How to build Warren Buffett's 90/10 asset allocation with ASX ETFs

Buying shares in ASX ETFs can be a great way to get your portfolio started.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're just getting started out with investing and you don't have a lot of money behind you, buying shares in ASX ETFs can be a great way to get your portfolio started.

Not only is it a straightforward process, but one of the best things about investing in an ETF is the broad exposure you can get to different parts of the market without investing in several companies yourself.

And with many of the world's investment elite saying ETFs are a great way to build wealth, it's something that I'll be focused on myself in the following years.

a woman

What is Warren Buffett's 90/10 asset allocation?

You may recall Warren Buffett's 90/10 portfolio asset allocation for retirement investing. He says to invest 90% of your money into a low-fee stock index fund and 10% into short-term treasuries.

The focus with the 90/10 asset allocation is having exposure to the stock market while hedging any downside risk with short-term treasuries.

How can you build Warren Buffett's 90/10 asset allocation with ASX ETFs?

You can build your own 90/10 asset allocation using ASX ETFs that give you exposure to the ASX200 and Australian Government Bonds.

The Vanguard Australian Share ETF (ASX: VAS) tracks the performance of the ASX 200. With this ETF you get exposure to Australia's biggest companies like BHP Group Ltd (ASX: BHP), Wesfarmers Ltd (ASX: WES) and the Commonwealth Bank of Australia (ASX: CBA) without needing to buy individual shares in each company. This fund charges a 0.14% management fee.

For exposure to Australian Government Bonds, you could buy shares in the SPDR S&P/ASX Australian Government Bond Fund (ASX: GOVT). It tracks the S&P/ASX Government Bond Index, and it can help you hedge against potential market downturns. The fund charges a management fee of 0.22% and has a current yield of 3.47%.

But, what if you still want to pick your own stocks?

When you have a keen interest in finance and investing, the thought of buying shares in an ASX 200 ETF and Australian Government Bonds ETF could make you feel like you're missing out on picking stocks yourself. You can have the best of both worlds, though.

If you still want to pick your own stocks while building wealth through an ASX 200 ETF, decide on what proportion of your portfolio you want to set aside for picking your own investments. For example, if you have a lower risk appetite like me you may decide on an 80/10/10 split between an ASX 200 ETF, a short-term treasuries ETF and 10% for your own stock picks.

Leaving aside part of your asset allocation for making your own stock picks will give you exposure to the broader market with an ETF while giving you ownership over building out your own stock portfolio. With this approach you can invest like Warren Buffett would while still having some personalised decisions to make up your portfolio.

If you're looking for some blue chip companies to start your stock portfolio, check out these 3 blue chips that have been rated a buy for 2019.

Motley Fool contributor Nicola Smith has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

Piggybank with an army helmet and a drone next to it, symbolising a rising DroneShield share price.
Defensive Shares

How to build a defensive ASX share portfolio in 2026

2026 could be a rough year for investors.

Read more »

Australian dollar notes in businessman pocket suit, symbolising ex dividend day.
Dividend Investing

2 ASX dividend shares with yields above 7%

I’m a big fan of businesses offering large yields and growth potential.

Read more »

Buy and sell written on a white cube.
Growth Shares

2 ASX shares highly recommended to buy: Experts

These businesses have a lot going for them…

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Dividend Investing

1 ASX dividend stock down 18% I'd buy right now!

The passive income from this stock looks too good to miss.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Small Cap Shares

Morgans says these small-cap ASX shares could rise 85%+

Big things are expected from these small-caps.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
Dividend Investing

Why I just made this great ASX dividend share my latest buy

This ASX dividend share ticked the boxes of what I wanted: yield, growth and good value.

Read more »

A woman relaxes on a yellow couch with a book and cuppa, and looks pensively away as she contemplates the joy of earning passive income.
Dividend Investing

Why I'd buy these 3 ASX income shares this week

The ASX is full of income opportunities, but some stand out more than others.

Read more »

Man holding Australian dollar notes, symbolising dividends.
Dividend Investing

3 blue-chip ASX dividend shares to buy and hold

Let's see why these shares could be top picks for income investors.

Read more »