globally, you smooth out volatility and ensure you are positioned to capture growth wherever it occurs.

Below, we break down the three primary categories of the global equity market from a US perspective: US (Domestic), International Developed, and Emerging Markets.

The US Market

The United States represents the largest, most liquid, and most influential financial market in the world, as it is home to dominant, multinational corporations that drive a massive portion of global innovation. Because of its robust legal system, shareholder-friendly policies, and history of strong earnings growth, investors generally view the US as a safe region for investing. However, this premium status is well-known, so US stocks typically command high valuations and investors must pay a premium for a slice of US earnings compared to the rest of the world.

International Developed Markets

This category includes mature, industrialized economies outside of the US, primarily found in Western Europe, Japan, Australia, and Canada. These markets operate with similar regulatory standards and economic stability as the US, but they often have different sector compositions, leaning more heavily toward financials, industrials, and consumer goods rather than big tech. Historically, developed international stocks often trade at lower valuations than their US counterparts and can offer higher dividend yields, providing a stabilizing, value-oriented component in a portfolio.

Emerging Markets

Emerging markets, such as India, Brazil, and China, represent rapidly developing economies. They offer the allure of high potential returns driven by growing populations, expanding middle classes, and rapid industrialization. However, this comes with significantly higher volatility, less regulatory oversight, political instability, and currency risk. It is a common misconception that high economic (GDP) growth automatically translates to high stock market returns. Rather, holding emerging markets is about capturing a specific risk premium and adding a distinct, often less-correlated asset class to your broader portfolio.

US vs. International

The debate over how much to allocate to US versus international stocks is one of the most common in the investing world. While the US has heavily outperformed international markets over the last decade, historically, these regions tend to move in cycles, taking turns outperforming one another for years at a time. Trying to time these cycles, just like trying to time stocks versus bonds, is virtually impossible and often driven by recency bias.

Currently, the US market boasts significantly higher valuations than the rest of the world. Historically, elevated valuations have been a strong indicator of lower future returns. Yet, the investing landscape is always evolving; structural advantages in the US market might justify some of this premium, and betting against the US economy has notoriously been a losing proposition. The key takeaway is that no one has a crystal ball.

Ultimately, you shouldn't feel forced to choose a winner between the two; you should simply diversify. The US is home to many of the world's most successful companies, but their continued success is already priced in to their expensive stocks. International markets may look fundamentally cheaper and offer unique opportunities, but their corresponding risks are priced in as well. A globally diversified portfolio ensures you don't go too heavy on one side, accepting the market's aggregate return without having to predict the future.

Factor Investing

Factors are measurable components of a portfolio, like size and value, which may have explanatory power for the differences in stock returns. Below, we will go over the ones that have the best evidence in support of their effects.

The Market Factor

This single baseline factor accounts for about 80% of the difference in returns between diversified portfolios.

• Mkt-RF: Market minus Risk-Free Rate: This represents the excess return of the broader stock market over risk-free assets, such as short-term Treasury bills. Because equities are inherently volatile and are subordinate to debt in the event of a corporate bankruptcy, investors demand a premium. You require a higher expected return as compensation for taking on the risk of the stock market instead of holding safe cash equivalents.

The Fama-French Three-Factor Model

By adding two specific fundamental factors to the baseline market factor, this model can account for approximately 90% of the difference in returns between diversified portfolios.

• Size (SMB: Small minus Big): Historically, small-cap companies have outperformed large-cap companies over long investment horizons. Because small businesses are less established and much more vulnerable to economic downturns, investors demand higher expected returns as compensation for holding these riskier assets.

• Value (HML: High minus Low): Companies with high book-to-market ratios (fundamentally cheap stocks) tend to outperform those with low ratios (expensive or growth stocks). Value stocks are often distressed, unpopular, or operating in unglamorous industries. Behaviorally, investors tend to overprice exciting growth narratives and underprice these distressed companies, creating a value premium that rewards investors as prices eventually revert to the mean.

The Five-Factor Extension

Building on the Three-Factor model, the addition of Profitability and Investment pushes the explanatory power to roughly 95%, capturing specific anomalies that the previous model missed.

• Profitability (RMW: Robust minus Weak): Companies with robust, highly profitable operating margins tend to outperform unprofitable firms. This factor was added to explain why some fundamentally expensive stocks still perform exceptionally well. If a company generates massive cash flow without needing external financing, it justifies a higher valuation. Ultimately, this captures the reality that holding structurally weak, unprofitable companies is a losing proposition over time.

• Investment (CMA: Conservative minus Aggressive): Companies that invest their capital conservatively historically outperform those that invest aggressively (such as through massive capital expenditures or aggressive acquisitions). Aggressive investing often signals "empire building" or overconfidence by a company's management team, which frequently destroys shareholder value. Conversely, conservative companies tend to focus on operational efficiency and returning capital to their shareholders.

Additional Factors

While the financial industry markets dozens of other factors, most are simply subsets or byproducts of the core five listed above.

We can generally group these "ghost" factors into two categories: safe and risky. Some argue that "safe" traits (like low volatility, high quality, and high-dividend yields) offer a premium because investors irrationally overprice sexier, high-growth stocks. Conversely, others argue that "risky" traits (like illiquidity or aggressive growth) offer a premium to compensate for distinct dangers, such as the inability to exit a position quickly or high duration risk.

A logically plausible story isn't enough; for a premium to be valid, the higher returns must be consistently present in historical data and not already explained by the existing Fama-French factors. Simply put, many trendy investment strategies that appear to beat the market are actually just capturing indirect exposure to the aforementioned factors. Rather than paying for a complex strategy, investors are usually better off targeting the core factors directly and at a lower cost.

The one notable exception is momentum, the tendency of winning stocks to keep winning. Momentum is unique because it tends to correlate negatively with conventional factors like value, making it an excellent diversifier that still provides higher expected returns. Unfortunately, true momentum is notoriously difficult to capture and it requires constantly buying recent winners and selling recent losers (high turnover), leading to high trading costs, tax inefficiencies, and higher management fees.

A handful of companies offer high-quality momentum funds:

• US: SPMO, MTUM, QMOM

• International (Developed): IDMO, IMTM, IMOM

• Emerging: EEMO

Core Portfolio Strategies

Once you understand the power of broad, low-cost index funds, the next step is deciding how to mix them together. These established strategies offer different balances of risk, reward, and effort, providing a roadmap from complete automation to highly customized investing.

Target Date Funds

A Target Date Fund (TDF) is the ultimate hands-off investment vehicle, often used as the default option in employer 401(k) plans. You simply pick the single fund with the year closest to your expected retirement (e.g., "Target Retirement 2060 Fund"), and the fund does all the work for you.

• The Goal: Simplicity and automated risk management. In your younger years, the fund is heavily invested in stocks for maximum growth. As you get closer to your retirement year, the fund's manager automatically shifts the allocation along a "glide path," gradually selling stocks and buying safer bonds to protect your capital.

• The Catch: You lose control over your specific asset allocation and tax placement. Additionally, you must be careful to choose an index-based Target Date Fund; actively managed TDFs often carry higher expense ratios that eat into your long-term returns.

The Three-Fund Portfolio

If you want to lower your fees and take direct control over your investments, the Three-Fund Portfolio is the next logical step. Popularized by the "Bogleheads" (followers of Vanguard founder John Bogle), it is the gold standard for DIY investors who want maximum diversification with minimal complexity.

• A Total US Stock Market Fund (e.g., VTI)

• A Total International Stock Market Fund (e.g., VXUS)

• A Total Bond Market Fund (e.g., BNDW)

The Goal: Ultimate low-cost control. By adjusting the percentages of these three funds, you can perfectly tailor your portfolio to your exact risk tolerance. An aggressive young investor might hold 60% US Stocks, 40% International, and 0% Bonds, while a conservative retiree might shift to 30% US Stocks, 20% International, and 50% Bonds.

The Catch: It requires you to manually log in and rebalance your portfolio, typically once a year, to maintain your target percentages. It also requires the emotional discipline to not tinker with the allocation during market panics.

Factor Tilting

For investors who have mastered the Three-Fund Portfolio and are willing to accept more complexity in pursuit of higher returns, there is Factor Tilting. Based on the Fama-French Five-Factor Model, this strategy acknowledges that certain types of stocks, specifically small and inexpensive value companies, have historically provided a higher expected return over long periods to compensate investors for taking on additional risk. The five-factor extension can also be applied to the screening, creating a more holistic tilt.

This strategy starts with a broad market index fund as its foundation, but deliberately tilts the overall portfolio toward these specific risk premiums (e.g., holding 70% in a Global Equity fund, and 30% in a Small-Cap Value ETF or simply a Global Equity Fund with a built-in tilt). Dimensional Fund Advisors (DFA) and Avantis (founded by former DFA employees) both do a great job of capturing these factors and plenty of funds to choose from:

• Board Market Fund w/ Mild Factor Tilt

  • Total Market

    • Dimensional World Equity (DFAW)

    • Avantis All Equity Markets (AVGE)

  • US/Domestic

    • Dimensional US Core Equity 2  (DFAC)

    • Avantis U.S. Equity (AVUS)

  • International (Developed & Emerging)

    • Dimensional World ex U.S. Core Equity 2 (DFAX)

    • Avantis All International Markets Equity (AVNM)

• Small-Cap Funds w/ Heavy Factor Tilt

  • US/Domestic

    • Dimensional U.S. Small Cap Value (DFSV)

    • Avantis U.S. Small Cap Value (AVUV)

  • International (Developed)

    • Dimensional International Small Cap Value (DISV)

    • Avantis International Small Cap Value (AVDV)

  • Emerging Markets

    • Dimensional Emerging Markets Value (DFEV)

    • Avantis Emerging Markets Value (AVES)

The Goal: To mathematically increase your long-term expected returns beyond what the basic market average will provide by intentionally overweighting historically riskier, cheaper companies.

The Catch: Factor tilting requires extreme patience. While factors like size and value have outperformed over multi-decade periods, they can underperform the broader market for years at a time. If you tilt your portfolio but panic and sell during a decade of underperformance, you capture all of the added risk and none of the premium.

Core-Satellite Investing

What if you agree with the math of passive index funds but still have an overwhelming itch to pick individual stocks or chase the latest trend? The Core-and-Satellite approach is arguably the most effective strategy for bridging the gap between evidence-based investing and the human desire for control (or gambling).

Allocate the vast majority of your portfolio, say 90% (the "Core") into boring, broad-market index funds, then use the remaining 10% (the "Satellite") as your "fun money" to buy individual stocks, trade options, or buy cryptocurrency.

The Goal: A behavioral safety valve; it satisfies the psychological need to play the "game" without jeopardizing your retirement.

The Catch: You must strictly compartmentalize the two. If your satellite investments skyrocket, it is tempting to increase your allocation and take on too much risk. If they go to zero, you must accept the loss and not pull money from your Core to try and win it back. Statistically, your satellite will likely underperform your core over the long run.

The All-Weather Portfolio

For investors whose primary goal is capital preservation rather than maximum growth, there is the All-Weather Portfolio. Created by billionaire hedge fund manager Ray Dalio, it is designed to survive any economic environment: inflation, deflation, rising economic growth, or recession.

Instead of allocating by dollars (like a traditional 60/40 stock/bond split), it allocates by risk, a concept known as risk parity. Because stocks are vastly more volatile than bonds, a 60% stock portfolio actually gets about 90% of its risk from the stock market. To balance this, the All-Weather portfolio holds a mix of commodities or managed futures.

The Goal: To drastically reduce portfolio volatility. Historically, this portfolio experiences much smaller drawdowns during market crashes, providing more emotional comfort.

The Catch: Because it holds such a massive allocation of bonds and non-cash-flowing commodities, it will significantly underperform a standard, stock-heavy portfolio during a long economic expansion. It is a highly specialized strategy built for wealth preservation, not accumulation.

The Rest of the Bunch

These strategies are often in the headlines and recommended by people looking for something different or trying to sell you something. Some may sound like a great idea, but they ultimately fail to hold up in the real world.

Active Funds

Active funds employ professional managers who constantly buy and sell stocks in an attempt to outperform the market. In contrast, passive index funds simply buy and hold all the stocks in a given market segment, accepting the market's average return. While the idea of hiring a highly paid expert to beat the market sounds appealing, the statistical reality paints a very different picture.

Over long time horizons, the overwhelming majority of active fund managers fail to beat their benchmark indices. This isn't necessarily because these managers lack skill, but rather because of simple arithmetic.

Before costs are factored in, the stock market is a zero-sum game. The aggregate return of all investors equals the market return, so for every investor who beats the market, someone else must underperform it by the exact same amount. However, active funds charge significantly higher management fees (expense ratios) and incur heavier trading costs due to constant buying and selling. Once these higher expenses are deducted, active management mathematically becomes a negative-sum game. The average active investor is guaranteed to underperform the average passive investor.

While a small percentage of active managers do outperform in any given year, identifying who will consistently win in advance is virtually impossible. Additionally, the data shows that past performance is not a reliable indicator of future success, and managers who outperformed one year frequently underperformed the next.

Stock Picking & Day Trading

While passive investing involves buying the entire market, stock picking is the attempt to find the few golden needles. Day trading takes this to the extreme, attempting to profit from minute-by-minute price fluctuations within a single day. The allure is obvious: the potential for massive, rapid wealth; however, the reality is bleak.

Professional money managers with supercomputers and insider access routinely fail to pick winning stocks consistently. For an individual retail investor to succeed, they must not only be smarter than those professionals, but they must also overcome significant trading fees, bid-ask spreads, and short-term capital gains taxes. Studies consistently show that the vast majority of day traders lose money over time, and even those who occasionally win rarely outpace the simple buy-and-hold return of a basic index fund. Stock picking is best viewed as a form of entertainment, speculation, rather than a reliable strategy for building wealth.

Dividend Investing

A subculture of investing is dedicated entirely to building a portfolio of stocks that pay high, consistent dividends. The appeal makes sense, as receiving deposits every quarter feels like more tangible passive income and provides a sense of security.

However, from a purely mathematical standpoint, a dividend is not free money. When a company pays a $1 dividend, its stock price instantly drops by exactly $1. The company is simply taking cash off its balance sheet and handing it to you. Furthermore, in a taxable brokerage account, you are forced to pay taxes on those dividends every single year, creating a significant "tax drag" on your compounding growth. While dividend-paying companies are often mature and less volatile, any historical outperformance is due to indirect exposure to the aforementioned factors and focusing exclusively on yield often leads investors to ignore total return (price appreciation plus dividends) and miss out on high-growth companies that reinvest their cash rather than paying it out.

Covered Calls (Options Trading)

Options are derivative contracts that give you the right, but not the obligation, to buy or sell a stock at a specific price. A covered call is a popular, relatively conservative options strategy designed to generate extra income.

In this strategy, you must already own 100 shares of a stock. You then sell (or "write") a call option, giving someone else the right to buy your shares at a predetermined price (the strike price) before a specific date, and you collect a cash premium upfront for selling this right. If the stock stays flat or drops, you keep the premium and the stock. The downside is that if the stock price skyrockets, you are obligated to sell your shares at the lower strike price, meaning you cap your upside potential. Covered calls can provide steady income in a sideways market, but they severely limit your ability to capture the massive compounding gains of a bull market. 

Leveraged ETFs

Since the overall stock market has historically provided positive returns over long time horizons, it might seem like a brilliant idea to buy a leveraged ETF to simply multiply those gains. These complex financial instruments use derivatives, like swaps and futures, to amplify the daily returns of an underlying index, often by 2x or 3x. For example, if the S&P 500 goes up 1% today, a 3x Leveraged ETF aims to go up 3%.

While this sounds like a shortcut to wealth, leveraged ETFs are extremely dangerous for long-term investors due to a mathematical phenomenon known as volatility decay (also called leverage decay or beta slippage). Because these funds reset their leverage target every single day, a volatile market will quickly and permanently erode their value.

To understand how daily rebalancing eats away at buy-and-hold gains, look at the math:

Example 1: A flat market with volatility

If the market goes up 10% one day, then down 10% the next:

• The Market: $100 → $110 → $99 (Down 1%)

• 3x Leverage: $100 → $130 → $91 (Down 9%)

Example 2: A rising market where leverage still loses

Even if the underlying market ends up slightly positive, the math of daily leverage can still result in a loss. If the market goes up 10% one day, then down 8% the next:

• The Market: $100 → $110 → $101.20 (Up 1.2%)

• 3x Leverage: $100 → $130 → $98.80 (Down 1.2%)

Because the daily losses are calculated on a shrinking base, the leveraged fund suffers capital loss. This risk becomes catastrophic during extreme or extended bear markets. If the strategy still seems tempting, consider whether you have the fortitude to stomach a terrifying 90% drawdown if the broader market crashes by 30%, a hole so deep that recovery is nearly impossible. Ultimately, leveraged ETFs are designed strictly for short-term, intraday trading by professionals. They are absolutely not meant to be held as long-term investments.

Asset Location

Choosing what stocks to buy is the foundation of wealth building, but deciding where to hold them determines how much of that wealth you actually get to keep. Unlike bonds, which generate highly taxed ordinary income, stocks are generally tax-efficient. They generate qualified dividends and long-term capital gains, both of which receive tax discounts (0% for people making under 50k and 15% for people making under 500k). Additionally, because stocks have the highest expected growth rate over your lifetime, placing them in the correct accounts is critical to maximizing your after-tax compounding.

Post-Tax Accounts (Roth 401(k) / Roth IRA)

This is the best spot for most stocks, as all future growth and withdrawals are 100% tax-free forever. Prioritize assets that have the highest expected returns, with the rest going into pre-tax accounts. The Roth perfectly shields both the dividend tax drag while capturing decades of tax-free capital appreciation.

Pre-Tax Accounts (Traditional 401(k) / Traditional IRA)

While a Traditional 401(k) is a great wealth-building tool, it is actually a less optimal place to hold stocks in retirement. If you hold stocks in a pre-tax account, every dollar you withdraw in retirement is taxed as ordinary income (which is often over 20%). You are taking a naturally tax-friendly asset and accidentally subjecting it to your highest possible tax bracket.

You should absolutely still invest in your Traditional 401(k) to get the upfront tax deduction and employer match. However, when optimizing your overall portfolio across all your accounts, use your pre-tax space to hold most if not all of your bond allocation, and only use the leftover space for your stocks.

The exception to this is if your 401(k) has poor fund options. In that case, pick the best funds they have available and fill out the rest of your allocation in your Roth and taxable accounts.

Taxable Brokerage Accounts

Unlike bonds, which are heavily penalized in a standard brokerage account, standard stock index funds don't incur many extra taxes. Many ETFs rarely sell underlying stocks, so they almost never distribute capital gains taxes to you, and most dividends generated by standard US index funds are qualified dividends, so they are heavily discounted.

International developed indexes (like VXUS) are particularly good to hold in a taxable brokerage account. Foreign governments tax international dividends before the money reaches the US, so if you hold VXUS in a taxable account, the IRS allows you to claim a foreign tax credit. If you hold international stocks in an IRA, you permanently lose the ability to claim this credit.

Even with those benefits and the relative lack of significant drag, you should always max out the annual contributions for your tax-advantaged accounts.

Summary

If you want to perfectly optimize your lifetime tax bill: 

• Highest growth assets (stocks) in Roth (post-tax) accounts

• Bonds and the rest of your stocks in traditional (pre-tax) accounts

• International stocks in taxable accounts if pre-tax and post-tax accounts are maxed out

Target Allocation

You can use a simple rule of thumb for your stock allocation: 120 minus your age. For example, if you are 30 years old, 120 - 30 = 90% in stocks. You can adjust this baseline up or down to match your risk tolerance.

As for what to invest in, most people should simply own the entire global stock market at the lowest possible cost. The easiest way to do this is by holding Vanguard Total World Stock (VT) or if you want more control over your U.S. versus international exposure, you can split this between Vanguard Total Stock Market (VTI) and Vanguard Total International Stock (VXUS).

If you are comfortable with more complexity, you can add funds that academic research supports as having historically outperformed the broader market over long timelines (known as factor investing). In this setup, your broad market funds should still make up at least half of your portfolio, with the remainder allocated to:

• Small-Cap Value

  • Avantis U.S. Small Cap Value (AVUV)

  • Avantis International Small Cap Value (AVDV)

  • Avantis Emerging Markets Value (AVES)

• Momentum

  • Invesco S&P 500 Momentum (SPMO)

  • Invesco International Developed Momentum (IDMO)

  • Invesco Emerging Markets Momentum (EEMO)

Try out my interactive Portfolio Builder tool to get a tailored breakdown and target percentages of each of these funds.