I am looking for information on building a portfolio of mutual funds and/or ETFs that will be more on the stable side. How can I begin this journey ?

This is for someone who is over 70 and lives in the US.


RE: "building a portfolio of mutual funds and/or ETFs that will be more on the stable side"

I think the biggest thing to recognize here is that returns and risk (i.e. stability) are almost always correlated. That is, if you desire higher returns, then you are going to have to take on higher risk and vice versa, if you desire lower risk, then you are going to have to accept lower returns.

In a very low risk/very low return bucket would be entities like treasury bonds, or bank savings account/CD interest. These are about as safe as can be, but they are very limited in return -- today their return actually on average loses money vs. the inflation rate.

One can pursue greater returns if one is willing to take some more risk.

Truly, most recommendations of portfolio building includes holding a spectrum of securities, with their various risks & rewards; that is, your portfolio will include a percentage of so-called growth stocks, a percentage of established so-called income stocks, a percentage of bonds, and maybe even a percentage in plain old savings accounts. When one is younger (say 30 to 40 years from planned retirement), one wants to be a little riskier because of that possibility of more growth. When one is at or nearer retirement, one wants far more assurances that the money they have saved will be available when it is needed and hence accepts far less growth.

All in all, this is a deep and complex subject and posts on a Q&A website don't do it enough justice. And as the market has changed in the last 10-20 years, some of the old adages in this space have also had to change. Do some searches for "asset allocation by age" or "portfolio composition by age" or similar. If you come across concepts in those results that confuse you, come back and ask, but there are many resources out there to start you on the basics in this space.

Then you will need to start doing some planning -- how much you have to invest, the timeline, the goals, your personal tolerance for risk -- all these factor into your personal portfolio composition. You can do a lot of this yourself, but if it remains overwhelming, finding a good financial planner may help.

  • I did send some time doing this kind of research. I am confused as to why mutual funds etfs in lets say BRSVX - Bridgeway Small-Cap Value could be considered having any risk since the 5 year return is at 17%. Doesnt that mean that in 5 years it hasn't lost value ? What is the risk ?
    – DES
    Aug 18 at 13:57
  • There is tremendous risk. Small-Cap means they are smaller companies. Smaller companies means they are not as established and literally the risk of going bankrupt for any of them is high, relative to the big companies, and their income from year to year is far more variable. Furthermore, past returns are no guarantee of future returns. I.e. it is well within the realm of possibilities for BRSVX to be -17% next year. Aug 18 at 14:00
  • Still if one company drops in value (even 100%) the fund has many other companies mixed in so overall it wont be affected that drastically no ? Since Im obviously missing something in that sense How can I better understand what funds are riskier than others ?
    – DES
    Aug 18 at 14:26
  • Sure, that's the benefit of a fund -- to spread out the risk of any single company in the fund from having issues. But, the whole index can still go down. Check out how the Russell 2000 index did from 2007 to 2010, for example, despite it being 2000 companies. How you find out which funds are riskier is from researching the components, their managers, and looking at some of their stats like the beta which is a measure of how much the fund reacts compared to the market indexes. In particular, small caps are known to have higher beta -- they tend to overreact compared to the overall market. Aug 18 at 15:34
  • 1
    Think about this: if that 17% from BRSVX was very low risk, why would anyone -- ANYONE -- ever put money into a bank CD or savings account that is paying less than 1% today? You haven't discovered something that rest of everyone else in the markets have missed. That 17% comes with significant chance of also going down and hence losing money. If you put the money in just a bank, even if the bank fails, there are guarantees that you will still get your money back, via FDIC program. The risk there is the bank and the government collapses, not 0% chance, but very small, and why its return is low. Aug 18 at 15:41

Really, it's simple: get some money, and buy shares in some ETFs.

If you don't know exactly what you're doing, but are investing for the long term, apply the KISS rule and buy:

  1. a "Whole Stock Market ETF" (for example, VTI), and
  2. a "Whole Bond Market ETF" (for example, BND or SCHZ).

Your age and the time span you're investing for will determine what percentage of money you allocate to each fund.

Some brokerages have a minimum account size, so that might be a factor in what brokerage you go with.

EDIT: Over age 70, and in the US... I would focus on capital preservation, via "Defined maturity date" bond funds.


Firstly you will need to choose a platform with which to do your investments.

If these are your very first steps, then It may be worth taking the next few months / year to invest a small amount on a platform you think will work for you and get the feel for how they work.

This may be your bank or a 3rd party platform.

Really, getting started is the biggest hurdle, and then you will learn from there.

Choosing a fund to invest in will be down to the research you do and your ethical / investment goals.

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