Weekly Wrap: Foreign Stock Picks, Babe Ruth's Bucks, June's Fund Flows

Editor's note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

Thirty years ago this week, I began working at Morningstar. Don't worry--I'm not going to spend this issue of Smart Investor tripping down memory lane. (However, those interested in taking a ride in the way-back machine can see what the fund industry looked like in the 1990s in this article.) Instead, I'd like to share my biggest takeaway from three decades of covering mutual funds, exchange-traded funds, and stocks, which is: Most investors should keep things simple. I know, that's awfully anticlimactic. Did it really take me 30 years to figure that out? OK, maybe it really only took 25 years. But it took me a while to recognize a few things. First, the financial industry has evolved in a way that makes getting low-cost, broad exposure to various asset classes quite easy. Second, it's important to diversify, but diversification has its limits during the accumulation stage if you have a long enough runway to needing the money. And lastly, even investing junkies can stand to benefit from simplifying their core portfolios, freeing up time they can use to invest their mad money. You can keep things extremely simple by owning one age-appropriate target-date fund and calling it a day--target-date strategies provide exposure to U.S. stocks, international fare, and bonds (and in some cases, other asset types, too). If you're interested in being more hands-on with your asset mix, however, you can craft a simple three-fund portfolio that will give you plenty of diversification and will likely get you where you need to go, assuming you maintain an appropriate savings rate. To commemorate my 30-year anniversary, here are 30 (or so) building blocks you can choose from to assemble a three-fund portfolio. These funds earn Morningstar Analyst Ratings of Gold and hail from what many consider to be the three "core" Morningstar Categories of funds to use when building minimalist portfolios. (Disclosure: I own Vanguard Institutional Index Fund VINIX.) U.S. Large Blend: American Funds Washington Mutual AWSHX, Fidelity 500 Index FXAIX, Fidelity Total Market Index FSKAX, FMI Large Cap Investor FMIHX, iShares Core S&P Total US Stock Market ETF ITOT, iShares Core S&P 500 ETF IVV, iShares S&P 500 Index WFSPX, Primecap Odyssey Stock POSKX, Schwab Total Stock Market Index SWTSX, Schwab S&P 500 Index SWPPX, Schwab US Broad Market ETF SCHB, Schwab US Large-Cap ETF SCHX, SPDR Portfolio S&P 500 ETF SPLG, SPRD Portfolio S&P 1500 Composite Stock Market ETF SPTM, Vanguard Dividend Appreciation ETF VIG, Vanguard Dividend Growth VDIGX, Vanguard Tax-Managed Capital Appreciation VTCIX, Vanguard Total Stock Market VITPX/VTI, Vanguard S&P 500 VINIX/VOO and Vanguard Large Cap ETF VV. Foreign Large Blend: American Funds International Growth and Income IGFFX, FMI International FMIJX, iShares Core MSCI Total International Stock ETF IXUS, Vanguard ESG International Stock ETF VSGX, and Vanguard Total International Stock ETF VXUS. Intermediate Core Bond: Baird Aggregate Bond BAGIX, Fidelity US Bond Index FXNAX, iShares Core US Aggregate Bond ETF AGG, SPDR Portfolio Aggregate Bond ETF SPAB, TCW Core Fixed Income TGCFX, Vanguard Total Bond Market ETF BND, and Western Asset Core Bond WATFX. Perhaps you feel your portfolio needs more than just three funds--maybe you're in the accumulation stage and want additional exposure to smaller companies, or you're retired and want a Treasury Inflation-Protected Securities bond fund. Or perhaps you're fine with just three funds, but you want a bond fund that gives you some exposure to lower-quality bonds or to international debt. If that's you, feel free to review our Top-Rated Mutual Funds and Top-Rated ETFs lists as a starting point. Just remember: When it comes to investing, less can be more.

--Susan Dziubinski

Editor's Picks

How Rich Was Babe Ruth? The lesson learned by translating yesterday's dollars. Rebalancing: What You Need to Know How to keep your retirement assets on track. 11 Superior Foreign Stocks to Buy These undervalued wide- and narrow-moat names were recently added to the Morningstar Global Markets ex-US Moat Focus Index. How an Investor Helped Netflix Disclose Its ESG Performance Investor advocate Lily Bowles' story with Netflix is a successful one, but new restrictions on shareholder resolutions make such efforts harder to replicate. 4 Funds to Dial Down Your Risk The markets are hot, so consider these less risky funds.

U.S. Fund Flows Set a New Record in the First Half of 2021 Interest in taxable-bond and value-equity funds continues in June.

Portfolio Planning and Personal Finance With Christine Benz

Must-Knows About Restricted Stock These grants can seem like mad money, but they can add up to serious money over time. Risk, Not Volatility, Is the Real Enemy Grant us investors the wisdom to know the difference.

Mutual Funds and Exchange-Traded Funds

Green Muni Bonds Are Blooming Slowly What does the market for green muni bonds look like, and where is it going? What Investors Need to Know About Low-Volatility Funds Low volatility doesn't mean no volatility, just less. Target-Date Deep Dive: Vanguard This giant's target-date series remains among the best for retirement savers. Target-Date Deep Dive: Fidelity We unpack the differences among the firm's three target-date strategies. Target-Date Deep Dive: T. Rowe Price The firm has one of top teams for asset-allocation research and execution in the industry.

Stocks

The Costs of Digitizing Education Institutions and students bear the brunt, but opportunities are considerable. 5 Underperforming, and Undervalued, Stocks in Q2 These stocks struggled in the second quarter but are also trading at bargain prices. The Promise and Peril of Ethereum, Part II The cryptocurrency has generated massive gains at times, but extreme volatility will likely rule it out for many conventional investors. 5 Automakers Best Positioned for the Future These companies can take advantage of rapid electric vehicle growth. Stock Analyst Updates IBM's Q2 a Tale of Two Drivers; Shares Overvalued In IBM's second quarter, the company dealt with continued headwinds to its managed infrastructure business because of the option to now have public cloud providers manage workloads, while also benefiting from cloud tailwinds in its software and business services portfolio. Netflix Posts Slowing Subscriber Growth in Q2 We see the new mobile games offering as a distraction at best from the core business. J&J Posts Strong Q2 Results The company continues to innovate across segments, adding support to its wide moat. Verizon Bounces Back With Solid Customer Gains The company's second quarter was the strongest in four years. Coke Reports Blowout Quarter; Shares Fairly Valued We plan to raise our fair value estimate to reflect time value and increased guidance. Despite Distractions, AT&T Continues to Gain Momentum The firm has also announced additional strategic moves this week that should benefit the business. Solid Performance Supports Sales Growth for Roche The strong performance was partly due to pandemic headwinds in the second quarter of 2020 creating weaker comparisons.

Rekenthaler Report

Liquid Alternatives Funds: Is There Any Hope? Considering the future of a fund-industry flop.

Advisor Insights

Integrating Sustainable Investing: Assessing Current Portfolios Morningstar provides many data points for analyzing portfolios. How Ethical Is Automatic Enrollment in Retirement Plans? We explore how people view the ethics of this feature. For Women in Finance, Challenges Remain at the In-Person Workplace Along with the networking events and conferences comes a return of workplace challenges.

The Long View Podcast

Manisha Thakor: Beware of 'Junk Personal Finance' The author and financial educator discusses how social media affects financial well-being, how women can close the wealth gap, and why young people should steer clear of individual stock trading.

Commentary

How Has Portfolio Management Changed During the Global Pandemic? David Herro, portfolio manager of Oakmark International, discusses the effects of loose fiscal and monetary policy, federal intervention, and inflation. 6 Midyear Tax-Planning Tips for Business Owners Waiting until year-end can mean missing out on tax savings.

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