Building a Resilient $50,000 Dividend Portfolio: A Strategic Approach with 3 ETFs and 3 Stocks
In the dynamic landscape of investment, constructing a well-diversified portfolio demands time and expertise. Many investors, however, lack the luxury of meticulous company selection. In this blog post, we explore a strategic dividend portfolio that requires minimal effort, comprising three Exchange-Traded Funds (ETFs) and three individual stocks. The goal is to achieve extensive diversification and reduced risk, providing investors with an appealing 5-year Weighted Average Dividend Growth Rate (CAGR) of 9.31%.
The Investment Thesis
Not every investor can dedicate time to a vast portfolio. Our approach revolves around presenting a diversified dividend portfolio with three ETFs and three individual companies. The aim is to demonstrate how to allocate $50,000 strategically, minimizing risk while targeting positive returns.
Portfolio Composition
The three ETFs, each representing 30% of the total portfolio, include:
- Schwab U.S. Dividend Equity ETF (SCHD)
- iShares Select Dividend ETF (DVY)
- Vanguard Dividend Appreciation ETF (VIG)
Additionally, the portfolio comprises three individual stocks, each holding a 3.33% proportion:
- Apple (AAPL)
- BlackRock (BLK)
- Johnson & Johnson (JNJ)
Overview of the 3 Selected ETFs and 3 Individual Companies That Are Part of This Dividend Portfolio
|
Symbol |
Name | Sector | Industry | Country | Dividend Yield [TTM] | Dividend Growth 5 Yr [CAGR] | Allocation | Amount in $ |
| SCHD | Schwab U.S. Dividend Equity ETF | ETF | ETF | United States | 3.52% | 13.05% | 30% | 15,000 |
| DVY | iShares Select Dividend ETF | ETF | ETF | United States | 3.68% | 5.95% | 30% | 15,000 |
| VIG | Vanguard Dividend Appreciation ETF | ETF | ETF | United States | 1.86% | 9.52% | 30% | 15,000 |
| AAPL | Apple | Information Technology | Technology Hardware, Storage and Peripherals | United States | 0.48% | 6.15% | 3.33% | 1,666.66 |
| BLK | BlackRock | Financials | Asset Management and Custody Banks | United States | 2.51% | 10.72% | 3.33% | 1,666.66 |
| JNJ | Johnson & Johnson | Health Care | Pharmaceuticals | United States | 3.02% | 5.83% | 3.33% | 1,666.66 |
| Average: 2.92% | Average: 9.31% | Sum: 100% | Sum: 50,000 |
Diversification Across Companies and Sectors
Despite the simplicity, this portfolio achieves extensive diversification. The risk analysis ensures that no individual position holds more than 5% of the total portfolio. Even when distributing ETFs across the invested companies, the risk remains minimized.
Risk Analysis
Company-Specific Concentration Risk
The analysis highlights that Apple, BlackRock, and Johnson & Johnson account for the largest share. Yet, their proportions remain under 5%, showcasing reduced company-specific concentration risk.
Sector-Specific Concentration Risk
The portfolio demonstrates sector diversification, with Financials holding the largest share at 21.77%. While the absence of the Real Estate sector is noted, the addition of Realty Income (O) is suggested for further diversification.
Individual Companies Analysis
Apple, BlackRock, and Johnson & Johnson are chosen for their strong positions in their respective industries. Financial metrics and growth indicators underline their profitability and positive growth prospects, contributing to the portfolio’s reduced risk level.
Equity Style and Conclusion
The equity style analysis indicates a balanced allocation, with 66% in large-cap companies, 27% in mid-cap, and 7% in small-cap. The conclusion emphasizes the suitability of this portfolio for a buy-and-hold approach, ideal for passive investors seeking wealth accumulation with reduced management demands.
Author’s Note
The presented dividend portfolio not only offers potential returns but also allows investors to spend more time with family. The strategic balance of ETFs and individual stocks minimizes active portfolio management demands. Wishing you a Merry Christmas and a prosperous 2024!
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