Lazy Stocks-only Portfolio

To achieve diversification within a stock-only portfolio, consider combining the S&P 500, small-cap stocks, and value stocks. Despite all being within the same asset class, these categories behave differently under various market conditions, thereby reducing overall risk. Historically, both value and small-cap stocks have tended to provide higher returns over the long run. Again, this portfolio is for 20+ years.

A well-structured portfolio might include:

70%

S&P 500 (e.g., Vanguard S&P 500 ETF (VOO), SPDR Portfolio S&P 500 ETF (SPLG), iShares Core S&P 500 ETF (IVV), Schwab S&P 500 Index Fund (SWPPX))

15%

small-cap stocks (e.g., Vanguard Small-Cap ETF (VB), SPDR Portfolio S&P 600 Small Cap ETF (SPSM), or Vanguard Small-Cap Value ETF (VBR) for the small-value tilt the historical premium actually rode on)

15%

value stocks (e.g., Vanguard Value ETF (VTV), Fidelity Value Factor ETF (FVAL), Vanguard Value Index Fund Admiral Shares (VVIAX))

By including different types of stocks, you spread risk. The S&P 500 offers stability and broad market exposure, small-cap stocks offer growth potential, and value stocks provide a cushion during downturns.

Despite diversification, this portfolio is still exposed to overall market risk since all components are equities. Small-cap stocks can be more volatile than large-cap stocks, which might not suit all investors. The S&P 500 is heavily weighted towards certain sectors like technology, which can introduce sector-specific risks.