Question

You have $100,000 to invest. Investment Horizon is 15 years, at which point you will use the money as a downpayment on a house. You don't plan to use the money until then, but should you need it, it can be used as an emergency fund. You are required to invest in Vanguard mutual funds, and only that.

https://investor.vanguard.com/mutual-funds/list#/select-funds/asset-class/month-end-returns - List of funds

Pick any from one to six funds, and decide how much of the $100,000 you want to invest in each.

Provide the estimate of the current yield (dividends + interest) divided by the value of the portfolio. Also provide the total expected return of the portfolio.

Would your choice of funds be different if you only had a one year investment horizon?

Answer 1

The investment horizon is long and is upto 15 years. So it is sensible to have an exposure to equity in a balanced manner. So a balanced fund should be used to invest the $100,000
From Vanguard's list, the fund -Vanguard Balanced Index Fund Admiral Shares should be chosen which has an exposure of ~ 60% in stocks and 40% in bonds. Also the 10 year return or yield is ~ 11% which is a very good yield.
So there is no need to chose multiple funds and best to stick to one good balanced fund as cited above.
Expected return would be the historic 10 Y yield ~ 11%.
If it was only a 1 year investment horizon, then we should have parked the money in a liquid fund such as Prime Money Market which has a yield of ~ 2% for 1 year. This is important to reduce volatility in returns and hence exposure should only be in the government securities and debt.