How to Allocate Your BEGINNER Investment Portfolio in 2026
A simple portfolio allocation framework for first-time investors.
You already know how to purchase an ETF? Perhaps you’ve even determined which investments are wise for the long run. However, purchasing ETFs you like at random can be a little challenging. What you require is a well-defined portfolio structure.
Simply put, a portfolio is your allocation strategy. It’s where you choose which investments to put a certain percentage of your money into. Developing a portfolio is similar to preparing for a marathon.
Everybody has a strategy, and everyone claims theirs is the most effective. What counts most, though, is whether the strategy suits your risk tolerance and investing personality. And most novices get stuck at that point.
So in this article, I’m going to write to you about how to allocate your portfolio as a complete beginner, so you can see which one makes sense for you.
I want to write to you about a friend of mine to clarify this. We’ll refer to him as Maverick. Maverick suddenly had an extra $200 a month to invest after receiving a promotion at work. Additionally, he intended to start with a lump sum of roughly $50,000 that he had saved.
He completed his homework, just like the majority of novices. He studied ETFs, researched brokerages, discovered the true workings of expense ratios, and spent time learning how to execute his first trade. After that, he began making investments.
He invested $20,000 in QQQ and $30,000 in SPY with his original $50,000. His developer pals assured him that technology was unstoppable, so the following month, he had an additional $200 to invest and chose to put it all into QQQ. He divided that month’s $200 between VOO and IVV after seeing some reels on Instagram claiming that they were the top S&P 500 ETFs at the moment.
Then he became enthusiastic about dividend ETFs, such as DGRO, VYM, and SCHD. He invested $65 in each of those the next month. Maverick had invested slightly more than $52,400 by the conclusion of his first year.
Markets were decent that year, so his portfolio grew to roughly $56,000.
To be clear, I think that’s great. Most folks didn’t even begin. For years, they have discussed investing, but they never take any concrete action. I was therefore quite pleased for my friend when I learned that he was truly doing this.
But there are some downsides to investing without a defined portfolio allocation or a defined plan. Maverick and I have been friends since we were kids. He was always the crazy one.
He was the first to construct and test a wooden ramp in his driveway when we were around eleven years old, even before anyone else thought it was a good idea. And he is that way. He makes the initial commitment and solves the problem in midair.
“I was surprised when he showed me his portfolio. He kept around 70% of his money in broad market ETFs that track the S&P 500, like SPY, VOO, and IVV. They are somewhat stable and often don’t produce sharp short-term increases, but these are great long-term investments.
And as someone who spent years picking gravel out of his elbows, I wasn’t surprised that he told me that he was frustrated because everything felt slow and completely hands-off.
Additionally, he owned sixteen different exchange-traded funds (ETFs), several of which held the same major US corporations but were packaged slightly differently and had varying expense ratios. This indicates that he was more replicated than unique.
Sporadic investing had misaligned two things for Maverick. First is the level of risk that he was actually taking, and second, how his money was really being allocated.
Rather than having a distinct 70/30 or 80/20 framework that suited his mentality, he had gathered jobs on a monthly basis depending on whatever seemed appealing at the moment.
He probably would have owned fewer ETFs, each with a distinct function, and his allocation would have represented his actual risk tolerance if he had begun with a specified portfolio allocation or stated plan.
Even though Maverick had little trouble getting started, having a clear allocation might also encourage people to take action rather than waiting months for their lump sum to sit in their checking account, earning nothing and gradually depreciating due to inflation.
Now, let’s look at three beginner investment portfolios.
1: Set-it-and-forget-it portfolio.
You select your all-time favorite ETFs and just automate regular additions into them with this incredibly easy arrangement. This strategy, known as “QQQ and chill” or “VOO and chill,” involves investing 90% of your funds in a single, dependable ETF and possibly holding 5 to 15% in cash.
And remember, when I say cash, I mean keeping it in a high-yield vehicle, like maybe a money market fund. So if you are using something like Fidelity, which is the brokerage I use, this cash is automatically swept into a money market fund called SPAXX.
Make sure your money is set to sweep into a money market fund if you’re using a different brokerage, such as Schwab, which I also use, so it doesn’t sit about and make respectable returns.
You have flexibility if you spot an opportunity, such as a brief market decline or your preferred ETF selling at a favorable price, thanks to the five or perhaps ten percent you hold there.
So, this way, you have some money, or what they call dry powder, to invest in it, while the other 90% remains untouched long-term.
Who should choose a set-it-and-forget-it portfolio?
Definitely not Maverick, though. The Sandras of the world — hardworking professionals who appreciate accumulating wealth but don’t want investing to become a second job — are a much better fit for this.
She’s a purist, the kind who orders a margarita pizza because it’s simple and reliable, not one that’s piled high with prime steak, truffle oil, and 12 toppings. She’d rather go with what works and let time and consistency do their thing.
I’m frequently asked if you can select any ETF for a set-it-and-forget portfolio. In a technical sense, you are free to do anything you desire.
But personally, I focus on broad diversified ETFs like maybe VOO, IVV, or SPYM, or maybe even a total market fund like VTI. Or, if you want to invest in international stocks, VXUS.
These ETFs basically give you exposure to hundreds of companies in one purchase.
I would avoid super-concentrated or thematic ETFs for this strategy. Things like single-sector funds, leveraged ETFs, or trend-based products like cannabis-focused ETFs that popped up when marijuana stocks became the next big thing.
2: Let’s look at the 3-bucket portfolio.
Because equal amounts are invested in each of the three buckets, which helps lower concentration risk, this is frequently referred to as a balanced portfolio.
For example, if you choose QQQ for your set-it-and-forget-it portfolio and tech companies suddenly experience a big dip, you’re going to feel the full force of that decline.
However, you might put about 30% of your three-bucket portfolio into a stable backbone ETF like SPY, VM, VT, VTI, or VOO, which follows the overall market and exposes you to hundreds or even thousands of businesses in various industries.
You could also invest in maybe 30% in a growth ETF such as QQQM, QQQ, VUG, or VGT, which are known for higher growth potential but also higher volatility.
Another option is to invest, say, 30% in a dividend exchange-traded fund (ETF) like VYMI, SPYD, or SCHD, which offers long-term growth potential along with a consistent income stream.
Another popular three-ETF strategy is the Bogleheads strategy, where you might have 30% in a US ETF like VTI, 30% in an international ETF like VXUS, and 30% in a total bond ETF like BND.
3: 70/20/10 core and satellite portfolio
In the past, this meant allocating a smaller portion of your money to more active or higher-conviction investments known as the satellites and maintaining the rest of your money in wide, diversified index funds, or the core.
However, I’ve seen a lot of investors add a twist to this, such as keeping 20% in specific blue-chip stocks for covered calls, 10% in cash, and 70% in a core portfolio consisting of three to five ETFs.
If Microsoft is currently trading at $420 a share, you could sell a covered call against your shares in which you commit to selling them at a higher price — perhaps $440 — within a predetermined window of time.
If, by the end of the time frame- let’s say 30 days or a month- the share price reaches $440 or higher, your shares get sold at the agreed price.
You are still entitled to keep your shares if it doesn’t. However, in both situations, the premium you get up front for selling that covered call — which, depending on the contract, may range from $400 to even $800 — is yours to keep.
You can use the money if your shares are called away to buy the same stock again or make other investments. The trade-off is that you still have to sell your shares at $440 even if the stock soars to, say, $450. Thus, you forfeit that possible profit.
Now, over time, covered calls can generate additional income similar to dividends, but they require active decision-making.
As you could expect, Maverick’s eyes brightened at this point. When he feels that his investments are slowing down too much, he can adjust them and increase the risk in this type of portfolio.
When I was chatting with him at the time, I recommended that he structure things like this.
He had to first choose which ETFs to include in the central 70% of his portfolio. It turned out that he shared my passion for SPY, QQQM, and SCHD, which was ideal since it provided him with a well-balanced, broad market, growth, and dividend ETF.
Secondly, he had to decide which specific equities to sell covered calls on. Additionally, because Amazon and Google are big, well-established businesses with robust liquidity and active option chains, I personally particularly loved them at the time.
You are not permanently stuck because you have previously made intermittent investments. By simply figuring out what 70%, 20%, and 10% of your total balance should be, you may reallocate your portfolio by changing your positions to align with those goals.
Now, just be careful not to sell all of your 400 SPYM shares only to turn around and buy another 450 SPYM shares 10 minutes later.
Look at what you already have instead. For example, you don’t need to reset everything if you already hold 400 shares and your new target allocation calls for 450 shares. To cover the gap, you can just purchase the extra fifty shares.
