In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’ve started a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments. Today we’ll take a closer look at a 100% Bond (0% Stock) portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 100% Bond portfolio:

       Click here to learn how to invest in a diversified 100% Bond portfolio. Keep in mind that you’ll need $6,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.18%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Now for some quick facts about this 100% Bond portfolio:

• The highest calendar year return for this portfolio was 19.5% in 1982.
• The lowest calendar year return for this portfolio was -2.3% in 1956.
• From 1927 to 2007, the average annual return for a diversified 100% Bond portfolio was 4.9%.
• This 100% Bond portfolio never lost money during any consecutive 3 year period from 1927 to 2007.

       I would never recommend that anyone with a long-term time horizon invest in a 100% Bond portfolio. You get a much better return for very little additional risk by using a 20% Stock portfolio instead. That extra 20% of stock really does help to increase your return and long-term results significantly.

       If you have a short-term (< 5 years away) goal that you'd like to save for, I recommend using a high-yield savings account or U.S. Treasury Inflation-Protected Securities (TIPS). These will enable you to save for your goal while earning a reasonable interest rate with little to no risk.

       Last week, we talked about Leisure in Benjamin Franklin’s The Way to Wealth. Striving for leisure as an end in itself is never going to afford us any real leisure. But careful use of our time and hard work can provide comfort and leisure. However, it’s far too easy to let your hard work go to waste if you’re not careful whom you trust. Here is today’s quote:

       Trusting too much to others’ care is the ruin of many; … but a man’s own care is profitable; for, saith Poor Dick, learning is to the studious, and riches to the careful … And farther, if you would have a faithful servant, and one that you like, serve yourself.

The Way to Wealth – Benjamin Franklin

       When I wrote “Ripped Off: Can You Trust Your Financial Adviser?“, my main focus was looking at how financial advisers (stock brokers, bankers, realtors, financial planners, insurance agents, lawyers, and accountants) get paid and how that can affect the advice they give you. Franklin sums up the cautionary advice quite well: “Trusting too much to others’ care is the ruin of many.”

       Whether you’re getting financial advice, paying for home repairs, or simply trying to run your business, you must always be careful who you trust. Even when you find a trustworthy adviser, repairman, or employee, you need to find a way to check up on their work. This could mean getting a second opinion, shopping around, or setting up a system to review and reward people. In anything you do, it’s wise to be careful and cautious when trusting others.

       Finally, if you can’t find anyone worth trusting with a task, it might be best if you do it yourself. Study up and decide if it is something that’s worth your time and within your abilities. If it is, you just might be the best person for the job.

       In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’ve started a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments. Today we’ll take a closer look at a 10% Stock portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 10% Stock portfolio:

       Click here to learn how to invest in a diversified 10% Stock portfolio. Keep in mind that you’ll need $375,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.19%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Now for some quick facts about this 10% Stock portfolio:

• The highest calendar year return for this portfolio was 18.6% in 1982.
• The lowest calendar year return for this portfolio was -5.5% in 1931.
• From 1927 to 2007, the average annual return for a diversified 10% Stock portfolio was 5.8%.
• During any consecutive 3 years from 1927 to 2007, this portfolio lost money 2 times out of a possible 79 periods. The two worst 3 year periods were 1929-1931 and 1930-1932 (Great Depression), when the portfolio lost about 2.7% and 0.3% of its original value, respectively.
• This 10% Stock portfolio never lost money during any consecutive 5 year period from 1927 to 2007.

       I would never recommend that anyone with a long-term time horizon invest in a 10% Stock portfolio. You get a much better return for very little additional risk by using a 20% Stock portfolio instead. That extra 10% of stock really does help to increase your return and long-term results significantly.

       If you have a short-term (< 5 years away) goal that you'd like to save for, I recommend using a high-yield savings account or U.S. Treasury Inflation-Protected Securities (TIPS). These will enable you to save for your goal while earning a reasonable interest rate with little to no risk.

       This week’s Personal Finance Bible Scripture comes from 1 Timothy 6:17-19.

       ¹⁷ Teach those who are rich in this world not to be proud and not to trust in their money, which is so unreliable. Their trust should be in God, who richly gives us all we need for our enjoyment. ¹⁸ Tell them to use their money to do good. They should be rich in good works and generous to those in need, always being ready to share with others. ¹⁹ By doing this they will be storing up their treasure as a good foundation for the future so that they may experience true life.

1 Timothy 6:17-19 (NLT)

       I’ve lived my entire life in America, and I haven’t visited another country yet. But I know how amazingly blessed I am to have been born in a country where prosperity abounds. Even the poor in America are richer than most people in the rest of the world, yet we generally take our wealth for granted and tend to trust in it too much.

       Are you a Christian living in America (or a wealthy or prosperous Christian in any country)? I encourage you to meditate on this verse for the next week. How is God speaking to you through His Word? Do you trust in money more than God? Do you truly believe God provides everything you need? Where are you storing your treasures?

       Let’s try to make sure we don’t get so caught up in the riches of this world that we miss out on true life.

       In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’ve started a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments. Today we’ll take a closer look at a 20% Stock portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 20% Stock portfolio:

       Click here to learn how to invest in a diversified 20% Stock portfolio. Keep in mind that you’ll need $188,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.20%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Now for some quick facts about this 20% Stock portfolio:

• The highest calendar year return for this portfolio was 20.8% in 1933.
• The lowest calendar year return for this portfolio was -10.5% in 1931.
• From 1927 to 2007, the average annual return for a diversified 20% Stock portfolio was 6.7%.
• During any consecutive 3 years from 1927 to 2007, this portfolio lost money 3 times out of a possible 79 periods. In 1 of those 3 times, it lost less than 0.6% of its original value.
• The two worst 3 year periods were 1929-1931 and 1930-1932 (Great Depression), when the portfolio lost about 12% of its original value.
• During any consecutive 5 years from 1927 to 2007, this portfolio lost money only once out of a possible 77 periods. Even then, it lost less than 1.8% of its original value.
• This 20% Stock portfolio never lost money during any consecutive 7 year period from 1927 to 2007.
• This portfolio never averaged less than a 4.2% annual return during any consecutive 30 year period from 1927 to 2007.

       My hope is that this information will prepare you for the possible risk of investing in a 20% Stock portfolio while giving you some perspective during tough times. I think it’s really important to emphasize that last quick fact. If you have a time horizon of 30+ years, there is no historical period where you would have averaged less than a 4.2% annual return. (Even if you started just before the Great Depression!!!) Take comfort in that fact when the media barrages you with doom and gloom news every day.

       In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’ve started a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments. Today we’ll take a closer look at a 30% Stock portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 30% Stock portfolio:

       Click here to learn how to invest in a diversified 30% Stock portfolio. Keep in mind that you’ll need $125,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.21%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Now for some quick facts about this 30% Stock portfolio:

• The highest calendar year return for this portfolio was 28.6% in 1933.
• The lowest calendar year return for this portfolio was -15.5% in 1931.
• From 1927 to 2007, the average annual return for a diversified 30% Stock portfolio was 7.4%.
• During any consecutive 3 years from 1927 to 2007, this portfolio lost money 4 times out of a possible 79 periods. In 2 of those 4 times, it lost less than 3.3% of its original value.
• The two worst 3 year periods were 1929-1931 and 1930-1932 (Great Depression), when the portfolio lost about 21% of its original value.
• During any consecutive 5 years from 1927 to 2007, this portfolio lost money 3 times out of a possible 77 periods.
• This 30% Stock portfolio never lost money during any consecutive 7 year period from 1927 to 2007.
• This portfolio never averaged less than a 5.1% annual return during any consecutive 30 year period from 1927 to 2007.
• In 27 of the 52 possible consecutive 30 year periods from 1927 to 2007, this portfolio had a return higher than its historical average of 7.4%. Nearly 52% of the time, you would have had a higher than average return for a 30 year time period.

       My hope is that this information will prepare you for the possible risk of investing in a 30% Stock portfolio while giving you some perspective during tough times. I think it’s really important to emphasize those last two quick facts. If you have a time horizon of 30+ years, there is no historical period where you would have averaged less than a 5.1% annual return. (Even if you started just before the Great Depression!!!) And 52% of the time, you would have had a higher than average return over a 30 year time period. Take comfort in those facts when the media barrages you with doom and gloom news every day.

       In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’ve started a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments. Today we’ll take a closer look at a 40% Stock portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 40% Stock portfolio:

       Click here to learn how to invest in a diversified 40% Stock portfolio. Keep in mind that you’ll need $94,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.22%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Now for some quick facts about this 40% Stock portfolio:

• The highest calendar year return for this portfolio was 36.4% in 1933.
• The lowest calendar year return for this portfolio was -20.5% in 1931.
• From 1927 to 2007, the average annual return for a diversified 40% Stock portfolio was 8.2%.
• During any consecutive 3 years from 1927 to 2007, this portfolio lost money 5 times out of a possible 79 periods. In 2 of those 5 times, it lost less than 4.2% of its original value.
• The two worst 3 year periods were 1929-1931 and 1930-1932 (Great Depression), when the portfolio lost about 30% of its original value.
• During any consecutive 5 years from 1927 to 2007, this portfolio lost money 4 times out of a possible 77 periods.
• This 40% Stock portfolio never lost money during any consecutive 7 year period from 1927 to 2007.
• This portfolio never averaged less than a 5.9% annual return during any consecutive 30 year period from 1927 to 2007.
• In 29 of the 52 possible consecutive 30 year periods from 1927 to 2007, this portfolio had a return higher than its historical average of 8.2%. Over 55% of the time, you would have had a higher than average return for a 30 year time period.

       My hope is that this information will prepare you for the possible risk of investing in a 40% Stock portfolio while giving you some perspective during tough times. I think it’s really important to emphasize those last two quick facts. If you have a time horizon of 30+ years, there is no historical period where you would have averaged less than a 5.9% annual return. (Even if you started just before the Great Depression!!!) And 55% of the time, you would have had a higher than average return over a 30 year time period. Take comfort in those facts when the media barrages you with doom and gloom news every day.

       Last Sunday, we continued looking at God’s View of the World, Money, and our lives so we can start to focus on serving Him instead of serving Money. We’re finishing that discussion today, and we’ll start talking about practical applications next Sunday.

       In David’s prayer to God after the Israelites’ freewill offering for the building of the temple, we see an excellent example of God’s View of the World, Money, and our lives:

David’s Prayer

¹⁰ David praised the LORD in the presence of the whole assembly, saying,
       ”Praise be to you, O LORD,
       God of our father Israel,
       from everlasting to everlasting.

       ¹¹ Yours, O LORD, is the greatness and the power
       and the glory and the majesty and the splendor,
       for everything in heaven and earth is yours.
       Yours, O LORD, is the kingdom;
       you are exalted as head over all.

       ¹² Wealth and honor come from you;
       you are the ruler of all things.
       In your hands are strength and power
       to exalt and give strength to all.

       ¹³ Now, our God, we give you thanks,
       and praise your glorious name.

       ¹⁴ “But who am I, and who are my people, that we should be able to give as generously as this? Everything comes from you, and we have given you only what comes from your hand. ¹⁵ We are aliens and strangers in your sight, as were all our forefathers. Our days on earth are like a shadow, without hope. ¹⁶ O LORD our God, as for all this abundance that we have provided for building you a temple for your Holy Name, it comes from your hand, and all of it belongs to you. ¹⁷ I know, my God, that you test the heart and are pleased with integrity. All these things have I given willingly and with honest intent. And now I have seen with joy how willingly your people who are here have given to you. ¹⁸ O LORD, God of our fathers Abraham, Isaac and Israel, keep this desire in the hearts of your people forever, and keep their hearts loyal to you.

1 Chronicles 29:10-18 (NIV)

       David recognizes the awesome power of God. God is the ruler of all things, creator of all things, owner of all things, and giver of all things. We are truly nothing in comparison to all of God’s glory. Our very few days on Earth (when compared to God’s eternity) are but a shadow. We must remember that we have not created all we have—it all comes from God.

       The second part of David’s prayer has some especially good points to keep in mind in our giving. First, everything we have comes from God, so when we give we’re really only giving what is already God’s. Second, we must give willingly and honestly to truly bring joy to God. He doesn’t want our Money for the sake of having our money. A willing offering is a sign of complete loyalty to God—it shows that our heart belongs to God and not Money.

       If a willing and honest desire to give back to God in thanks for His goodness, mercy, and glory is not in your heart, pray that God will help change your heart and focus your mind on His ways. If you already have a willing and honest desire to give, pray that God will keep that desire in your heart forever and that He will keep your heart loyal to Him.

       To view everything as belonging to God, to view contentment as the ultimate path to wealth, and to give God all praise and glory are ideas that go against our human nature and the ways of society. It may be difficult to take on God’s View and live it out because it will seem like foolishness to many people. But consider what Jesus said in Matthew 16:26:

       ²⁶ What good will it be for a man if he gains the whole world, yet forfeits his soul? Or what can a man give in exchange for his soul?

Matthew 16:26 (NIV)

This passage is also found in Luke 9:25.

       What good will millions of dollars do for you if you lose your soul in the process? How much will you care about having a nice car and a nice home if it means you have severed your relationship with Christ? Is there anything in this world that’s really worth eternal separation from God?

       It’s so easy to let Things creep into our lives and put up a barrier between us and Jesus. Sometimes it happens without our realizing it. But we have to remember that nothing is worth more than our life in Christ. When the Things of this World seem to start taking precedence over your faith, step back for a moment and consider: Is it worth it?


Want to read the entire Bible study series on Contentment? Download your free copy of Contentment Is Wealth: A Bible Study on Contentment now!