I'm a financial planner, and here's the investment plan I'm using to build wealth

Matt Becker

One of the most important posts on this site is a comprehensive guide to the investment philosophy I follow myself, and the one I recommend most often when my clients ask for advice. Here it is: "The Beginner's Guide to Index Investing."

That post has all the information you need to understand why that strategy works, and has important tips for helping you get started.

But I know that when I first started investing, it was helpful to see examples of how other people actually did it. Not because I wanted to copy them, but just because it can all feel a little abstract until you see it in action.

So today, I'd like to show you how my wife and I have implemented our own personal investment plan. This is not meant to be a recommendation for you, as everyone's situation is different. My hope simply is that seeing how we've done it will be helpful as you come up with your own plan.

Quick note: For step-by-step guidance through creating YOUR personal investment plan, check out my book: "Smart Investing for Your 20s and 30s."

What are we investing for?

The investment strategy I'm describing here is for our retirement savings. We have multiple short-term savings goals that are kept in much safer investments, primarily savings accounts. Retirement is our main long-term goal at this point, and therefore the only major goal for which we have an investment plan.

Our asset allocation

Our overall asset allocation is 70% stocks and 30% bonds.

The stock portion is split with 50% in the US stock market and 50% in the international stock market.

The bond portion is 50% intermediate-term nominal US Treasury bonds and 50% TIPS (Treasury Inflation-Protected Securities).

So the overall breakdown looks like this:

• 35% US stock market
• 35% international stock market
• 15% Nominal US Treasury bonds
• 15% TIPS

This allocation will not change throughout our lifetime except that as we get close to and into retirement, we will keep a few years' worth of cash on hand at all times. But the invested portion of our money will always maintain this same allocation.

Our investment selection

Our entire asset allocation is accomplished with just four funds, all of which are held at Vanguard.

The four funds we use are:

• VTSAX, representing the entire US stock market
• VTIAX, representing the entire international stock market
• VFITX, representing nominal US Treasury bonds
• VIPSX, representing TIPS

The expense ratio of each fund ranges from 0.05-0.20% and because we hold them directly with Vanguard, there are no commissions to buy or sell. These four funds allow us to achieve our desired asset allocation in a simple, low-cost manner.