Sat Jul 06 2024, by Tyler Gardner

If I were in my 20s and had to invest my first $1,000 and I wanted to maximize my return and minimize my risk, here's exactly what I would do and what I would invest in.

I'm Tyler, a former financial advisor and portfolio manager, and now I create financial content for free so that you don't have to pay for it.

Investment Strategy Overview

Number one, I would invest this money in a Roth IRA or a Roth 401(k). Why? Because decades of compound growth would now be 100% tax-free as it's funded with post-tax dollars.

Asset Allocation

Number two, I would invest 70% of my assets in stocks. Here’s the breakdown:

• 25% in a total U.S. stock market fund like Vanguard's VTI.
• 10% in a small-cap value fund like Vanguard's VISVX, as historically, both small-cap and value stocks have outperformed the overall market.
• 5% in a micro-cap fund like iShares IWC, because micro-caps have the potential for incredible long-term growth.
• 10% in a real estate investment trust like Vanguard's VNQ, which allows early access to real estate investing without being a landlord or homeowner.
• 5% in a Pacific Rim index like Vanguard's VPACX.
• 5% in a European fund like Vanguard's VGK.
• 5% in an international small-cap value like DFA's DISVX.
• 5% in an emerging markets fund like DFA's DFEMX, providing long-term exposure to countries like China and India.

Fixed Income Investments

Number three, I would invest the remaining 30% in fixed income like bonds. Many of you may say this is super conservative and boring, but until you have invested and remained invested through market downturns like the housing crisis of 2008 or the global pandemic of 2022, you do not yet know how you will actually respond to a portfolio of 100% stocks.

For bonds, I would allocate:

• 20% in investment-grade bonds.
• 5% in high-yield or junk bonds.
• 5% in inflation-protected bonds.

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