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For many investors, building a portfolio is key to attaining long-term financial stability, whether for generating passive income, retirement or simply growing their wealth over time.
Still, some find it difficult to come up with the right balance between stability, growth and income, especially with so many options available today.
This concern is at the center of a recent heated discussion sparked by a 31-year-old investor with $250,000 to bet on who shared her dilemma and allocation plan in Reddit’s r/dividends community.
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The 31-year-old is relatively new to stock investing but has already eyed dividend stocks and index ETFs as her favorite picks for building wealth over time. Her portfolio includes Ares Capital (NASDAQ:ARCC), JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ), Main Street Capital (NASDAQ:MAIN), Vanguard Total Stock Market Index Fund ETF Shares (NASDAQ:VTI) and Vanguard Total International Stock Index Fund ETF Shares (NASDAQ:VXUS), with a previous SPDR Portfolio S&P 500 ETF (NYSE:SPLG) holding that she sold but is considering reinvesting in.
She’s drafted an allocation plan that includes $75,000 into VTI, $50,000 into SPLG, $50,000 into JEPQ, $25,000 into VXUS, $25,000 into ARCC, and finally, $25,000 into MAIN. However, she’s hesitant to put the $50,000 into ARCC and MAIN because of their recent gains, so instead, she is considering splitting the money and investing in VTI and JEPQ for now.
“My thought process for not going all in on VTI is I wanted a little diversification. I’m interested in JEPQ because of the monthly dividend of 10% back. Same with ARCC, which I know is quarterly and MAIN. Eventually, I will do a VTI, SPLG and VXUS but wanted to build enough in JEPQ, ARCC and MAIN so I could also use that as income for myself until I get to retirement. In my head, there’s no guarantee I will get to retirement so I wanted to at least enjoy some of my money now,” she wrote.
Here are Reddit’s recommendations for the 31-year-old investor.
Focus on Broad-Market ETFs for Diversification and Growth
The poster mentioned she wants to diversify her portfolio, but several Redditors emphasized the fact that VTI already offers broad-market exposure, with access to over 3,600 companies.
“You said you want diversification, but do you know that VTI is already extremely diversified? It holds literally 3,609 companies within it. You could (if you wanted to) hold just VTI and basically be invested in almost every publicly traded U.S. company,” a comment reads.
This Redditor prefers , but his comment aligns with the general sentiment of the thread, which is to focus on broad-market ETFs.
“[Vanguard S&P 500 ETF (NYSE Arca:VOO)] would be my core,” he wrote.
One commenter took their time to recommend the young investor several holdings that they think add diversification and growth to a portfolio.
“I would go for VOO for the long term, [Schwab US Dividend Equity ETF (NYSE Arca: SCHD) for a high dividend yield ETF with a low expense ratio (and adds diversification to my portfolio), [Vanguard Real Estate Index Fund ETF Shares (NYSE Arca: VNQ)] as a good REIT ETF and [Realty Income (NYSE: O)] since it provides dividends monthly. [Vanguard Information Technology Index Fund ETF Shares (NYSE Arca: VGT)] is another pick since it has all the top tech companies and its expense ratio is high plus; its [compound annual growth rate] has been growing decently during the last and recent years,” the comment says.
Avoid Overlapping ETFs and Prioritize Cost Efficiency
Several Reddit members pointed out that holding multiple ETFs with similar stocks, such as VTI and SPLG, can lead to higher costs and overlap.
“VTI and SPLG are basically the same thing so just pick one. I vote for SPLG due to the lower cost-per-share and expense ratio,” a Redditor said.
“Growth stocks like SPLG, VOO or similar do far better for longer periods, and you have a ways to go for retirement yet,” reads another comment.
MAIN: Pros and Cons
The poster has expressed interest in MAIN but is hesitant to invest in it because of its recent significant growth. Several commenters expressed both pro and con opinions regarding putting the money into MAIN.
“You do you, there is nothing wrong with MAIN, I have owned it for years. Those special dividends are such sweet icing on the cake,” a pro comment reads.
“MAIN is okay if you dollar-cost-average (DCA) in. Maybe put in x amount of dollars every week or two weeks or month. That way you’re not throwing it all at once and having regret if the market crashes or something,” recommends another Redditor.
One commenter agreed that MAIN has grown considerably, and suggested the investor two other holdings.
“MAIN’s pretty expensive now. Look into others like [Blackstone Secured Lending Fund (NYSE: BXSL)] or [Putnam BDC Income ETF (NYSE Arca: PBDC)],” his comment reads.
One more Reddit member implied that MAIN might be overvalued, so he advised the 31-year-old to invest but in a smaller percentage.
“MAIN is good but I would limit my % in it,” he recommended.
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