The 2022 Diversified Portfolio Example for Long-Term Growth
This year, the stock market is teaching new investors an important lesson, with many sectors losing value. Instead of hoping for the next big run-up, I will show you a diversified portfolio example that can help you build long-term wealth.
A well-diversified portfolio can help promote growth in almost any economic condition. But, most important, it can also protect against significant losses that can set you back years.
As we are seeing right now, rotations are a natural part of the stock market. Likewise, owning leaders in several asset classes has proven to be an effective strategy over time. For example, growth stocks are down this year, with the iShares Russell 2000 Growth ETF (NYSE: IWO) slipping 11%. In the meantime, value stocks are having their moment, with the iShares S&P Value ETF (NYSE: IVE) up 7% in 2022.
However, growth and value are only one part of the equation. Keep reading to find a diversified portfolio example to promote long-term growth while protecting from downside risk.
The Diversified Portfolio Example
Building a balanced account will consist of several different factors. Not only do you want to own stocks, but you may want to consider other income options to kickstart the compounding process.
Below is an outline of a diversified portfolio example anyone can use to help promote returns in the long run. I will explain in-depth what to look for in each category after.
Even though this may seem like a lot, it’s relatively easy to put together and can appreciate in most situations. Your investment goals and risk tolerance will determine the amount you will want to allocate to each category (more on this later).
Keep reading for more on diversified portfolio examples.
No. 1 Stocks
Stocks are a critical factor in any long-term investment strategy. They are the bread and butter of investments. Although they can be riskier, stocks generally promote higher returns in the long run.
At the same time, you will want to include a variety of factors to manage risk and promote growth. For example, growth & value, large & small-cap, different sectors and you may even include international stocks. Below are a few diversified portfolio examples to give you an idea.
- Apple (Nasdaq: AAPL): Large-Cap Growth. Information Technology (IT).
- Google (Nasdaq: GOOGL): Large-Cap Growth. Communication Services.
- Performance Food Group (NYSE: PFGC): Small-Cap Value. Consumer Staples.
- CVS Health Corp. (NYSE: CVS): Large-Cap Value. Heath Care.
- Advanced Micro Devices (Nasdaq: AMD): Large-Cap Blend. IT.
- UBS Group (NYSE: UBS): large-Cap Value. Financial. *Switzerland-based.
- Adobe (Nasdaq: ADBE): Large-Cap Growth. IT.
- Vale S.A (NYSE: VALE): Large-Cap Value. Materials *Brazil-based.
- Amazon (Nasdaq: AMZN): Large-Cap Growth. Consumer Discretionary.
Of course, there is a lot of room to move things around depending on your risk tolerance and goals. For example, if you are more aggressive, you can add something like Tesla (Nasdaq: TSLA). Or, if you are more conservative, consider something like Lockheed Martin (NYSE: LMT) as a diversified portfolio example.
No. 2 Commodities & Energy
Investing in the commodity market can help protect your portfolio from downside risk. These resources tend to outperform during unease, such as economic or political tension.
For example, the SPDR S&P Metals & Mining ETF (NYSE: XME) is up 34% this year. At the same time, the S&P 500(NYSE: SPY) is down 4%. With this in mind, owning these assets can promote growth while other holdings lag.
- SPDR Gold Trust (NYSE: GLD): An ETF that gives investors access to the gold market.
- Devon Energy Corp. (NYSE: DVN): Oil & gas exploration and production company.
Again, there is some wiggle room here. But gold and oil are two great diversified portfolio examples and good places to start when buying commodities.
No. 3 Fixed Income
You may already have some fixed-income options depending on your investing goals. For example, if you own dividend stocks, that is one form of fixed income. But if you are looking for even less risk, here are a few diversified portfolio examples for you.
- iShares 7-10 Year Treasury Bonds ETF (Nasdaq: IEF): Another ETF seeking to track the returns of U.S Treasury bonds maturing in seven to ten years.
- iShares TIPS Bond ETF (NYSE: TIP): An ETF for inflation-protected bonds.
However, if you are looking for more aggressive returns, these may not be for you. On the other hand, if you are focusing on risk management, these can provide passive income while protecting your account.
No. 4 Real Estate
Investing in real estate is another effective way of building a diverse portfolio for long-term growth. Although buying real estate directly is one option. Here are a few other options for you when examining a diversified portfolio example.
- Airbnb (Nasdaq: ABNB): Airbnb is not directly a real estate investment. But buying ABNB stock can give access to the short-term rental market.
- Reality Income (NYSE: O): A real estate investment trust (REIT) that owns, manages and leases properties. The company’s top tenants include Walgreens, Dollar General, and 7-Eleven.
Real estate has proven throughout history to hold its value. In particular, home prices are rising significantly in the U.S., as average prices are up 16% YOY.
No. 5 Cash
Cash is an essential part of any investment strategy for several reasons. For one thing, cash is less risky than investing in other assets. At the same time, it can depreciate when inflation is rising.
Although the U.S dollar Currency Index (DXY) shows the dollar is up 4% in the past year, inflation is also rising. In fact, the Consumer Price Index (CPI) is up close to 8% YOY. So, even though cash is less risky, it can still lose value.
But, the critical thing to keep in mind is to maintain cash for buying opportunities. For instance, many leading stocks fell over 30% from their highs during the pandemic. If you bought Apple stock around its lows, $60 a share, you would be up almost 200% already.
Is This Diversified Portfolio Example for You?
The outline above is a basic diversified portfolio example designed to provide long-term growth. By investing in several different stocks and other assets, you can reduce your risk of any major setbacks.
At the same time, building a diverse portfolio takes maintenance. Adding to your leaders over time can help multiply your returns in the long run.
This diversified portfolio example will help you get started, but determining how much to invest in each category will depend on your goals. If you are looking for higher returns with more risk, putting the majority in stocks will be best. On the other hand, if you are looking to avoid risk, a more balanced approach may be appropriate.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.