A fashion designer who retired at 36 after investing in stocks shares the 3 funds she holds and the 4th she’s now aggressively buying that’s up by over 580% since inception.

• Rachel Covert aggressively invested for seven years to build a retirement portfolio.
• She picked funds that would do the work for her so she didn’t have to pick and chose stocks.
• She’s now heavily allocating to an aggressive, high-growth technology fund.

Rachel Covert, 38, graduated in 2007 with the goal of working her way up the corporate ladder in New York City’s fashion industry.

She had no idea that achieving that goal would entail 12-hour days of working herself to exhaustion. She wanted out by 2014 and decided that early retirement might be the way to go. Her main issue, however, was a lack of funds.

Until then, she had been sparingly contributing to her 401(k) at about 3% of her paycheck, believing that it would grow over time. She decided to become frugal after realizing that time was no longer on her side in order to invest the majority of her salary.

Between 2014 and 2021, she prioritized maxing out her 401(k) and then putting the rest into a brokerage account and a Roth. She had a comfortable annual salary of $180,000 as the vice president of a women’s fashion company when she left in 2021. According to financial statements reviewed by Insider, her large salary and aggressive budgeting enabled her to build a nearly $500,000 retirement portfolio.

Covert has been out of work for over two years, spending her time in Portugal and splitting expenses with her partner. She has been doing online work as a money coach while still contributing to her portfolio on the side.

Fund allocation

Her investment strategy revolves around a single concept: protecting herself from herself.

“The less I do to the portfolio, the better, because I know I’m not going to outperform the market average by trying to time the market and trade,” Covert explained.

As a result, the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) holds the majority of her retirement portfolio. This is due to the fact that it is diverse across industries. If one sector of the economy, such as the financial sector, suffers, her portfolio will be balanced. Furthermore, this fund exposes her to all stock sizes, including small caps.

“So, if a small cap company does something really big and really cool as they grow,” Covert explained, “my holdings of that company automatically grow without me having to do anything or change any of my asset allocation.”

The Vanguard Mid-Cap Growth Index Fund ETF (VOT) follows, and it tracks the CRSP US Mid Cap Growth Index, which is a basket of midsize growth companies. She put a lot of money into this fund when she had a steady paycheck and a 401(k) with few options. This was the best option for a high-growth fund. Since her retirement, Covert has not contributed to this fund.

She has instead added Vanguard’s Target Date retirement funds, which have target dates of 2050 and 2065. The year represents when an investor anticipates retiring. As that date approaches, the fund shifts its allocation from stocks to more bonds, lowering risk and creating a less volatile portfolio.

“I’m not inclined to make a prudent investment decision.” “As a result, I’m not inclined to go out and buy a bunch of bonds,” Covert said. “But the reality is that I’m getting closer to 40. And when you look at some of the traditional recommendations for how much bond a person should have at my age, people are starting to have 10, 20% bonds in their portfolio.”

According to Investopedia, a general rule of thumb for calculating the appropriate stock-bond ratio based on age is to subtract your age from 100 to 120 (depending on how long you intend to work). The difference should be the percentage of your portfolio that is invested in stocks, with the remainder in bonds. For instance, at the age of 25, it would be 120-25 = 95. As a result, stocks should account for 95% of your allocation.

Covert has had extra cash flow ranging from $2,000 to $6,000 per month since she began doing online coaching. She no longer needs to draw from her investment portfolio, and she can use the extra cash to make riskier investments. This also means she can be more aggressive with her stock investments because she has more time to ride out the volatility.

Her goal was to diversify into more volatile technology growth stocks. She, on the other hand, did not want to pick and choose which companies to bet on. As a result, she began allocating to the Invesco QQQ ETF (QQQ), which tracks the tech-heavy Nasdaq 100, in August. This ETF has been around since 1999 and has returned 585% since inception.

“I am not the type of person who seeks out the newest, latest, greatest,” Covert explained. “I’m definitely the type of person who wonders, ‘What does history tell me about things?'” And QQQ has been around for quite some time. It is highly regarded. And I’m more comfortable with tech firms as my version of a more volatile asset than, say, some people who might have purchased an international fund for volatility.”

She only has $5,000 in QQQ, which she purchased this year. She said that because she doesn’t have a steady paycheck, anything she earns above her monthly expenses will go towards this fund for the rest of the year.