3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (2024)

It doesn’t matter who you are or how much money you make. There’s no better way to assure you’ll be rich one day than by investing inindex funds.

And when you leveragemultipleindex fundsit becomes a powerful tool called the lazy portfolio.

  • What is a lazy portfolio?
  • How do I build a lazy portfolio?
  • Rick’s two-fund lazy portfolio
  • Taylor’s three-fund lazy portfolio
  • Dr. Bernstein’s “no brainer” lazy portfolio
  • Additional suggestions

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What’s a lazy portfolio?

A lazy portfolio is a diversified portfolio of low-cost index funds that allows you to…well, be lazy. That means no active trading, no checking your stocks every day, and no paying some hedge fund manager (who won’t beat the market anyway) to handle your money.

It just gives youresults.

It’s the set-it-and-forget-it approach to investing, allowing you to set the same asset allocation in your portfolio for a lonnngggggg time (typically for 10+ years).

Does this sound boring? Yes.

Will it make you rich? Oh, yeah.

That’s because lazy portfolios generally have:

  1. Fewer fees.Many mutual funds come with a bunch of dumb costs because they’re handled by money managers. Index funds do not, because you’re just investing in the whole market, so transactions are handled by computers that are happy to take much less money.
  2. Less risk.Since index funds invest in the entire market, they’re MUCH less volatile. You’ll earn moneyslowly, but if you keep your cash in the market over your lifetime, I promise you’ll make money.

Check out the graph of how the S&P 500 has performed since 1950.

3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (1)


The S&P 500 since 1950.

If you don’t know how to purchase funds yet, I highly suggest youat the very leastread myHow mutual funds workarticle. In fact, do that now. (Don’t worry, this article will still be here!)

When you’re done, I want to show you a few funds to get you started in building a lazy portfolio for yourself and start earning money in the market today.

How do I build my lazy portfolio?

Good news: Building a lazy portfolio iseasy.You do it the same way you would put money into any other fund.

However, there isn’t a one-size-fits-all way of doing things when it comes to a lazy portfolio. That’d be like saying that there was only one single fund or bond that EVERYONE should put exactly XX% of their money in…which is wrong.

Luckily, there are certain “recipes” that people have leveraged to help them earn money on their investments. These recipes differ in terms of how many funds are in the actual portfolio and also how the assets are allocated.

They are also completelymalleable,which means you can change them whenever and however you want depending on your financial goals.

While there are many different recipes out there, they generally break down into three categories:

  • Two-fund portfolios
  • Three-fund portfolios
  • Four-fund portfolios

Below are three portfolios that I suggest that fall into each category — along with suggestions for funds you can put in them.

Rick Ferri’s Two-Fund Lazy Portfolio

The 60/40 rule of asset allocation is a tried-and-true rule of thumb for approaching your portfolio. And it’s ludicrously simple:

  • 60% stocks
  • 40% bonds

That’s it.

Of course, you’re going to want to find funds that fit those asset classes. One great combination of funds (as well as their stock symbols) recommended by Rick Ferri, founder ofPortfolio Solutions, is:

  • Vanguard Total Bond Market ETF (BND)
  • Vanguard Total World Stock ETF (VT)

If you choose to set this up as your lazy portfolio, your asset allocation will look like this:3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (2)

You can change how you allocate these assets depending on your risk tolerance too. If you’re willing to put a little bit more into the market via stocks — a riskier choice — you can put more into the Total World Stock ETF. Otherwise, you can place more into bonds and get a more assured return.

Taylor Larimore’s Three-Fund Lazy Portfolio

Developed by the guy who Jack Bogle called “The King of the Bogleheads,” this fund is another one that’s pure 60/40 rule. However, unlike the aforementioned two-fund portfolio, this one suggests investing in both international index funds as well as stock market index funds.

The percentages for the asset allocation look like this then:

  • 42% U.S. stocks
  • 18% international stocks
  • 40% bonds

As a Boglehead himself, Larimore suggests going with Vanguard funds here:

  • Vanguard Total Stock Market Index Fund (VTSMX)
  • Vanguard Total International Stock Index Fund (VGTSX)
  • Vanguard Total Bond Market Index Fund (VBTLX)

If you choose to set this up as your lazy portfolio, your asset allocation will look like this:

3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (3)

If your assets don’t look like the Mercedes symbol, you’re doing it wrong.

Over the past decade, this fund has returned roughly 7%,according to the Wall Street Journal— which beats out the VAST majority of actively managed funds and even the S&P 500. It’s a no-brainer if you want to invest in an easy, hands-off portfolio that will give you gains.

Speaking of no-brainers…

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Dr. Bernstein’s “No-Brainer” Lazy Portfolio

As a neurologist turned financial wizard and author ofThe Intelligent Asset AllocatorandThe Birth of Plenty, Dr. William Bernstein has championed the power of the index fund over individual stocks and bonds for YEARS. So it’s no surprise that he suggests you put your money in a lazy portfolio that’s made of a few of them.

One portfolio that he suggested inThe Intelligent Asset Allocatoris called the “No-Brainer” Portfolio, and is comprised of four equal funds:

  • 25% U.S. stocks
  • 25% small-cap U.S. stocks
  • 25% international stocks
  • 25% bonds

You can see why it’s a “no-brainer.” This portfolio also gives investors a chance to diversify their risk (since there are four equally distributed funds) over time.

Here are his suggestions for the funds you can invest in:

  • Vanguard 500 Index (VFINX)
  • Vanguard Small-Cap Index (NAESX)
  • Vanguard Total International Stock Index (VGTSX)
  • Vanguard Total Bond Market Index (VBMFX)

If you choose to set this up as your lazy portfolio, your asset allocation will look like this:

3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (4)

Over the past decade, this portfolio has had anannual return of about 5%— which is in line with the S&P 500. It’s a great one for anyone who likes low-risk, assured returns.

Other recipe suggestions

Those are just a few solid recipes that I suggest.

If you’re a weirdo like me, and want to dive even deeper into the world of lazy portfolios and asset allocation, here are a few great recipes for portfolios for further reading:

No matter what you choose, remember that when it comes to your lazy portfolio, there’s no right or wrong way to go about it. It’s just what matters toyouand your goals.

That’s it. One of these lazy portfolios might make perfect sense to you while the others seem AWFUL…and that’s fine! It’s your finances, and ultimately, it’s you who gets to make the decisions.

How to invest in your lazy portfolio for peak laziness

When you finally invest in your lazy portfolio, you can take your lazinesseven furtherby automating your finances.

I.Talk.About.This.A.LOT. But that’s only because it’s the best way to invest, save, and earn money. This system allows you toautomaticallysend your money where it needs to go as soon as you receive your paycheck.

3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (5)

If you liked this post, you’d LOVE my Ultimate Guide to Personal Finance

It’s one of the best things I’ve published, and totally free – just tell me where to send it:

3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips) (2024)

FAQs

3+ Lazy Portfolio Recipes From Personal Financial Expert (Tips)? ›

A three-fund portfolio aims to diversify your portfolio across three asset classes: domestic stocks, international stocks, and domestic bonds. You can use a three-fund approach in most 401(k) accounts. Investors choose the allocation of funds that suit their goals.

What is the 3 portfolio rule? ›

A three-fund portfolio aims to diversify your portfolio across three asset classes: domestic stocks, international stocks, and domestic bonds. You can use a three-fund approach in most 401(k) accounts. Investors choose the allocation of funds that suit their goals.

What is the Lazy 3 fund portfolio? ›

Three-fund lazy portfolios

These usually consist of three equal parts of bonds (total bond market or TIPS), total US market and total international market. While the "% allocation" is different from those listed below, these funds typically make up the core of Vanguard's Target Retirement and Lifestrategy funds.

What is the best 3 fund portfolio allocation? ›

Here are a few popular options: An 80/20 three-fund portfolio with 64% U.S. stocks, 16% international stocks, and 20% bonds. This option prioritizes growth and is good for investors with high risk tolerance. An equally weighted three-fund portfolio with 33% to 34% in each asset.

What is the 40 60 portfolio rule? ›

The “60/40 portfolio” has long been revered as a trusty guidepost for a moderate risk investor—a 60% allocation to equities with the intention of providing capital appreciation and a 40% allocation to fixed income to potentially offer income and risk mitigation.

What is the golden rule of the portfolio? ›

Hold your investments long-term. Like adding to your investment over time, holding your investment long-term is really important to building your wealth, generating more profit. Your money needs years to grow, and with time, it can grow exponentially and generate higher returns.

What are the 3 A's of investing? ›

Amount: Aim to save at least 15% of pre-tax income each year toward retirement. Account: Take advantage of 401(k)s, 403(b)s, HSAs, and IRAs for tax-deferred or tax-free growth potential. Asset mix: Investors with a longer investment horizon should have a significant, broadly diversified exposure to stocks.

What is an example of a lazy portfolio? ›

For example, your preferred lazy portfolio asset allocation might be 70% in stocks and 30% in bonds. But if bonds outperform stocks during the year, at the end of the year, your asset allocation might drift to 35% bonds and 65% stocks.

What are the disadvantages of a 3 fund portfolio? ›

Cons of a Three-Fund Portfolio

Index funds, by nature, are designed to match the market not beat it. So if your goal is to achieve above-average returns, a three-fund approach may not suit your needs in terms of performance. Rebalancing. A three-fund portfolio is not set-it-and-forget-it.

What is the Boglehead strategy? ›

Bogleheads create a good plan, avoiding attempts to time the market, and then stick with it ("stay the course"). This consistently produces good outcomes over the long term.

How do I start a 3 fund portfolio? ›

The task, then, is to take these three basic non-cash assets — domestic stocks, international stocks, and bonds — decide how much of each to hold (your asset allocation). Choose where to hold each of these asset classes, and finally choose a mutual fund to use for each asset class.

What is the 3 fund strategy? ›

This strategy involves choosing three mutual funds or exchange-traded funds (ETFs) to create a diversified portfolio. The three-fund portfolio is often associated with the Bogleheads, named after Vanguard founder John Bogle. It's a lazy way to invest, but is it right for you?

Who are the Big 3 passive funds? ›

BlackRock, Vanguard, and State Street are often lumped together for the purpose of considering large passive managers within the U.S.,” Stewart told Institutional Investor.

What is the rule of 3 in finance? ›

If you find yourself in this situation, consider the “Rule of Three:” When you have an unexpected windfall, put 1/3 of the windfall towards paying down debt, 1/3 towards long-term saving and investing, and the remaining 1/3 towards something rewarding or fun.

What are the 3 common types of portfolios briefly describe? ›

  • 1) Showcase or Presentation Portfolio: A Collection of Best Work. ...
  • 2) Process or Learning Portfolio: A Work in Progress. ...
  • 3) Assessment Portfolio: Used For Accountability. ...
  • 4) A Hybrid Approach.
Mar 26, 2021

What is the 3 1 rule in investing? ›

Many real estate investors subscribe to the “100:10:3:1 rule” (or some variation of it): An investor must look at 100 properties to find 10 potential deals that can be profitable. From these 10 potential deals an investor will submit offers on 3. Of the 3 offers submitted, 1 will be accepted.

What are 3 things you should put in a professional portfolio? ›

Here are 12 elements you can consider including in your career portfolio to distinguish yourself from other candidates:
  • Career summary. ...
  • Mission statement. ...
  • Brief biography. ...
  • Resume. ...
  • Marketable skills. ...
  • Professional accomplishments. ...
  • Work samples. ...
  • Awards.
Mar 16, 2023

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