With 40k USD to invest, it’s important to diversify and balance risks and returns. This article provides suggestions on constructing an investment portfolio with index funds, bond funds and REITs to generate stable long-term revenues. Proper asset allocation and regular rebalancing could control risks while gaining from compound interests.
Allocate 60% into low-cost index funds tracking S&P 500
Index funds like Vanguard S&P 500 (VOO) can provide broad market exposure at low cost. Historically S&P 500 has generated ~10% annualized returns over the past 90 years. With 24k allocated in VOO, compound interests could double the investment every 7 years without adding additional capital.
Invest 20% into aggregate bond index fund
Bonds lower risks and provide fixed income. Put 8k into total bond market index funds like BND could generate 2-4% stable annual returns to balance risks.
Purchase USD-denominated Asian REITs with 10%
REITs generate rental income like bonds with upside potential from property appreciation. Good choices would be REIT ETFs exposed to Asia real estate with distributions above 4% like AJIA or individual REITs such as EC World REIT trading at discounts.
Reinvest dividends and rebalance portfolio annually
Reinvesting dividends allows accelerating compounding effects. Annual rebalancing keeps allocations inline adjusting risks brought by market fluctuations.
In summary, constructing a 40k investment portfolio with 60% domestic equity index funds, 20% aggregate bond fund and 10% REITs could strike a balance between risks and returns. Compounding effects and proper periodic rebalancing facilitate generating 5-8% stable annual revenues in the long run.