Now that we’re ready to invest, how do we get started? It’s easy—the strategy outlined in this book can be fully implemented through a common online brokerage account.

Whether you’re in the United States or outside, there’s no shortage of good-quality, online, discount brokerages available, several of which are listed in the brokerages section of this website.

Once your online brokerage account is setup, and funded with a bank transfer, you can buy and sell securities which trade on the various stock markets. As you know by now, we’ll be using the brokerage to buy and sell ETFs. Buying is literally as simple as entering the ETF symbol and number of shares you want, and clicking the “Buy” button.

Which ETFs should I purchase?

Earlier, we suggested two conservative asset allocations. The following is a list of specific ETFs you can buy to implement those allocations. (Remember, we provide additional options in the portfolios section.)

Option 1: The Classic

This simple allocation involves buying three ETFs.

Investment Product Symbol Allocation Cost
Vanguard Total Stock Market ETF VTI 25% 0.03%
Vanguard Total International Stock ETF VXUS 25% 0.11%
Vanguard Total Bond Market ETF BND 50% 0.05%

Option 2: What I do

The allocation in which I personally invest, called “The Golden Butterfly” involves buying five ETFs.

Investment Product Symbol Allocation Cost
Vanguard Large-Cap Stocks ETF VV 20% 0.04%
Vanguard Small-Cap Value ETF VBR 20% 0.07%
iShares 20+ Year Treasury Bond ETF TLT 20% 0.15%
iShares Gold Trust IAU 20% 0.25%
iShares Short Treasury Bond ETF SHV 20% 0.15%

Why these particular ETFs?

I’ve suggested ETFs issued primarily by Vanguard and iShares for two reasons. First, they are among the largest issuers, which in itself provides for some security. At present, over $125 billion are invested in Vanguard’s VTI ETF. Secondly, they are among the cheapest; for example, the Vanguard VTI ETF costs only 0.03% per year.

What if you live outside the United States?

There are three considerations—currency, the stock exchange and estate taxes.

1. Currency

This guide focuses on principles that are objective, universal and time-tested. Currency selection, however, can be a matter of opinion, so I’ll just tell you my personal thoughts, relevant to my own asset allocation.

The Golden Butterfly portfolio includes US stocks and bonds, and I’ve chosen not to experiment with how the portfolio will perform with global stocks against US bonds. (And in terms of 20+ year duration bonds, the US long-bond is the only game in town.) That said, many of the largest American companies represented in those stocks have worldwide operations, and so I do indirectly have global exposure. And gold, of course, is currency agnostic.

2. Stock exchange

The second issue relevant to those living outside the United States is the stock exchange on which your ETFs are bought and sold.

All of the ETFs recommended above are bought and sold on the American stock exchanges. A brokerage in Spain, however, will likely apply a lower transaction charge for ETFs sold on the Madrid or Irish exchange, as opposed to ETFs sold on the American exchange.

3. Estate taxes

The final issue relevant to those living outside the United States is estate taxes. When a non-US person dies, the United States will charge up to 40% estate tax on any assets owned by the deceased which are considered to be “situated” in the United States. Imagine you owned a US-based brokerage account, in which you invested in ETFs sold by US-based Vanguard, but which invested exclusively in non-US companies. Would your investments be considered “US situated”?

Turns out the answer is yes; the determining factor is the location of the ETF itself—which in this case is the United States—and not the securities owned by the ETF. A non-US person wishing to avoid US estate tax on their investments should therefore invest in non-US-listed ETFs. Fortunately, one of the largest ETF companies, iShares, has an ample range of ETF listed in Ireland, which can be purchased on most European exchanges. A sample portfolio based on non-US listed ETFs can be found in the portfolios section of this site.

The step-by-step process

Summarizing, here’s how you implement the plan:

  1. Open an account at a discount brokerage.
  2. Buy the individual ETFs corresponding to the asset allocation you’ve chosen.
  3. Save as much as you can each month, purchasing additional shares of those ETFs.
  4. Periodically check whether your allocation needs rebalancing, and if so, buy and/or sell the shares necessary to bring it back to its target.

Simple. Easy. Powerful.