Buy and Hold Equity investing.

I am an active investor who enjoys spending untold hours researching investment possibilities but I realize that many (probably most) people don’t have an interest in the “market” strong enough to overcome their fear of investing. They limit themselves to CDs and other fixed income investments that return about a third of the inflation rate. The result is a return that actually diminishes their savings. I think there's a better way.

There used to be quite a few investors that bought into a stock position and never looked back. Back then they usually bought single companies that were stalwarts of stability; these kinds of companies were even called “widow & Orphan” stocks. That all changed in the last three decades when company’s like Kodak, Xerox and GM faltered and volatility reigned. I think that class of investor just left the Stock Market and hid under the bed.

Today there are equities that can furnish the “not-really-interested” investor with a reasonable return, diversification and the stability that’s only possible with well established companies that hold a dominant niche in their industry. These equities are ETFs and here’s my thoughts on a small investors portfolio that would only require a sporadic review.

My perfect put it in a drawer ETF portfolio:

SDY—S&P Dividend ETF—Pays Dividend of 2.19% and returned a 15% annual performance for 5 years. Top Ten holdings are 19.09% of the total holdings of 96 companies; TOP TEN are HCP-T-ED-NNN-TGT-PBCT-MCD-CVX-ABBV-LEG

VIG---Dividend Appreciation ETF—Pays 1.93% Dividend and returned 14.1% annual performance for 5 Years, The Top ten holdings are 36% of the total holdings of 166 companies, The TOP TEN are JNJ, PEP, KO, WMT ,QCOM,XOM,IBM,MMM,CVS,UTX

NOBL—Dividend Aristocrat ETF---Pays 1.44% Dividend and began in 2013, has returned 17% annualized. The Top ten holdings are 20.62% of the total holdings of 55 Companies , The TOP TEN holdings are SIAL,FDO,CTAS,LOW,NUE,SHW,ADM,VFC,CAH,HRL Note, The NOBL ETF is composed of equities that have increased their Dividend each year for 25 Yrs.

I have significant positions in all three of these ETFs and continue to add to them on any downturn but my advice for the new investor is too wait for a market break of more than 4%; be patient it will come; we had a 7% downturn in late September. As of today’s post buying 100 shares each of all three ETFs would cost $21,300 with all fees paid.

All three of these ETFs are new enough that while the double digit return for 5 years is impressive how about the stock market debacle in 2008 you ask? There is another ETF that’s mirrors the entire 500 stocks in the S&P-500; it trades under the symbol SPY. It has returned 19.5% for one year, 15.6% for 5 years, 8% for 10 years and 9.2% since it began trading in 1993. These are annualized figures that show returns every year.

If you're only a slightly more adventurous investor the following ETFs are very close to my perfect three “buy & hold” diversified ETF portfolio.

VHT—Vanguard Health Care ETF—Pays 1.1% Dividend and returned 20.1% annual performance for 5 yr--- The Top ten holdings are 45.8% of the total holdings of 310 companies, The TOP TEN holdings are JNJ,PFE,GILD,MRK,AMGN,ABBV,VNH,CELG,BIB

SPLV—S&P Low-Volatility ETF---Pays 2.26% Dividend and returned 14.9% YTD (began in 2011). Top ten holdings are 12.2% of total holdings, SIAL,WMT,CB,TRV,UPS,PG,CLX,ADP,BRK/B

You get the idea; I think if you're looking for a low-cost, leave it alone portfolio that offers stability with relatively low volatility then holding large positions in SDY, VIG and NOBL is a decent scheme. They won’t be rockets to the moon but they do offer good returns, diversification and sleep well at night stability.