We are excited to share this special real-money portfolio with all Fools around the world. As we shared in our announcement on April 1, we think this is an opportune time to make long-term investments in the stock market. And that's exactly what this unique portfolio is: A collection of our high-conviction Foolish stocks designed to make money over the long run.
In building out this portfolio, we're leveraging the collective thinking of our Premium investing team to choose some of our highest-conviction companies to recommend. But readers won't be alone in owning these companies, because as part of this offering, The Motley Fool will be investing $50,000 of our own capital into this portfolio. So we'll have skin in the game right alongside you in owning these stocks, which we believe have the ability to produce positive returns over five years (and, ideally, beat the market as well).
We've also identified a handful of low-cost exchange-traded funds (ETFs) that will provide wider market exposure, and work alongside our stock recommendations in an important diversifying role.
We've crafted our April Fool's Portfolio with an eye on diversification, while still allowing our most high-conviction ideas to play a significant role. We think owning at least 15 stocks is a key component of successful investing, so that's what we're doing here. And by adding in the ETFs, we believe we'll build a diversified, Foolish portfolio with high potential to make money over the next five years.
This is a foundational portfolio that represents some of our most compelling and exciting recommendations. And we want everyone to get invested alongside us!
Let's jump into it, starting with our allocation plan.
Over the next few weeks, we'll be recommending 15 stocks and five ETFs, for a diversified portfolio that we think is set up very well to potentially make money over the next five years:
- Stocks (15): 75% of our portfolio (5% for each stock)
- ETFs (5): 20% of our portfolio (4% for each ETF)
- Cash: 5% cash reserved
This particular collection of investments is designed to play a growth-oriented equity role, so if you're a more conservative investor, you may want to consider holding additional safety assets such as cash or bonds elsewhere in your portfolio. In fact, you'll see that we're also advocating at least a 5% cash position in the portfolio to help balance out expected volatility from our companies, and to keep some additional funds to invest down the road.
Finally, remember to consider this portfolio in the context of all of your holdings and your overall asset allocation.
Now, on to the first five investments that we're making and will be purchasing for our special April Fool's Portfolio:
Vanguard Total Stock Market ETF
Portfolio weighting: 4%
Vanguard Total Stock Market ETF (NYSEMKT:VTI) is a broad market exchange-traded fund that offers wide-ranging exposure to the domestic equity market. While the primary focus will be on larger stocks, mid- and small-cap stocks also get some representation here. This fund is meant to be an anchor for the April Fool's Portfolio, given its far-reaching focus across domestic equity asset classes.
With an expense ratio of a mere 0.03%, this ETF is a low-cost tool for capturing exposure across the broader stock market. This fund, like all of our ETF recommendations, is designed to serve as a complement to the individual stock picks elsewhere in this portfolio.
Vanguard Total International Stock Market ETF
Portfolio weighting: 4%
Vanguard Total International Stock Market ETF (NASDAQ:VXUS) provides a one-stop shop for international investing. While the fund leans more heavily into the large-cap developed-market space, it offers exposure to emerging markets as well, to the tune of roughly one-quarter of the stocks in the ETF.
VXUS comes with a reasonable 0.08% price tag, so you won't lose money to unnecessary fees. We recommend that all investors have at least some direct exposure to overseas companies; this fund fills that role nicely on a broad level, while also leaving room elsewhere in the portfolio for more targeted exposure.
Portfolio weighting: 5%
Amazon.com (NASDAQ:AMZN) is consistently one of our highest-conviction companies within the Fool analyst team (even with the planned change in leadership role for founder Jeff Bezos). The company has become a growing part of so many of our lives, especially during the pandemic year of 2020.
At $1.7 trillion in market cap, Amazon is a giant, but the company remains nimble and innovative across its businesses, including those where it leads (like e-commerce shopping and Amazon Web Services) and those in which it's taking a larger share of the pie (like online advertising, a market where it's now reportedly third-largest).
At nearly $3,300 per share, Amazon is a high-priced stock. So if you have access to fractional shares, you can allocate closer to an amount you can afford (we'll be buying $2,500 worth in our own real-money portfolio). But don't let that share price or market cap scare you. We believe Amazon has plenty of moneymaking days ahead of it, even with Bezos handing over the reins to Andy Jassy, the talented current CEO of AWS.
Portfolio weighting: 5%
Etsy (NASDAQ:ETSY) found 2020 a "transformative" year, according to CEO Josh Silverman, and there's no surprise why: Revenue and gross merchandise value sold over Etsy's platforms more than doubled, to levels the company originally targeted to hit in 2023. In fact, it grew 2.5 times as fast as e-commerce grew overall in 2020.
There are now more than 85 million items for sale on the handcrafted goods marketplace, and Etsy takes a little cut of those sales (which increased nicely during the year). Etsy is also doing a wonderful job keeping more of its buyers around. The number of customers making six or more purchases per year increased a whopping 157% in 2020.
While the surge in buying handcrafted masks to fight off the spread of COVID-19 helped fuel growth in 2020, the effect lessened through the year (now just 4% of merchandise sales, versus 11% earlier in 2020).
With a rock-solid balance sheet, high margins, and increasing returns on capital, Etsy is looking like a winner well beyond 2020.
Portfolio weighting: 5%
During a very stressful 2020, there was at least one place online that hundreds of millions of users visited to be inspired, encouraged, and entertained: Pinterest (NYSE:PINS). With nearly 460 million monthly active users (including 100 million who joined last year), Pinterest is one of the largest social media platforms, offering a positive atmosphere for users to "go from inspiration to reality." There are now 50% more "boards" -- places on the site where users save and collect ("pin") the content they love -- than a year ago.
Along with the growing user numbers comes a growing business that is really still finding its footing. Revenue grew 76% in the last quarter, as the company's artificial intelligence and new advertising tools helped ad clients spend more efficiently. The company's average revenue per user increased 29% in the fourth quarter, but remains way below other social media advertising platforms like Facebook. So there's ample room for improvement and expansion, especially as Pinterest continues ramping up its more direct shopping avenues.
We like that CEO and co-founder Ben Silbermann, who left Alphabet's Google to start Pinterest, owns more than $3 billion worth of shares (as does his fellow co-founder Paul Sciarra). While the stock will undoubtedly have its ups and downs (likely more so than the average stock), we think that Pinterest's platform, its positivity, its market opportunities, and its improving business model are all good things to pin to a portfolio.
Look for more recommendations
We will be partially funding the April Fool's Portfolio each week as we announce the underlying investments, so if you're following along (and we certainly hope you are!), you can expect to be fully invested by the end of April or the beginning of May.
Remember that this is a long-term portfolio, and that ups and downs are likely along the way, so try not to pay too much attention to the day-to-day gyrations of the market. Rather, focus on the big picture -- seeking to accumulate wealth over time.
Be sure to check back here next week on Friday, April 16, for our next update and a new round of Foolish investments!