How I would invest $50,000 for my retirement if I had to start from scratch


If you’re entering the market now and building a retirement portfolio, the state of the market and the economy can seem a little daunting. The bear market has been tough, and with the expectation of a continued economic slowdown, or recession, on the horizon, the outlook may not improve anytime soon.

But this type of market, as uncertain as it is, should not change any long-term strategy, particularly in terms of retirement. The market went through several bear markets, and they were usually followed by longer and more robust bull markets.

That said, if I were building a retirement portfolio from scratch right now with $50,000, I would be cautious, balanced, and optimistic.


Being cautious means being prepared for market fluctuations that occur over time. If you invest primarily in one type of stock – say, all growth stocks or tech stocks or small caps – this volatility will be more pronounced and your portfolio will be subject to wild swings. This is why portfolio diversification is so important.

I would diversify my portfolio in two ways: through exchange-traded funds (ETFs), which are baskets of stocks that track an index, and by diversifying these ETFs by investment style or strategy.

^ SPX data by YCharts

The bulk of the portfolio would be an S&P 500 ETF, tracking the top 500 stocks in the United States. It is the primary benchmark by which stocks have been measured, and over the past 40 years it has returned 9% per year on an annualized basis through September 20. I would put about 30% of my $50,000, or $15,000, in an S&P 500 ETF. There are many good options, but the granddaddy of them all is the SPDR S&P 500 ETF Trustwhich is the oldest ETF on the market.

Then I would put the rest into two ETFs that perform differently in different market cycles, to support the portfolio in tough markets while driving growth in strong markets. To determine which ETFs would best achieve this goal, I would use the past 20 years as a guide.


If you look at the 20 years from 2000 to 2020, you had two very different market cycles. 2000 to 2009 was a tough time, filled with several bear markets, from the bursting of the dot-com bubble to the Great Recession. Then, from 2010 to the end of 2019, the market experienced the longest bull market and longest period of economic expansion in US history.

^ SPX Chart

^ SPX data by YCharts

From 2000 to 2009, it was a bad time for growth stocks and large caps, as the S&P 500 had an annualized return of -2.7% over this period while the Nasdaq had an average annual return of -5, 7. The Nasdaq 100, which is an indicator for growth stocks, posted an annual return of -6.7% during this period.

On the other hand, value stocks and small and mid caps are doing much better over this 10 year period. The S&P 400, a mid-cap index, had an annualized return of 5%, while the Russell 2000 returned 2.2% annually. On the value side, the S&P 400 Value Index generated a return of 6.8% per year, while the Russell 2000 Value Index generated a return of 6% per year.

So I would split an extra $20,000 into two different ETFs that would better navigate the markets. One would be in a mid-cap value ETF, to access the range of mid-sized companies with value characteristics, while the other would be in a small-cap ETF to invest in a range of smaller companies.

A good option among mid-cap value ETFs is the Vanguard S&P Mid-Cap 400 Value ETFwhile a good small cap fund is the iShares Russell 2000 ETF.


The rest of the portfolio would reflect my long-term optimism that growth stocks, particularly the technology sector, will continue to drive market growth.

As mentioned, growth stocks and large caps struggled in the 2000s, but in the 2010s it was a whole different story. The S&P 500 returned 11.2% annually from 2010 to 2019, while the Nasdaq Composite posted an annual return of 14.7% and the Nasdaq 100 posted an annualized return of 16.7% over this period. period. The Russell 2000 Index posted a solid return of 10.3%, while the S&P Mid-Cap Value Index posted an average annual return of 10% over the decade.

In the long term, I would invest 30% of the $50,000, or $15,000, in a technology-focused ETF like the Invesco QQQ Trust (QQQ -1.63%). This ETF tracks the Nasdaq 100 and has the best long-term performance over the past 40 years, even with its negative performance in the 2000s. This is of course a concentrated index that includes the most important technology stocks and fastest growing.

It’s just one person’s perspective, but a portfolio built with a focus on diversification, balance, and growth will go a long way toward achieving your long-term goals.


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