Become the James Bond of Investing: Mastering Market Missions with the SHY SPY Portfolio

Crafting an optimal portfolio is key to securing your financial future. The classic portfolio, a strategic blend of stocks and bonds, has stood the test of time in providing both growth and stability. However, the advent of Exchange-Traded Funds (ETFs) has revolutionized this approach, making it simpler and more accessible than ever.

Enter the "SHY SPY Portfolio" – a straightforward yet powerful investment strategy. This approach utilizes two major ETFs: SHY and SPY. SHY is an ETF that represents U.S. government bonds, known for their safety and stability. On the other hand, SPY tracks the S&P 500, a broad representation of the U.S. stock market and a bellwether for equity performance. Together, these two assets form the backbone of a robust portfolio, adaptable to investors of all ages and stages in their careers.

As Income Operators we want to have investments that produce income within the next 12 months. We want to be able to use some of the cash in our investments now versus waiting until retirement. Therefore we recommend the SHY SPY Portfolio as the foundational holdings of your taxable Income Now investment brokerage account.

What is the SHY ETF?

SHY, known as the iShares 1-3 Year Treasury Bond ETF, offers investors targeted access to the short-term segment of the U.S. Treasury market. It specifically focuses on U.S. Treasury bonds that have remaining maturities between one and three years, making it a suitable choice for those seeking exposure to shorter-term government debt. This ETF enables investors to customize their exposure to Treasuries, providing a strategic tool for managing investment portfolios. The objective of SHY is to track the investment results of its underlying index, which is composed of these specific U.S. Treasury bonds. With an expense ratio of 0.15%, it presents an efficient option for investors looking to incorporate short-term Treasury bonds into their investment strategy.

What is the SPY ETF?

The SPDR S&P 500 ETF Trust, commonly known as SPY, is a prominent ETF designed to mirror the performance of the S&P 500 Index, a leading indicator of U.S. equities. The ETF aims to provide investment results that correspond to the price and yield performance of the S&P 500, a diversified large-cap U.S. index encompassing companies across all sectors. With a gross expense ratio of just 0.0945%, SPY stands out as a cost-effective option for investors seeking exposure to the American large-cap equity market.

The beauty of the SHY SPY Portfolio lies in its simplicity and flexibility. For those earlier in their career, the emphasis is placed more on SPY, with an allocation range between 70% to 100%. This phase of life is typically associated with higher risk tolerance, as time is on your side to weather market fluctuations and benefit from the potential higher returns that stocks can offer. During this stage, you are akin to a full SPY secret agent, embodying the daring and adventurous spirit of 007, navigating the stock market with less concern and more "spy-like" agility.

As you advance in your career and age, the portfolio gradually transitions, increasing the weight towards SHY. This shift mirrors the natural progression of an individual’s risk tolerance, skewing towards the preservation of capital and income as retirement approaches. A 50/50 weighting is recommended. Bonds, with their fixed income and lower volatility, become more attractive, providing a cushion against the unpredictable nature of the stock market.

Implementing the SHY SPY Portfolio is remarkably simple. Both SHY and SPY are widely available ETFs and can be purchased through most brokerage accounts such as eTrade or Robinhood. This approach does not require the expertise of buying individual bonds or the risks associated with holding stocks of specific companies. Moreover, adjusting the portfolio's allocation between SHY and SPY over time is straightforward, aligning with your evolving financial goals and risk appetite.

The SHY SPY Portfolio presents an effective, memorable, and easy-to-implement strategy for investors at any life stage.

The name’s Spy. Shy Spy.