Lazy Portfolio Collection

Lazy portfolios are low cost set and forget investments. The idea is they cover the gamut of asset classes, though some better than others, give diversification, and (hopefully) beat the S&P 500 index. As with all portfolios, they should be rebalanced periodically; generally every year.

They are a good way to see what others have done - from professionals and millionaires to second graders.

The portfolio should consist of low-cost mutual funds or ETFs, depending on how you plan to invest. ETFs have brokerage fees, so monthly investing is best done using mutual funds even though they usually have a higher expense ratio.

The key to a good portfolio is:

• Low costs.
• Diversify. Index funds do this at low cost. Watch out for index funds that are not cheap. Use Vanguard as a comparison.
• Take intelligent risks.

Since the portfolios consist of a large percentage of stocks, the time horizon is long; in other words, don't put money you need in a year or two into these.

When you start your portfolio has a big difference on long-term performance. For example, if you started at the Dow's peak (The Dow topped out at 14,168.53 on Oct. 9, 2007), you would still be underwater. A good understanding of the expectations of a portfolio is paramount.

Something interesting I read in an Oct 2008 op-ed in the NY Times: Warren Buffett had his entire private stash in government bonds until circa Oct 2008 when he announced he's adding U.S. equities to his private portfolio.

Some of the portfolios have changed over the years.

Lazy Portfolios

Charles Ellis

• Total World Stock (VTWSX)
• Total Bond Market (VBMFX)

The VTWSX fund's current allocation is 59% in foreign stocks and 41% in U.S. stocks.

Charles is author of "Winning at a Loser's Game".

Allocation

Under 40 years old: 100% in stocks.
40 to 50: 90% in stocks, 10% in bonds.
50 to 60: 80% in stocks, 20% in bonds.
60 to 70: 60% in stocks, 40% in bonds.
70 to 80: 50% in stocks, 50% in bonds.

Aronson Family Portfolio

• 15% Vanguard Pacific Stock Index fund (VPACX)
• 15% Vanguard Inflation Protected Securities (VIPSX)
• 15% Vanguard Index 500 (VFINX)
• 10% Vanguard Extended Market (VEXMX)
• 10% Vanguard Long-Term Treasury fund (VUSTX)
• 10% Vanguard Emerging Markets Stock Index fund (VEIEX)
•    5% Vanguard High Yield Bond fund (VWEHX)
•    5% Vanguard Small Cap Growth Index fund (VISGX)
•    5% Vanguard European Stock Index fund (VEURX)
•    5% Vanguard Total Stock Market Index fund (VTSMX)
•    5% Vanguard Small Cap Value Index fund (VISVX)

Ted Aronson, partner in AJO Partners, puts his family's taxable money in this portfolio.

Breakdown: 70% stocks, 30% bonds

Second Grader Portfolio

• 60% Vanguard Total Stock Market ETF (VTI)
• 30% Vanguard FTSE All-World Ex-U.S. ETF (VEU)
• 10% Vanguard Total Bond Market ETF (BND)

This is an aggressive asset allocation. Note that a second grader started this portfolio with the help from his Dad.

Breakdown: 90% stocks, 10% bonds

 Unconventional Portfolio

• 30% Vanguard Total Stock Market ETF (VTI)
• 20% Vanguard REIT ETF (VNQ)
• 15% iShares Barclays TIPS Bond (TIP)
• 15% SPDR Barclays Capital Long Term Treasury ETF (TLO)
• 15% Vanguard Europe Pacific ETF (VEA)
•  5% Vanguard Emerging Mkts ETF (VWO)

David Swenson, the chief investment officer at Yale University, recommends the above portfolio in his Unconventional Success. He is a big proponent of equity-oriented allocations for investors with long time horizons.

Breakdown: 70% stocks, 30% bonds

 Core Four Portfolio

• 36% Vanguard Total Stock Market ETF (VTI)
• 18% Vanguard FTSE All-World Ex-U.S. ETF (VEU)
•  6% Vanguard REIT ETF (VNQ)
• 40% Vanguard Total Bond Market ETF (BND)

“You only need a few asset classes in your portfolio, and after that there are diminishing returns. The mutual funds you choose to represent those asset classes should be the lowest cost funds you can buy.” –Rick Ferri, CFA on the Bogleheads Forum.

Breakdown: 60% stock, 40% bonds

 Coffeehouse Portfolio

• 40% Vanguard Total Bond Market ETF (BND)
• 10% iShares S&P 500 Index ETF (IVV)
• 10% Vanguard Value ETF (VTV)
• 10% Vanguard Small-Cap ETF (VB)
• 10% Vanguard Small-Cap Value ETF (VBR)
• 10% Vanguard FTSE All-World Ex-U.S. ETF (VEU)
• 10% Vanguard REIT ETF (VNQ)

Right out of Bill’s book, “The New Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get on with Your Life”.

Breakdown: 60% stocks, 40% bonds

Big Rocks Portfolio

• 40% Vanguard Short-Term Bond ETF (BSV)
•   9% iShares S&P 500 Index ETF (IVV)
•   9% Vanguard Value ETF (VTV)
•   9% Vanguard Small-Cap ETF (VB)
•   9% Vanguard Small-Cap Value ETF (VBR)
•   6% Vanguard REIT ETF (VNQ)
•   6% SPDR S&P International Dividend (DWX)
•   3% Vanguard FTSE All-World Ex-U.S. ETF (VEU)
•   3% Vanguard FTSE AW ex-US Sm-Cap ETF (VSS)
•   3% WisdomTree International SmallCap Div (DLS)
•   3% Vanguard Emerging Mkts ETF (VWO)

 Larry Swedroe’s portfolio is tilted toward small-cap and value equities.

Breakdown: 60% stock, 40% bonds

Permanent Portfolio

• 25% iShares S&P 500 Index ETF (IVV)
• 25% SPDR Barclays Capital Long Term Treasury (TLO)
• 25% Cash (i.e., money market funds)
• 25% SPDR Gold Trust ETF (GLD)

The idea behind Browne’s Permanent Portfolio is that the four asset classes have sufficiently low correlation that the portfolio should be able to put up modest gains each year under just about any circumstance imaginable. This portfolio was heavily discussed on the Boglehead's forum.

Breakdown: 25% stocks, 25% commodities, 50% bonds & cash

No Brainer Portfolio

• 25% iShares S&P 500 Index ETF (IVV)
• 25% Vanguard Small-Cap ETF (VB)
• 25% Vanguard FTSE All-World Ex-U.S. ETF (VEU)
• 25% Vanguard Total Bond Market ETF (BND)

Bernstein, author of The Four Pillars of Investing, suggests the above portfolio for investors with a long time horizon. Note that it’s very similar to the first portfolio mentioned above (Roth’s Second Grader Portfolio), but with a much heavier allocation toward small-cap domestic stocks.

Breakdown: 75% stocks, 25% bonds

Couch Potato Portfolio

Originated by Scott Burns, a Dallas financial columnist.

• 50% Vanguard Inflation-Protected Securities (VIPSX)
• 50% Vanguard Total U.S. Stock Mkt Index (VTSMX)

Breakdown: 50% stocks, 50% bonds

FundAdvice Ultimate Buy and Hold

Paul Merriman has several indexed portfolios. Here is one of them.

• 20% Vanguard Intermediate-Term Treasury (VFITX)
• 12% Vanguard Short-Term Treasury (VFISX)
• 12% Vanguard International Value (VTRIX)
• 12% Vanguard Developing Markets (VDIMX)
•  8% Vanguard Inflation-Protection (VIPSX)
•  6% Vanguard Small Cap Index (NAESX)
•  6% Vanguard Small Cap Value Index (VISVX)
•  6% Vanguard Value Index Fund (VIVAX)
•  6% Vanguard S&P 500 Index Fund (VFINX)
•  6% Vanguard Emerging Markets (VEIEX)
•  6% Vanguard REIT Fund (VGSIX)

Breakdown: 68% stocks, 32% bonds

Resources

Lazy Portfolio Performance - See how some of the portfolios have performed.

Additional Notes

VTI encompasses large cap stocks, REITs (about 2.5%), small cap stocks, and mid cap stocks on the NYSE and NASDAQ. It tracks the MSCI US Broad Market index.

VFINX tracks the S&P 500 which includes REITS (about 1.2%).

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