Use ETFs to create a diversified 10-item portfolio

— -- Q: What 10 stocks should I buy if I want to get the best returns for the long and short term?

A: Why do you think you need 10 stocks? Why not nine stocks or 11?

Many investors ask what one stock they can buy and be diversified. The simplicity of owning a single stock is certainly appealing. But one stock is a bad idea, even if it's Warren Buffet's Berkshire Hathawaybrkabrkb, which is basically a diversified holding company.

The closest you could come to a single diversified stock would be to buy shares of the Standard & Poor's 500 exchange-traded fund (ETF); the ticker symbol is spy. The ETF owns stocks of 500 companies, and you are pretty much guaranteed to track the market's returns. You won't outperform it, but you probably won't underperform it, either.

The fact you're asking for 10 stocks makes me think you're willing to do a little more tinkering with your portfolio. And while you may not have known it, 10 is a decent number of stocks to create a diversified portfolio.

Thanks to the boom in exchange-traded mutual funds, which trade like stocks, you can own shares in thousands of companies by buying a handful of investments.

A great start for your portfolio would be shares in U.S. large company stocks such as the SPY fund mentioned above. That's a great core holding. From there you can add large value priced stocks, with Vanguard's Large Cap value ETF vtv. Next, add ETFs that own stocks of small companies, small value-priced companies, emerging markets, international, small international, real-estate investment trusts and bonds. That's nine investments. You could round it out to 10 by sweeping your excess cash into a money market fund. And there you go, a diversified portfolio with 10 investments.

To find ETFs that match the criteria above, the ETF Screener at USATODAY.com can help.

Not sure what percentage of your portfolio to put into each of these investments? Those percentages are determined by your taste for risk and when you'll need to start tapping your portffolio. For instance, if you can handle more risk and have a long time horizon, you might overweight small stocks and underweight large-cap value stocks and bonds. But if you don't want to take as much risk, you might load up on bonds.

There are many websites that will help you determine what your portfolio should look like. Easyallocator.com, for instance, will analyze your investments and measure what percentage should be in each asset type and in what types of accounts.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.