So you wanna be a millionaire.
Who doesn't, right?
Well, maybe ETFs are the answer.
At least that's what this YouTube video claims.
Six ETFs is all it takes apparently.
That's right, just six.
So in this deep dive, we're gonna break it all down.
Exactly, we'll see if this strategy really holds up.
First things first.
Gotta start somewhere.
What's the foundation?
What's the core of this whole thing?
VTI, they say.
VTI.
Vanguard Total Stock Market ETF.
Okay.
And that is...
Basically it's like owning a tiny piece
of almost every company in the US stock market.
Whoa, hold on, every company.
Well, pretty much all the publicly traded ones.
So from the big guys, like...
Apple, Microsoft, Amazon.
Two companies I've probably never even heard of.
Exactly, you got it.
All in one ETF.
Yep, that's the idea.
I mean, that's pretty impressive diversification, right?
It is, but how does it actually perform?
Yeah, that's the real question.
Well, over the past 10 years,
the average return has been...
Has been...
12.52% per year.
Whoa, okay, that's...
That's not bad at all.
If I had invested, let's say, $10,000, 10 years ago...
You'd be sitting on over $32,000 today.
Okay, now I'm listening.
But remember...
Remember what?
The stock market, it's a bit of a roller coaster.
Oh yeah, for sure.
It has ups and downs.
But that's where VTI's broad diversification comes in.
I see, so it kind of smooths things out.
Exactly, because it includes companies
from all different sectors.
So even if one sector is struggling...
Others might be doing well.
And that helps to balance things out.
Right, and don't forget about dividends.
Oh yeah, those lovely little bonus payments.
With VTI, you're getting a little extra income on top of...
On top of the potential for growth.
You got it.
Okay, so we're getting diversification growth,
potential, and dividends.
All in one package.
I'm starting to see why they call this the core holding.
The solid foundation for any portfolio.
But is it perfect?
Are there any downsides?
Well, it is very US-centric.
Meaning?
It only invests in US companies.
So if I wanted to go global...
I'd need to look elsewhere.
Good point, no single investment can do it all.
Exactly, diversification is key.
And speaking of diversification, what about real estate?
Ah, yes, a classic portfolio addition.
Does this strategy include any real estate?
It does, they recommend VNQ.
VNQs.
Vanguard real estate ETF.
Okay, so with this one, I can...
Tap into the real estate market
without actually buying any property.
So no dealing with tenants?
No leaky faucets to fix.
Sounds pretty appealing actually.
It's definitely a hassle free way to invest in real estate.
So how does it work?
VNQ invests in something called REITs.
REITs.
Real estate investment trusts.
And those are?
Companies that own and manage income producing properties.
Like?
Office buildings, shopping malls, apartments, you name it.
So basically I'm owning a tiny piece of...
Kind of a whole bunch of different properties.
Like a mini real estate empire.
You got it.
But how do the returns compare to the stock market?
Well over the past 10 years,
VNQ has averaged.
Averaged.
About 7.48% per year.
Hmm, that's lower than VTI.
It is, but real estate tends to be...
To be.
Bit more stable.
Especially when the economy gets shaky.
Exactly, it can help to balance out
those stock market swings.
What about dividends?
VNQ is actually known for its dividends.
Really?
It has a yield of 3.1%.
So on a $10,000 investment.
You'd be getting about $309 per year in dividends.
Okay, not bad at all.
Nice little income stream.
But are there any catches?
Well there's a little tax nuance to keep in mind.
Like what?
Dividends from REITs are taxed as ordinary income.
Which could be higher than...
The tax rate for qualified dividends from regular stocks.
Okay, that's good to know.
Definitely something to consider.
So we've got VTI for broad US stark exposure.
And VNQ for some real estate stability and dividends.
Where do we go from here?
Well now it's time to think globally.
Ah, going international.
The video suggests adding VXUS to the mix.
VXUS.
Vanguard, total international stock ETF.
And this one invests in?
Companies outside the US.
So we're talking Europe, Asia.
Latin America emerging markets all over the world.
So it's like VTI, but for the rest of the world.
Exactly, it's a way to diversify beyond...
Beyond the US market.
And potentially tap into growth opportunities
in other regions.
Okay, I see the logic there spreading the risk.
But what about the performance?
Yeah, how is VXUS done?
Well over the past 10 years,
it's averaged 5.2% per year.
That's lower than both VTI and VNQ.
It is, but remember international markets
don't always move in sync with the US.
So even if the US is having a down year.
My international holdings might be doing just fine.
Exactly, it's all about balancing things out.
What about dividends?
The VXUS actually has a pretty decent dividend yield.
How decent?
3.86%.
So on a $10,000 investment.
You'd be looking at about $309 in dividends per year.
Not bad at all.
A solid addition to the income stream.
Okay, so we've got growth,
potential global diversification
and a decent dividend yield.
Anything else?
Yeah, any downsides to be aware of.
Well, international markets can be more volatile
than the US.
Especially those emerging markets.
Right, but over the long term.
International diversification can be a valuable tool.
Exactly, it's all about the long game.
All right, three ETFs down and three to go.
We're making progress.
We've got VTI for US stocks, VNQ for real estate, VXUS
for international exposure.
What's next on our path to millionaire status?
I'm eager to find out.
Let's dive in.
All right, we've explored this six ETF strategy
step by step, US stocks, international stocks,
real estate and bonds.
We've covered a lot of ground.
But as I was looking over our notes,
I noticed something was missing.
Hmm, something missing.
Did you catch it?
I did actually.
What is it?
They didn't mention commodities at all.
Commodities.
You know, like gold oil?
Ah, things like that.
Exactly, things like precious metals,
energy, agricultural products, all that good stuff.
So why is that important?
Why should we care about commodities?
Well, commodities often behave differently
than stocks and bonds.
Meaning?
Their prices aren't really tied to the stock market.
So if the market is down.
My commodities might be holding steady or even going up.
Hmm, interesting.
That's one of the big benefits of commodities.
They can help to reduce your overall portfolio volatility.
Exactly, they add another layer of diversification.
Okay, but how do you actually invest in commodities?
Well, you could buy physical commodities
like gold bars or barrels of oil.
Hmm, I don't think I have the storage space for that.
Yeah, that's not really practical for most people.
So what's the alternative?
Commodity ETFs.
Those are.
The ETFs that track the prices of various commodities.
Ah, so instead of buying a barrel of oil.
I can just buy shares of an oil ETF.
And that gives me exposure to the price of oil.
Exactly, it's a much easier way to invest in commodities.
So even though the six ETFs strategy
didn't mention commodities.
It's definitely something worth considering.
If for additional diversification.
Especially if you're looking to reduce volatility.
Makes sense.
Okay, so what else did the video miss?
Well, they didn't really dive into risk tolerance.
Ah, that's a big one.
Huge.
Everyone has a different level of comfort with risk.
And that should definitely influence
your investment decisions.
For sure, you need to figure out
what you're comfortable with.
So someone younger with more time to recover from losses.
They might be okay with a higher risk portfolio.
And someone nearing retirement.
They'd probably prefer a more conservative approach.
Less risk, less potential for big losses.
But also less potential for big gains.
It's all about finding that balance.
Right, what's right for one person
might not be right for another.
So risk tolerance is key,
but what about asset allocation?
Ah, yes.
How to actually divide your money among these six ETFs.
Did the video offer any guidance on that?
They didn't give any specific percentages.
And that's probably for the best.
Asset allocation is a very personal decision.
So I shouldn't just divide my money equally
among the six ETFs.
Not necessarily, it depends on your risk tolerance,
your time horizon, your goals.
So a younger investor with a longer time horizon.
They might choose to allocate more
towards growth oriented ETFs.
Like VTI and VGT.
Exactly, those have the potential for higher returns.
And also higher risk.
Right, and someone nearing retirement
might lean more towards BND.
For that added stability.
Exactly.
Bonds can help to protect your capital
as you get closer to retirement.
So it's all about customizing the strategy
based on my individual needs.
Precisely, it's not one size fits all.
That's really helpful.
I'm starting to see the bigger picture here.
It's not just about picking six ETFs and calling it a day.
It's about understanding the underlying concepts.
And making informed decisions.
Right, and adjusting my approach as I go.
Exactly, it's a journey, not a destination.
And speaking of adjusting, there's
that thing called rebalancing, right?
Yes, rebalancing, that's important.
Remind me what that is again.
Over time, your portfolio can drift away
from your target allocation.
So if one asset class is doing really well.
It might start to make up a larger percentage
of your portfolio.
And that could throw things out of balance.
Exactly, so rebalancing involves periodically
adjusting your portfolio.
To bring it back online.
So you might sell some of your winners.
And reinvest the proceeds in the asset classes
that haven't performed as well.
Right, it's a way to maintain that balance
we were talking about.
OK, so rebalancing is like hitting the reset button
on my portfolio every now and then.
It's a good way to think about it.
What else should we be thinking about?
Well, the video talked about diversification
across different asset classes.
Right, stocks, bonds, real estate.
But it didn't really go into diversification
within asset classes.
Hold on, I thought those ETFs were already diversified.
They are to a certain extent.
You can actually enhance diversification
by adding more ETFs within each asset class.
So instead of just holding VTI for US stock exposure.
You could add another US stock ETF that
focuses on small companies, for example.
I see.
So it's like diversifying my diversification.
Exactly, you're spreading the risk even further.
But wouldn't that make my portfolio super complicated
to manage?
Not necessarily.
There are tools and resources available to help you.
OK, good to know.
I'm starting to understand why this deep dive is so valuable.
We're uncovering all these layers beyond the initial six ETFs.
It's like peeling back an onion.
There's always more to learn.
And speaking of peeling back layers,
I remember the video mentioned something about art
as an investment.
Ah, yes, art as an alternative investment.
That definitely piqued my interest.
They even mentioned a platform called Masterworks,
which allows you to buy fractional shares of famous artworks.
So you're saying I could own a tiny piece of a Picasso.
Exactly.
Platforms like Masterworks are making art more accessible
to everyday investors.
Wow, that's pretty cool.
But is art really a viable investment?
Well, it's important to note that art
is a non-correlated asset.
Non-correlated.
Meaning its performance doesn't typically
move in tandem with the stock market.
So if the market is down, my art investment
might be doing just fine.
That's the idea.
It can help to reduce your overall portfolio of volatility.
So it's like having a secret weapon that's
immune to the stock market's mood swings.
You could say that, but there are also downsides to consider.
Like what?
Art is a relatively illiquid asset.
It can be difficult to sell quickly.
If you need to access your capital.
So it's a long-term play.
Exactly.
You've got to be patient with art.
OK.
I'm intrigued.
Art is definitely on my list to research further.
It's definitely a fascinating world.
Are there any other alternative investments worth exploring?
Oh, tons.
Real estate crowdfunding, private equity funds, hedge funds.
So many options.
It really depends on your goals, your risk tolerance,
and how much you're willing to invest.
Wow, this deep dive is really opening my eyes
to a whole universe of investment possibilities.
That's what we're here for.
I feel like we need a separate episode just
on alternative investments.
We could definitely do that, but for now.
Let's bring it back to our six ETF foundation.
Sounds good.
We've covered a lot of ground, and I
want to make sure we're connecting all the dots.
Let's do it.
Wow, this deep dive has been a wild ride.
We've covered a lot of ground, that's for sure.
Six ETFs, risk tolerance, asset allocation,
alternative investments.
It's a lot to digest.
But hey, that's what deep dives are all about, right?
It's exactly digging deep and exploring all the angles.
So as we wrap things up here.
What are the key takeaways?
What should our listener be thinking about?
What are those practical next steps?
Well, first things first, revisit your financial goals.
Yes, got to have those goals.
What are you saving for retirement?
A house early retirement to travel the world.
Figure out what you're working towards.
Exactly, because those goals will determine your time
horizon and your risk tolerance.
Makes sense.
So goals first, and then what?
Take a look at your current financial situation.
How much can I realistically invest?
Right, and do you have any existing investments?
Got to know where you're starting from.
Exactly, assess your financial landscape.
OK, so goals first, then assess my starting point, and then.
Now comes the fun part.
Research those ETFs.
Ah, yes.
Time to put on my detective hat.
Read their prospectuses.
Explore their holdings.
Understand their investment strategies.
Don't just take our word for it.
Right, do your own due diligence.
Become an ETF expert yourself.
Exactly, and remember, you don't
have to limit yourself to these six ETFs.
Oh, right, there are tons of ETFs out there.
Thousands covering every imaginable investment strategy.
So broaden your horizons.
Explore different options.
Exactly, find the ETFs that align with your goals
and your risk tolerance.
OK, so research those ETFs, but what
if I need a little extra help?
Oh, don't be afraid to seek guidance
from a financial advisor.
Ah, a professional opinion.
They can help you create a personalized investment plan.
Tailored to my specific situations.
Exactly, and they can answer your questions,
address your concerns, provide ongoing support.
So it's like having a personal trainer for my portfolio.
I like that analogy.
Any final words of wisdom before we wrap up this deep dive?
Remember, investing is a marathon, not a sprint.
Patience is key.
Exactly, be patient, stay disciplined,
and don't let short-term market fluctuations derail
your long-term goals.
Easier said than done sometimes.
It's true.
But focus on the long game, and most importantly,
enjoy the journey.
I love that.
Enjoy the journey.
It's not just about the destination.
Exactly, it's about the process of learning, growing,
and building your financial future.
Well said, this has been an incredible deep dive.
It has been my pleasure.
I'm feeling inspired and ready to take action.
That's what we like to hear.
A huge thank you to our expert for guiding us
through this fascinating world of ETFs.
Any time.
And to you, our listener, thank you
for joining us on this deep dive.
We'll see you next time.
On the deep dive only.