Where to Invest $10,000, $25,000, or $50,000

I'm regularly asked what I would buy if I had $10,000 to invest or $50,000 to invest, so I thought, "Why not share those answers?"

I'll walk you through my ideas for how an investor just starting out should build his or her portfolio. I'll take you down two tracks: one for low-maintenance investors and another for more-engaged investors. The important thing is to get the big asset-allocation picture right and populate your portfolio with great funds that have low costs. Here, I'm aiming for rather evergreen ideas.

$10,000
The low-maintenance answer for me is a target-date fund in line with the investor's likely retirement date, if you are selecting a fund in an IRA or 401(k). This provides great diversification and adjusts the asset mix over time so that an investor who really is uninvolved should still be in good shape. This is also a good type of fund to add to over time. I'll choose a Vanguard target-date fund such as  Vanguard Target Retirement 2040(VFORX). It costs only 0.18%, and you've got equities and bonds covered quite nicely.

For engaged investors, let's start with  Dodge & Cox Global Stock (DODWX). It doesn't get you bonds like the Vanguard fund does, but you get outstanding equities around the world in a very stable manage­ment firm. Dodge has a long track record at its domestic and international funds, and this one is largely a fusion of the two.

$25,000
Let's add $5,000 in money market accounts to both the low-maintenance and engaged portfolios--even though yields are negligible--because you need to be ready for surprise costs and any big-ticket items coming up. That leaves us with $10,000 more to invest in each. For low maintenance, we'll add that to Vanguard Target Retirement 2040 to grow that core.

For engaged investors, however, I want some growth stocks to balance Dodge's value tilt. So, I'm putting $5,000 each in  Primecap Odyssey Growth (POGRX) and  Primecap Odyssey Aggressive Growth (POAGX). Regular readers know that I'm a big fan of Primecap, and those funds offer very stable manage­ment teams and low costs.

$50,000
While the Vanguard target-date fund has broad equity and bond exposure, it doesn't give low-mainte­nance investors much exposure to small caps, emerging markets, foreign bonds, or high-yield bonds.

 DFA US Micro Cap (DFSCX) is a great way to gain passive exposure to micro-caps. The fund is cheap, and DFA keeps trading costs from soaring--a real risk in micro-cap land. So, put $10,000 in this fund. If you can't get into the DFA fund (DFA funds are sold only through authorized financial advisors) consider  Vanguard Small Cap Index (VSMAX) in open-end or ETF form. It's got low costs, too, of course. Or you can go with Primecap Odyssey Aggressive Growth. Yes, it’s actively managed, and it is a mix of small- and mid-cap stocks, but the firm's stability means you should be able to buy and hold this for a long time.

Next, I'm going to add another $10,000 to Vanguard Target Retirement 2040 to build up that core.

I've got another $5,000 left, so let's add  Loomis Sayles Bond (LSBRX) for both the low-maintenance and the engaged investors. This fund gets you expo­sure to both high-yield and foreign bonds. Dan Fuss and team do a brilliant job. Yes, it's higher risk, but we've already built up a nice, dependable core.

Next, let's build up small caps in the engaged port­folio. Since we have Primecap Odyssey Aggressive Growth in the small/mid-growth spot, let's get something with a value tilt. Chuck Myers'  Fidelity Small Cap Value (FCPVX) is on the value/blend border. We'll give Chuck $10,000 to run because he is a rare commodity--a good Fidelity manager who isn't overwhelmed with assets. You'll have to act fast, though, as the fund is set to close March 1.

In the engaged portfolio, I'm also giving Steve Romick $10,000 to run at  FPA Crescent (FPACX), the alloca­tion fund that's a conservative mix of equities, cash, and a sprinkling of shorts. For this kind of fund, we're looking for the best managers, and he fits the bill.

Try This in Premium Fund Screener
If you want to change the amount invested or swap in a different fund for one I chose, let our Premium Fund Screener do the work for you. You can select the investment minimum, the Morningstar analyst rating, and come up with your own idea list. You might want to add additional screens like "Open to New Investment" and "No-Load," too. 

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