It doesn’t matter who {you’re} or {how much cash} you make. There’s no better {solution to} assure you’ll be rich {1 day} than by {buying} index funds.
And {once you} leverage multiple index funds it becomes {a robust} tool called the lazy portfolio.
What’s a lazy portfolio?
A lazy portfolio {is really a} diversified portfolio of low-cost index funds {which allows} you to…well, be lazy. {Which means} no active trading, no checking your stocks {each day}, {no} paying some hedge fund manager (who won’t beat {the marketplace} anyway) {to take care of} {your cash}.
It just {offers you} results.
It’s the set-it-and-forget-it {method of} investing, {enabling you to} set {exactly the same} asset allocation in your portfolio for a lonnngggggg time (typically for 10+ years).
Does this sound boring? Yes.
Will it {cause you to} rich? Oh, yeah.
That’s because lazy portfolios generally have:
- Fewer fees. Many mutual funds {have a} {couple of} dumb costs because they’re handled by money managers. Index funds {usually do not}, because you’re just {buying} {the complete} market, so transactions are handled by computers {which are} {pleased to} take {significantly less} money.
- Less risk. Since index funds {spend money on} {the complete} market, they’re {Significantly less} volatile. You’ll {make money} slowly, but {in the event that you} keep {your money} {on the market} over {your daily life}, I promise you’ll {earn money}.
Check out the graph of {the way the} S&P 500 has performed since 1950.
The S&P 500 since 1950.
If you don’t {understand how to|learn how to} purchase funds yet, I highly suggest you at {the} least read my How mutual funds work article. {Actually}, {do this} now. (Don’t worry, {this short article} {it’s still} here!)
When you’re done, {I wish to|I would like to} show you {several} funds {to truly get you} started in {creating a} lazy portfolio {on your own} and start {making profits} {on the market} today.
Bonus:If the COVID-19 pandemic has you {concerned about} money, {have a look at} my free Portfolio Solutions, is:
- Vanguard Total Bond Market ETF (BND)
- Vanguard Total World Stock ETF (VT)
If {you decide to} set this up as your lazy portfolio, your asset allocation {can look} {such as this}:
You {can transform} {the method that you|the way you} allocate these assets {based on} your risk tolerance too. If you’re {ready to} put {a bit more} {in to the} market via stocks – a riskier choice – {it is possible to} put more {in to the} Total World Stock ETF. Otherwise, {it is possible to} place more into bonds {and obtain} {a far 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 {a different one} that’s pure 60/40 rule. However, unlike {these} two-fund portfolio, {that one} suggests {buying} both international index funds {and also|along with|in addition to} {currency markets} index funds.
The percentages for the asset allocation {appear to be} this then:
- 42% U.S. stocks
- 18% international stocks
- 40% bonds
As a Boglehead himself, Larimore suggests {choosing} Vanguard funds here:
- Vanguard Total {CURRENCY MARKETS} Index Fund (VTSMX)
- Vanguard Total International Stock Index Fund (VGTSX)
- Vanguard Total Bond Market Index Fund (VBTLX)
If {you decide to} set this up as your lazy portfolio, your asset allocation {can look} {such as this}:
If your assets don’t {appear to be} the Mercedes symbol, you’re {carrying it out} wrong.
Over {days gone by} decade, this fund has returned roughly 7%, according to the Wall Street Journal – which beats out {almost all} actively managed funds {and also} the S&P 500. It’s a no-brainer {if you need to|in order to} invest in {a straightforward}, hands-off portfolio {that may|which will} {offer you} gains.
Speaking of no-brainers…
Dr. Bernstein’s “No-Brainer” Lazy Portfolio
As a neurologist turned financial wizard and {writer of} The Intelligent Asset Allocator and The Birth of Plenty, Dr. William Bernstein has championed {the energy} of the index fund over individual stocks and bonds {for a long time}. So it’s {no real surprise} {he} suggests you put {your cash} in a lazy portfolio that’s {manufactured from} {those hateful pounds}.
One portfolio {he} suggested in The Intelligent Asset Allocator {is named} the “No-Brainer” Portfolio, and is {made up of} four equal funds:
- 25% U.S. stocks
- 25% small-cap U.S. stocks
- 25% international stocks
- 25% bonds
You {can easily see} why it’s a “no-brainer.” This portfolio also gives investors {an opportunity to} diversify their risk (since {you can find} four equally distributed funds) {as time passes}.
Here are his {ideas for} the funds {it is possible to} {spend money on}:
- Vanguard 500 Index (VFINX)
- Vanguard Small-Cap Index (NAESX)
- Vanguard Total International Stock Index (VGTSX)
- Vanguard Total Bond Market Index (VBMFX)
If {you decide to} set this up as your lazy portfolio, your asset allocation {can look} {such as this}:
Over {days gone by} decade, this portfolio {has already established} an annual return {around} 5% – {that is} {good|based on the} S&P 500. It’s {an excellent} one {for anybody} who likes low-risk, assured returns.
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To {learn more|get more information} {on how best to} automate {finances}, {have a look at} my 12-minute video explaining it here: