1 Stock Portfolio for Boomer Children

Three out of five Americans in their 30s are at risk of experiencing a decline in their standard of living after they retire. But despite this dire statistic, your retirement preparedness doesn't have to be hopeless. Constructing a great retirement portfolio is actually quite simple.

Getting a head start
Young investors harness the single most desirable trait in the entire investing universe: time. With time on your side, you have wiggle room to make up for any investing mistakes. Also, being young allows you to invest more aggressively than many investors. And investing small amounts of money now will give you significant advantages later in life.

If those reasons aren't enticing enough, consider that between 1926 and 2010, there was not one single rolling 20-year period with negative returns for stocks. Not one.

So let's get started!

Building your portfolio
You can construct a great portfolio using a simple method and several high-quality stocks. Allocate a portion of your portfolio in core stocks, a piece in growth stocks, and a sliver in aggressive stocks. If your risk tolerance is exceptionally high, consider stomaching an extra stock or two in the growth and aggressive piles. Instead, if your risk tolerance is low, add more core stocks and fewer aggressive ones.

Core
Core stocks build the foundation for your portfolio and provide you with slow but steady growth. They're stocks of big companies that have been around for many decades and are considered industry leaders in their respective sectors. Core stocks are often considered boring, but you can sleep soundly knowing they'll be around tomorrow. In fact, you'll probably own your core stocks for the rest of your life.

We often use these companies' products and services on a daily basis. For example, think about your favorite soft drink, the type of toothpaste you like, or where you bank. There's a good chance that the companies behind those products are considered core. For example, Coca-Cola (NYSE: KO  ) is a core stock you'll want to consider. As the world's largest beverage company, Coke boasts 16 billion-dollar brands -- including Diet Coke, Coca-Cola Zero, and Sprite -- and sells 1.8 billion servings of its beverages every single day. 

Growth
Growth stocks aren't as stodgy as core stocks, but they aren't as sexy as aggressive. These stocks still have excellent growth potential and boast well-established business models. For example, consider a growth stock like Chipotle Mexican Grill (NYSE: CMG  ) . Chipotle boasts a proven business model of providing yummy, high-quality fast food. This burrito maker has enjoyed sizzling success, but its growth story isn't over. Recently found to be the No. 1 fast-food restaurant choice among health-conscious consumers, Chipotle boasts vast growth opportunities internationally, and its Southeast Asian restaurant concept houses huge potential.

Aggressive
These companies potentially cause paradigm shifts, turning an industry totally on its head. Think of the small biotech company that might come up with a cure for cancer. Or consider today's red-hot 3-D printing sector, spurred by a disruptive technology that's reshaping the way the world converts data into physical objects. For example, last year's stock market darling, 3D Systems (NYSE: DDD  ) , returned nearly 248% in 2012! And that might be just the beginning if this exciting technology is adopted widespread.

Caution: These are swing-for-the-fences stocks. You probably will either hit a home run or strike out miserably. Be sure not to invest so much money in aggressive stocks that you'll be broke and inconsolable if you swing and miss.

Foolish takeaway
By starting at a young age, you'll not only build a great stock portfolio but also set yourself up for a fruitful retirement.

Your financial health is just as important as your personal health. The Motley Fool's special free report "3 Stocks That Will Help You Retire Rich" names specific investment opportunities that could help you build long-term wealth and help you retire well. The Fool also outlines critical wealth-building strategies that every investor should know. Click here to keep reading.


Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 27, 2013, at 12:36 AM, kankemike wrote:

    I wouldn't buy DDD, P/E is way too high. Grow your money slow, don't try to hit a grand slam out of the gates. Bad advice in my opinion on buying a speculative company at that price. Just my 2 cents.

  • Report this Comment On June 27, 2013, at 10:58 AM, Carioca58 wrote:

    The author was giving DDD as an example, not as a specific recommendation. That said, if Junior could buy just three stocks, one of each type above would be great.

    I would go with AAPL (or F or GLW), LF (or IMAX or IRBT) and AMRC (or GILD or OII).

    Other suggestions?

  • Report this Comment On June 27, 2013, at 11:34 AM, bensmama wrote:

    Yes, DDD is an aggressive stock and highly volatile. But my portfolio has grown since I've bought DDD. It's timing and making sure you've read the news and that the stocks has strong fundamentals and technicals. The chart will let you know when it's time to sell.

  • Report this Comment On June 28, 2013, at 9:17 AM, jasenj1 wrote:

    I wouldn't recommend an investor building their retirement portfolio to use individual stocks at all. Instead go for low fee index based mutual funds or ETFs. Get some broad funds (SPY) and segment targeted funds - small cap value, international, etc.

    Individual companies are way too risky.

  • Report this Comment On June 28, 2013, at 9:25 AM, jasenj1 wrote:

    And don't forget, if an employer offers a 401k with matching, your first step should be to maximize your matching contribution.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2512035, ~/Articles/ArticleHandler.aspx, 9/16/2014 3:56:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement