How to Create a Stock Portfolio (Super Simple!)

One of my goals for this year is building a long-term buy and hold stock portfolio. So in this video, I’m going to show you what stocks and funds I’ll be picking to build out my portfolio.

Most of my activity in the stock market is fairly active trading on a daily or weekly basis. Other than a couple of retirement accounts with long-term positions, my only real buy and hold stock portfolio is in M1 Finance. I started this in January of 2020 with $1,000 holding just one Vanguard ETF.

But for a long time, I’ve been wanting to add new holdings and start to make regular deposits to this account. One of the downsides of day or swing trading is it requires you to be actively participating and managing and sometimes… I just don’t want to. It can take up a lot of my time, and out here in California, I sometimes just don’t want to wake up at 6 in the morning to deal with it.

And with trading, you can easily have a few bad weeks or months, and in those cases, you’d be a lot better off if the money just sat in a solid portfolio earning you money while you focus on other things.

The Basics

So with most things in general, I like to keep things pretty simple. And to simplify this, your buy and hold portfolio can consist of individual shares of companies like Apple for instance, or it can consist of a bunch of different companies all put together into one fund. And it can also consist of bonds, but I’m going to leave bonds out for this video and focus more on stocks.

So let’s take the S&P 500 for instance. The S&P 500 is an index of 500 public, large-cap companies that represent the leading industries of the United States economy. Within the S&P, you have 11 sectors, based on companies’ primary business activities. The are:

Information Technology, Health Care, Financials, Consumer Discretionary, Communication Services, Industrials, Consumer Staples, Energy, Utilities, Real Estate, and Materials.

So companies like Microsoft and Apple would be in the Information Technology sector. Tesla, Home Depot, Starbucks, and Amazon would be in the Consumer Discretionary sector.

If you wanted to create a portfolio consisting of all 500 companies in the S&P 500, you can go out and buy shares for all 500 companies… but that would be a huge hassle and may cost a lot in commissions and just otherwise be difficult to manage.

Instead of doing that, you could buy just one share of the S&P 500 ETF, Spy. This ETF consists of all of the companies that make up the S&P 500 and so buying just one share of this ETF will give you exposure to all 11 sectors.

Now the downside to this is since it’s so diversified, it also won’t get crazy high returns. The average annual return is about 10% for the S&P.

What Kind of Stocks?

I already mentioned the 11 different sectors, but stocks can also be classified based on their expectations. Stocks can be growth, income, or value. Growth stocks are stocks that – well, have a lot of potential for growth. They are generally expected to invest most of their revenue into growing the company. All 11 sectors will have their own growth stocks, but in general, growth stocks are newer, innovative companies that are expected to have a big impact on the market. Tesla and Amazon are good examples of growth stocks.

Value stocks tend to be established companies that are currently trading below the price that their fundamentals might indicate. Essentially, they are a good value for the price you pay. It’s one of the reasons why Roaring Kitty bought up Gamestop over a year ago. He found some deep freakin value and was rewarded for it. Often you’ll find banks and energy companies as good examples of value stocks.

And lastly, you have income stocks. Income stocks are stocks that pay a dividend to their shareholders and they are usually companies that are well-established and have healthy financials. An example of this would be a company like 3M. They have a dividend yield of almost 3%. This means each year, 3M will pay you about 3% of their share price per share. It’s currently around $200, so you’d get about $6 per year per share.

So you’ve got companies with different pros and cons in a variety of sectors and maybe all this did was further complicate things for you – but don’t worry, this doesn’t have to be difficult.

This brings us back to ETFs. Let’s take a look at Vanguard’s ETFs. I like Vanguard’s ETFs because the expenses are low and the returns are pretty solid. To see the fee for any given ETF, it’ll be listed as an expense ratio. With Vanguard, I find the fees are usually pretty negligible considering the returns, but it’s something to be aware of and know about before investing in any ETF.

But, back to diversifying, ETFs make it easy. If you want dividend stocks, here is VYM. You can look at how it’s performing Year-to-Date and how it’s performed since the fund was formed.

If you want to be exposed to growth stocks, here is VUG.

For value stocks, here is VONV.

And then, you can just click on one to see what companies the ETF is holding. This growth ETF is comprised of 46% tech stocks and 23.5% consumer discretionary. You’ve got stocks like Apple, Microsoft, Amazon, Tesla, Mastercard, and so on. So if that fits your goals, you can grab some shares of this ETF.

How Much Diversification?

So how much diversification should you actually have for your portfolio? First, let’s see what Warren Buffett has to say on the matter.

6 stocks. Okay, that’s honestly pretty surprising. But honestly, it’s up to you, your goals, and your risk tolerance. For instance, here’s one of my friend’s buy and hold portfolios. It consists of quite a lot of stocks, and he’s covered different sectors and even crypto. I forgot to mention boomer is the 12th sector of the S&P.

So if you’re older and closer to retirement, you may want to conserve your cash and focus more on income stocks that pay dividends. If you’re younger and want to focus more on higher returns with higher risk, you can choose growth stocks that have the potential to beat the overall market with their returns.

For me, I’m still relatively young and thus, I’m okay with having a portfolio that’s focused more on growth to get potentially higher returns.

So let’s take a look at my portfolio and what I’ll be doing with it.

My Portfolio

I mentioned M1 Finance earlier and the reason why I like using M1 for my buy and hold portfolio is because that’s really what it’s designed for. Unlike brokerages where you can day trade and buy options, M1 has you build a pie of different stocks and funds and then you set what percentage of your investment you want allocated to each one. Instead of buying and selling whenever you want, they have trade windows. So the market’s closed right now, but I can get my pie setup and then M1 will make the transactions for me tomorrow.

Now if you don’t want to use M1, that’s totally fine too. All you’ll want to do is figure out how much you want to allot to each stock or fund and just buy that amount directly through your broker.

My first year with this portfolio, I had just one ETF – Vanguard’s growth ETF VUG. This gave me pretty terrific returns for an ETF. Earlier this year I added Ark’s innovation ETF ARKK… Apple... and Disney.

So for now, here is how I’m going to build my portfolio.

I’m going to hold onto the Vanguard and ARK ETFs along with Apple. I’m going to also add ARKG which is focused on genomics with companies like Teladoc, Regeneron, and Crispr.

I’ll add VONV for exposure to value stocks which cover a variety of sectors like Financials, Industrials, and Consumer Discretionary.

I’ll add Amazon as well – there is speculation of a stock split as well as earnings on Thursday.

So to balance my portfolio, it is growth-focused, so I’m going to make VUG 40%... ARKK 15%... ARK-G 5%... VONV 20%... AAPL 10%... oh, and I’m going to get rid of Disney since it’s covered pretty well in the Value Stock ETF… and then Amazon will be 10%.

I just realized I hit Warren Buffet’s magic 6 number… which really wasn’t intentional, but I feel pretty good about how it’s currently setup.

Helping It Grow

Another thing I would encourage if you’re able, is to make it a habit to contribute regularly to your portfolio. I made a free budgeting spreadsheet that you can download – without even entering your email – that can hopefully help you figure out what you may be able to invest each month and how much your investment can grow over time.

For me, I’m just going to start by setting up a $300 monthly transfer to this portfolio. I’ll also do a follow-up video to this at the end of the year to track how well this portfolio has done and share the results with you.

Final Thoughts

Now I could add more speculative plays in EV and cannabis or add more blue chip boomer stocks like Coke, but knowing how I am, I don’t want to get stuck analyzing so many options that I get overwhelmed with information and end up not doing anything at all.

I may adjust things over the next several months until I feel like I hit a good balance of growth without too much volatility, but this at least gets me going.

And now this video isn’t sponsored by them or anything, but If you want to check out M1 Finance for yourself, you can use the link to get $30 for free when you deposit $100. They’ll send me $30 as well, which is a win-win, but feel free to use whatever brokerage you like best. Also, here is a link to the pie, so you can check it out for yourself. As always, I recommend doing your own research before investing your own money and not blindly taking advice from dumb YouTubers like myself.

That’s all for this one, if you would do me a favor and hit the thumbs up button on this video and consider subscribing to my channel, that would really help me out. I’ll see you in the next one.