Does anyone have 'Lazy Portfolios'?

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g3d
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Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 3:13 pm

I know that any time a newbie comes in to ask for advice on asset allocation (myself included), an overwhelming majority of responses advice the three or fund portfolio.

But, somebody posted this link that has a bunch of Boglehead-like portfolios, I think that person was following a nine or ten fund portfolio.
http://assetbuilder.com/lazy_portfolios/

Do any of you have a lazy fund that has more than the core three or four? What's your split? Do any of you have your portfolio very similar to these lazy portfolios?

One thing I'm curious about is the core portfolios the site recommends have TIPS instead of Total Bond Market. Can someone explain why this may or may not be a better allocation to the portfolio?

[Edited] to clarify my question?
Last edited by g3d on Fri Aug 29, 2014 3:41 pm, edited 1 time in total.

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tigerman3
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Re: Does anyone have 'Lazy Portfolios'?

Post by tigerman3 » Fri Aug 29, 2014 3:19 pm

Suggest you start with the Wiki: http://www.bogleheads.org/wiki/Lazy_portfolios

bloom2708
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Re: Does anyone have 'Lazy Portfolios'?

Post by bloom2708 » Fri Aug 29, 2014 3:23 pm

I am a newer Boglehead. I have a pretty straight line "3 fund portfolio". Age 43, 65% stocks/35% bonds.

Taxable accounts: 45% VTSAX, 20% VTIAX, 35% VWIUX (Int-Term Tax-Exempt Bonds)

Tax sheltered: 45% VTSAX, 20% VTIAX, 35% VBTLX

I thought about TIPS and REIT, but Taylor Larimore was helpful in reminding me to "keep it simple". Less than 5% allocation doesn't have much impact.

I have all 3 funds in each account. There is some broad discussions about allocating "across" or "within". I chose "within". It is easier for me.
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g3d
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Re: Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 3:36 pm

tigerman3 wrote:Suggest you start with the Wiki: http://www.bogleheads.org/wiki/Lazy_portfolios
Thanks. This answered one of my four questions.

"You could split the bond portion between Treasury Inflation Protected Securities and nominal bonds, which would result in a slightly more conservative version of David Swensen's model portfolio"

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g3d
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Re: Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 3:38 pm

bloom2708 wrote:I am a newer Boglehead. I have a pretty straight line "3 fund portfolio". Age 43, 65% stocks/35% bonds.

Taxable accounts: 45% VTSAX, 20% VTIAX, 35% VWIUX (Int-Term Tax-Exempt Bonds)

Tax sheltered: 45% VTSAX, 20% VTIAX, 35% VBTLX

I thought about TIPS and REIT, but Taylor Larimore was helpful in reminding me to "keep it simple". Less than 5% allocation doesn't have much impact.

I have all 3 funds in each account. There is some broad discussions about allocating "across" or "within". I chose "within". It is easier for me.
Awesome! Thanks for weighing in.

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TimesAWastin
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Re: Does anyone have 'Lazy Portfolios'?

Post by TimesAWastin » Fri Aug 29, 2014 3:39 pm

My porfolio is indeed lazy. Pretty much 3 fund.. 401k has different options than my Roth, but all the funds serve 1 of 3 purposes: US Stock Index (S&P 500 / Completion or TSM), International Stock Index, and Short-Term Bond Index.

At some point I reasoned that I am currently too young to bother with TIPS. I forget why but it's written in my IPS. 20 or so years from now that may change.

To answer your question about my split, I'm something like 40/40/20 US/Int/Bonds... not far from the 3-equal-parts that some advocate.
Last edited by TimesAWastin on Fri Aug 29, 2014 4:22 pm, edited 1 time in total.
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FelixTheCat
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Re: Does anyone have 'Lazy Portfolios'?

Post by FelixTheCat » Fri Aug 29, 2014 3:40 pm

My portfolio is soooo lazy it snores. :D
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Deep Thoughts
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Re: Does anyone have 'Lazy Portfolios'?

Post by Deep Thoughts » Fri Aug 29, 2014 3:46 pm

I think the virtue of simplicity gets oversold on this board by some. If we're following a Buy and Hold strategy and maybe rebalancing one a year, it just isn't that onerous to rebalance a 8 fund portfolio versus a 3 fund one.

It's more important to understand why people slice and dice and why some people argue that 3 fund is best than to just throw up your hands and "go for simplicity". There are many very sofistocated financially and mathematically people on this board who have carefully considered and have decided on one or the other option.

The same goes for putting non tax efficient funds in taxable space. Here you have to weigh what the costs are and consequences of that action .... not just throw up your hands and say .... "it's too complicated otherwise". If you really don't want to deal with it, pay an advisor 150/200 dollars for their time and they'll tell you EXACTLY how to do it.

If someone tells me that I can get another expected 1 percent per year CAGR, I don't care if it requires 20 funds to pull off, I would do it.

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Re: Does anyone have 'Lazy Portfolios'?

Post by Kaufmanrider » Fri Aug 29, 2014 3:54 pm

I follow the Paul Merriman Ultimate Buy and Hold. It has 11 ETFs. I added one more, an international government bond. AA is 60/40 using Schwab commision free low ETF's. Rebalance only takes a few minutes. I use a google spread sheet that tracks my investment and tells me how many shares to buy/sell to keep my AA.

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g3d
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Re: Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 3:58 pm

Kaufmanrider wrote:I follow the Paul Merriman Ultimate Buy and Hold. It has 11 ETFs. I added one more, an international government bond. AA is 60/40 using Schwab commision free low ETF's. Rebalance only takes a few minutes. I use a google spread sheet that tracks my investment and tells me how many shares to buy/sell to keep my AA.
Interesting. Thanks for sharing. Do you use the exact funds he recommends (I see ERs around 0.5%) or just the asset allocation?

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Re: Does anyone have 'Lazy Portfolios'?

Post by livesoft » Fri Aug 29, 2014 4:04 pm

My portfolio is lazy as well. I made one trade in 2013 that ended up on my Form 1040 Schedule D. One single trade. Is that lazy enough?
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longinvest
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Re: Does anyone have 'Lazy Portfolios'?

Post by longinvest » Fri Aug 29, 2014 4:38 pm

I invest lazily in a Three-Fund Portfolio.

Here is why I do so: Investing in Total Markets
Last edited by longinvest on Fri Aug 29, 2014 4:44 pm, edited 1 time in total.
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steve r
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Re: Does anyone have 'Lazy Portfolios'?

Post by steve r » Fri Aug 29, 2014 4:41 pm

Deep Thoughts wrote:
If someone tells me that I can get another expected 1 percent per year CAGR, I don't care if it requires 20 funds to pull off, I would do it.
I see two nit picking flaws with this. 1) I would not suggest investing based on someone telling you something. Do your homework. 2) 20 different funds almost always starts to track the market plus one or two tilts. It is hard to imagine a bunch of holding of 5 percent or less in a variety of funds doing that much but add expenses and trading cost. Particularly if each holding has hundreds of stocks.

I am pointing this out primarily for new posters.

On your larger point +1
... if you believe owning say 5 - 10 funds helps (after careful study and examination) adds to expected return, rebalancing is not that difficult.

I know many believe adding more funds beyond 3 does not add to the expected returns. I am not in that camp. It may add something. I studied it a lot. And have considerable training in the area. I really do not know. Probably reduces risk with more deliberate diversification in holdings. The return thing is harder to nail down going forward.

That said, I think the real reason for simplicity is not so much difficulty rebalance ... but rather difficulty staying the course ... at least it is for me personally. Starting with 3 funds, should I add X, sure ... what about Y, maybe ... wait, X does not seem so good, but Z ... yeah that is the ticket ... no wait, A, B and C are also good.
X, Y, and Z and A, B, and C can be anything real, SCV to gold to reits to more exposure to emerging markets to TIAA CREFF real estate (which livesoft used to own and I still do) ... to technology to ... smart beta to .... the discussion never ends.

To answer the posters questions, I have several lazy portfolios for my three main accounts (three fund companies, work reasons) ... one with one fund ... two with five funds ... all with very low expense ratios (except TIAA CREF real estate)... it took me a while to settle my ABCXYZ debates in my mind... but once I did ... things were very easy (and lazy) I, like Livesoft, almost never trade and only rebalance on occasion.

Hope this helps.
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Re: Does anyone have 'Lazy Portfolios'?

Post by nobsinvestor » Fri Aug 29, 2014 4:46 pm

Major 3 fund proponent here :D ( intermediate term tax exempt as a proxy for TBM for those in high tax brackets).

I see no compelling reason to make investing the least bit complicated (i.e. deviating from total market approach).

I might get some hate here, but I don't get the "slice and dicers" trying to eek out an extra few basis points of return over the long run by pointing to old historical data that might or might not have anything to do with the future (small cap value comes to mind).

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Re: Does anyone have 'Lazy Portfolios'?

Post by berntson » Fri Aug 29, 2014 4:54 pm

livesoft wrote:My portfolio is lazy as well. I made one trade in 2013 that ended up on my Form 1040 Schedule D. One single trade. Is that lazy enough?
Ha! :D

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Re: Does anyone have 'Lazy Portfolios'?

Post by retiredjg » Fri Aug 29, 2014 5:01 pm

The term "lazy portfolio" gets used a lot, but people mean all kinds of things when they use that term.

As defined in our Wiki "They are "lazy" in that the investor can maintain the same asset allocation for an extended period of time, as they generally contain 30-40% bonds, suitable for most pre-retirement investors."

So this does not mean a three fund portfolio or anything along that line. It means a portfolio that stays at the same risk level throughout accumulation - say, from age 25 to age 65. Or whatever. It has nothing to do with being simple or indexed or easy to manage. In fact there are several "lazy" portfolios listed that have lots of funds and are not terribly "Boglehead-like" (whatever that means).

Using that definition, some people here probably have/do use a lazy portfolio, but I'd guess that most do not. I'd say that most use a "declining risk" approach - starting at a higher percentage of stocks and reducing it to a lower percentage of stocks along the way. This might be a simple 2 or 3 fund portfolio, but it is not a "lazy" portfolio by the definition used in our Wiki.

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g3d
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Re: Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 5:08 pm

nobsinvestor wrote:Major 3 fund proponent here :D ( intermediate term tax exempt as a proxy for TBM for those in high tax brackets).

I see no compelling reason to make investing the least bit complicated (i.e. deviating from total market approach).

I might get some hate here, but I don't get the "slice and dicers" trying to eek out an extra few basis points of return over the long run by pointing to old historical data that might or might not have anything to do with the future (small cap value comes to mind).
This is something I don't get and I actually wanted to make a dedicated thread on this too (probably a stupid question, but at age 22 and <5 mos into my investing life, that's the expectation). We are very quick to say don't look at historical data as a rationale for slicing and dicing. But then very quick to say that you should invest in the core three portfolio because it has historically outperformed mutual funds. Conveniently, there is such a response is this thread:
longinvest wrote:I invest lazily in a Three-Fund Portfolio.

Here is why I do so: Investing in Total Markets
Are we hypocritical in choosing when it is and isn't okay to use past performance as a factor in our portfolios?

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Re: Does anyone have 'Lazy Portfolios'?

Post by TheGreyingDuke » Fri Aug 29, 2014 5:10 pm

[quote="steve r"] like Livesoft, almost never trade and only rebalance on occasion./quote]

Same here and as I enter the decumulation stage I rebalance with strategic withdrawals.
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Re: Does anyone have 'Lazy Portfolios'?

Post by nobsinvestor » Fri Aug 29, 2014 5:16 pm

This is something I don't get and I actually wanted to make a dedicated thread on this too (probably a stupid question, but at age 22 and <5 mos into my investing life, that's the expectation). We are very quick to say don't look at historical data as a rationale for slicing and dicing. But then very quick to say that you should invest in the core three portfolio because it has historically outperformed mutual funds. Conveniently, there is such a response is this thread:
Actually, the 3 fund portfolio' strengths are not in its outperformance; the outperformance is incidental as a result of its structure; there are many other slice and dice index portfolios, and dare I say, actively managed funds that have "outperformed" over certain time periods.

What the 3 fund get you is this:

Rock bottom costs (and costs are the only thing you can control)
Total Market ownership, which is mathematically the lowest-risk for highest-return investment strategy since you capture the average return of the market's collective wisdom

The "historical data" behind the 3 fund portfolio simply points out what we already know based on what I wrote above. Like I said, perhaps slice and dicing might provide higher returns, but because it deviates from the total market approach, it's at a higher risk level, and we cannot predict what will happen going forward.

BTW, I'm not much older than you- I'm 24. At 22 I was a slice and dicer :D

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g3d
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Re: Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 5:36 pm

nobsinvestor wrote:
This is something I don't get and I actually wanted to make a dedicated thread on this too (probably a stupid question, but at age 22 and <5 mos into my investing life, that's the expectation). We are very quick to say don't look at historical data as a rationale for slicing and dicing. But then very quick to say that you should invest in the core three portfolio because it has historically outperformed mutual funds. Conveniently, there is such a response is this thread:
Actually, the 3 fund portfolio' strengths are not in its outperformance; the outperformance is incidental as a result of its structure; there are many other slice and dice index portfolios, and dare I say, actively managed funds that have "outperformed" over certain time periods.

What the 3 fund get you is this:

Rock bottom costs (and costs are the only thing you can control)
Total Market ownership, which is mathematically the lowest-risk for highest-return investment strategy since you capture the average return of the market's collective wisdom
Perhaps I'm still learning the investment 'lingo', but don't rock bottom costs and a mathematical lowest-risk for highest-return investment strategy translate to better overall performance?

In other words, couldn't I pick any investment strategy based on previous performance and say I'm doing so not for the performance, but because it has low costs, a good tilt, etc? All of the benefits of any investment strategy are irrelevant (and actually harmful because it makes the investment more attractive) if it doesn't perform well. Therefore, in an alternate universe where the 3 fund portfolio actually performed very poorly over time, nobody would be saying "let's invest in a 3 fund portfolio because it has low costs and has low risk and high return potential".

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Re: Does anyone have 'Lazy Portfolios'?

Post by nobsinvestor » Fri Aug 29, 2014 5:42 pm

Perhaps I'm still learning the investment 'lingo', but don't rock bottom costs and a mathematical lowest-risk for highest-return investment strategy translate to better overall performance?
Over a long period of time, absolutely. But there is a tradeoff of risk for reward. There are many actively managed funds, even with high fees, as well as complicated slice and dice index portfolio, that will beat a total market index in any given year. I challenge you to find them ahead of time, however, and of course, they will revert to the mean eventually.

Total market doesnt mean "low risk high return", it means, I'm taking the lowest amount of risk for the highest amount of return.

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Re: Does anyone have 'Lazy Portfolios'?

Post by Kaufmanrider » Fri Aug 29, 2014 6:02 pm

g3d wrote:
Kaufmanrider wrote:I follow the Paul Merriman Ultimate Buy and Hold. It has 11 ETFs. I added one more, an international government bond. AA is 60/40 using Schwab commision free low ETF's. Rebalance only takes a few minutes. I use a google spread sheet that tracks my investment and tells me how many shares to buy/sell to keep my AA.
Interesting. Thanks for sharing. Do you use the exact funds he recommends (I see ERs around 0.5%) or just the asset allocation?
Yes, I use the ETF's he recommends from Schwab, where my Roll over IRA is.

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g3d
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Re: Does anyone have 'Lazy Portfolios'?

Post by g3d » Fri Aug 29, 2014 6:08 pm

nobsinvestor wrote:
Perhaps I'm still learning the investment 'lingo', but don't rock bottom costs and a mathematical lowest-risk for highest-return investment strategy translate to better overall performance?
I challenge you to find them ahead of time, however, and of course, they will revert to the mean eventually.
Finding them ahead of time, sure, I don't think I can do that. If I was able to, saying they would revert to the mean eventually? How about the Healthcare, Consumer Staples and Energy sectors which have dominated the index over the last 50+ years?

In my mind, a 50+ year outperformance is a permanent deviation from the mean.

FYI, loving the discussion and learning more about why the 3 fund portfolio is wrong. I hope I can be proven wrong so I can align more with Boglehead thinking.

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Re: Does anyone have 'Lazy Portfolios'?

Post by DonCamillo » Fri Aug 29, 2014 6:43 pm

Deep Thoughts wrote: If someone tells me that I can get another expected 1 percent per year CAGR, I don't care if it requires 20 funds to pull off, I would do it.
Buy Low and Sell High

Theoretically, one of the benefits of rebalancing is that you buy low (funds that have recently underperformed) and sell high (funds that have recently outperformed). If there is a real benefit to that, then it might be an advantage to have a few more slices to better capture outperformance and take advantage of out of favor funds. It could be lazy (or at least easy) if you allocate all the funds to the same percentage, and when they get out of balance, sell enough of the one that is worth the most to equalize the value of the one that is worth the least.
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SuperSaver
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Re: Does anyone have 'Lazy Portfolios'?

Post by SuperSaver » Fri Aug 29, 2014 6:44 pm

Can someone explain to me benefits of putting ANY bonds into a taxable account? I'm high tax bracket, and young. Should I still put some intermediate bond funds in taxable?

I have tax-deferred account, and am putting higher allocation of bonds there. Isn't the mantra here: consider everything as ONE portfolio.

Thanks!

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JoMoney
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Re: Does anyone have 'Lazy Portfolios'?

Post by JoMoney » Fri Aug 29, 2014 7:01 pm

g3d wrote:...Do any of you have a lazy fund that has more than the core three or four? What's your split? Do any of you have your portfolio very similar to these lazy portfolios?...
What about lazy portfolio that's less than the core three/four? I use a Buffett Bequest lazy portfolio.
I use Vanguard's short-term bond index (which is only 70% Government bonds) instead of treasuries as he directed, but I was following this kind of portfolio partly because of comments Buffett had made, but before he so explicitly laid out the terms of how he would/will implement it.
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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Fri Aug 29, 2014 7:40 pm

bloom2708 wrote:I am a newer Boglehead. I have a pretty straight line "3 fund portfolio". Age 43, 65% stocks/35% bonds.

Taxable accounts: 45% VTSAX, 20% VTIAX, 35% VWIUX (Int-Term Tax-Exempt Bonds)

Tax sheltered: 45% VTSAX, 20% VTIAX, 35% VBTLX

I thought about TIPS and REIT, but Taylor Larimore was helpful in reminding me to "keep it simple". Less than 5% allocation doesn't have much impact.

I have all 3 funds in each account. There is some broad discussions about allocating "across" or "within". I chose "within". It is easier for me.
Much easier. You have a good portfolio.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Does anyone have 'Lazy Portfolios'?

Post by arthurdawg » Fri Aug 29, 2014 7:58 pm

I'm pretty lazy...

I am about

30% TBM

10% REIT

10% SC Value

5% Small World FTSE

20% Big World FTSE

25% TSM
TSM / SCV / FTSE Big World / FTSE Small World / REIT / TBM / Int Term Tax Exempt

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Re: Does anyone have 'Lazy Portfolios'?

Post by dumbbunny » Fri Aug 29, 2014 7:58 pm

Vanguard Total Stock 35% or thereabouts
Vanguard Intn'l Stock 15% or thereabouts
Vanguard Total Bond 40% or thereabouts
Vanguard Int'l Bond 10% or thereabouts
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Re: Does anyone have 'Lazy Portfolios'?

Post by tpm871 » Fri Aug 29, 2014 8:25 pm

nobsinvestor wrote: Actually, the 3 fund portfolio' strengths are not in its outperformance; the outperformance is incidental as a result of its structure; there are many other slice and dice index portfolios, and dare I say, actively managed funds that have "outperformed" over certain time periods.

What the 3 fund get you is this:

Rock bottom costs (and costs are the only thing you can control)
Total Market ownership, which is mathematically the lowest-risk for highest-return investment strategy since you capture the average return of the market's collective wisdom

The "historical data" behind the 3 fund portfolio simply points out what we already know based on what I wrote above. Like I said, perhaps slice and dicing might provide higher returns, but because it deviates from the total market approach, it's at a higher risk level, and we cannot predict what will happen going forward.

BTW, I'm not much older than you- I'm 24. At 22 I was a slice and dicer :D
I have been a slice & dicer for about seven years. Let me start with things that I think we can all agree upon:

1. Keep expenses and taxes low. These are a drag on your portfolio's return, but it's totally within your control.

2. Diversification is good. Having different types of investments, each with different types of risks, lowers your overall risk. For example, owning shares in total stock market is less risky than owning shares in a few random stocks.

I think these are really the underlying core principles of being a Boglehead. With that said, I don't think that the three fund approach is really the optimal strategy for pursuing these principles.

One thing that people get wrong is thinking that investing in total stock market and funds like that is somehow not tilting. IT IS TILTING! Since it market cap weighted, you are investing the bulk of your money in a just a handful of the largest companies. That actually isn't as diversified as many slice & dice portfolios. Better diversification is the only free lunch in investing: it's possible to get higher returns at the same level of overall risk, in comparison to a less diversified portfolio.

Regarding fees, it's possible to have a slice & dice portfolio with low fees. For example, investing in VGK (European index) and VPL (Pacific Rim index) separately would have a 0.12 expense ratio; investing in VXUS (total international stock index) actually has a slightly higher expense ratio at 0.14.

Also, just because it's slice & dice doesn't mean that you have to sell a lot. You can just direct new money and/or dividends to funds that are under their allocation, many times rebalancing without selling.

The only real advantage of the three fund portfolio over a well designed slice & dice portfolio is that it takes less thought and less time. That's fine if that's what you prefer, but it's wrong to say that there are any inherent advantages beyond that. Saying that it is "mathematically lowest risk for highest return" is simply untrue.

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Re: Does anyone have 'Lazy Portfolios'?

Post by Deep Thoughts » Fri Aug 29, 2014 8:43 pm

we are returning to the eternal argument on this board. S&D vs. 3-Fund.

There are good fundamental reasons for choosing each one. Really really good. There are super intelligent people .... authors of finance books, Boglehead authors, Nobel laureates that have made the argument for EACH option.

You, as an investor have to undertake to understand the arguments for each side (factor based arguments on stock returns AND efficient market theories) and then make your own decision. I personally have been swayed by the factor based arguments ... Larry Swedroe, Rick Ferri, William Bernstein all advocate some sort of tilting (from extreme to mild). I look at the thinking and analysis that the S&D investors do on this board and I find it waaaaay more thoughtful and impressive than the arguments put forth by the 3-funders. But that's just me. I'm used to working with data and I believe I fully understand what are the drawback and the possible caveats that have to go with analyzing this sort of stochastic data.

One thing that I find particularly telling is that the usual S&D'er is quite respectful of a 3-fund portfolio and realize that it is a completely sane option. Rarely do I see the same thinking coming from the other direction.

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Taylor Larimore
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"Three Proofs That Total Stock Market is Efficient"

Post by Taylor Larimore » Fri Aug 29, 2014 9:07 pm

Saying that it (Total Stock Market Index Fund) is "mathematically lowest risk for highest return" is simply untrue.
Not according to this study:

Three Proofs That TSM Is Efficient.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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parsi1
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Re: Does anyone have 'Lazy Portfolios'?

Post by parsi1 » Fri Aug 29, 2014 9:21 pm

imgritz wrote:My portfolio is soooo lazy it snores. :D
+1
mine is 90% in target retirement 2020, 10% Reit
I haven't had any need to rebalance yet

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Re: Does anyone have 'Lazy Portfolios'?

Post by longinvest » Fri Aug 29, 2014 9:24 pm

g3d wrote:
longinvest wrote:I invest lazily in a Three-Fund Portfolio.

Here is why I do so: Investing in Total Markets
Are we hypocritical in choosing when it is and isn't okay to use past performance as a factor in our portfolios?
I think that the article I referred to makes a pretty good theoretical argument for investing in total market index funds, which is what I do. It is not based on past performance. The actual mathematical proof can be found in The Arithmetic of Active Management.
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Re: Does anyone have 'Lazy Portfolios'?

Post by Whiggish Boffin » Fri Aug 29, 2014 10:48 pm

In 2007, I put my nest egg in a David Swensen lazy portfolio: 30% US stock index, 15% developed int'l stock index, 10% emerging int'l stock index, 15% US real estate, 15% Treasury bonds, and 15% TIPS. I had to rebalance heavily in the 2007 real-estate decline, the 2008 stock crash, the 2009 real-estate crash, and the 2011 stock decline. That has worked out rather well.

In 2013, I converted to Bodieism and put about 40% of the nest egg into an 8-year TIPS ladder. The rest remains in the Swensen allocation.

My job has been hanging by a thread since 2007. If I never get another paycheck, the ladder will cover my basic living expenses from now until I turn 70, God willing. Then I will start taking Social Security, and buy an inflation-adjusted life annuity, which will cover my basic living expenses as long as I live.

I willl use some of the Swensen to buy the annuity. Every year I hold onto a job, even part-time, I can spend that year's ladder rung for the annuity, and leave more money in the Swensen to pay for toys, treats, and trips.

Most likely this is not the optimal strategy. I don't know how to figure out what that is -- figuring out what it was is easier. I do think my strategy is good enough.

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Re: Does anyone have 'Lazy Portfolios'?

Post by placeholder » Sat Aug 30, 2014 12:04 am

livesoft wrote:My portfolio is lazy as well. I made one trade in 2013 that ended up on my Form 1040 Schedule D. One single trade. Is that lazy enough?
I had 0 last year since I was able to keep things balanced with new money well enough so all my Sched D had was some carryover losses.

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Re: Does anyone have 'Lazy Portfolios'?

Post by placeholder » Sat Aug 30, 2014 12:07 am

I have a slice and dice allocation based on Merriman and others that read back in the day then with some TLH and bonus chasing moves it's a bit more fragmented but I don't care it's extremely easy to manage and suits me fine.

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Re: Does anyone have 'Lazy Portfolios'?

Post by berntson » Sat Aug 30, 2014 6:55 am

There has been lots of discussion of slicing and dicing in this thread, but I think this misses the main idea behind lazy portfolios: holding a relatively fixed allocation to stocks and bonds throughout your investing career. The advantages of glide paths are IMO oversold and simply add to the complexity of a portfolio. Find an allocation you like and stick with it.

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Re: Does anyone have 'Lazy Portfolios'?

Post by Call_Me_Op » Sat Aug 30, 2014 8:28 am

nobsinvestor wrote: What the 3 fund get you is this:

Rock bottom costs (and costs are the only thing you can control)
Total Market ownership, which is mathematically the lowest-risk for highest-return investment strategy since you capture the average return of the market's collective wisdom
I don't agree that total market ownership provides the best risk-adjusted returns. This is not supported by the data. It's not even close.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Does anyone have 'Lazy Portfolios'?

Post by vesalius » Sat Aug 30, 2014 8:35 am

I have a lazy, simple to manage 4 fund portfolio. It also happens to be an extreme tilt Larry portfolio. Tilting does not automatically equate to being hard to manage.

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Re: Does anyone have 'Lazy Portfolios'?

Post by nobsinvestor » Sat Aug 30, 2014 9:47 am

Wow, lots of replies since my last post :happy

I still don't get the slice and dicers, but I will say this:

As long as you're regularly investing, using low cost funds and with a good asset allocation for you, the difference in the long run between a slice and dice and a 3 fund portfolio is negligible. You're already miles ahead of most investors. It's splitting hairs. I prefer the 3 fund for simplicity's sake and the strong academic (and real life) evidence behind it.

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Re: Does anyone have 'Lazy Portfolios'?

Post by midareff » Sat Aug 30, 2014 9:53 am

I use an 11 fund lazy portfolio. Everything needs to be put in context, I'm 66, retired 2.5 and in drawdown. I also slice and dice. Taxable equities have equal 7.5% of portfolio slices of Total US, Total Int, Small Value and Int Small along with IT Tax-Exempt and Limited Term Tax Exempt from which I draw monthly. My IRA has 7.5% slices of REITS, Health Care and the balance roughly divided into three bond funds, a short, a intermediate and one a little outside IG.

For a newbie I would stick with three or four until your educational understanding of risk tolerance has blossomed. You may not want to go further at that point.

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Re: Does anyone have 'Lazy Portfolios'?

Post by jaab » Sat Aug 30, 2014 9:57 am

nobsinvestor, something like U.S. TSM + Int. TSM + U.S. TBM is a slice & dice portfolio, too. Especially when Int. TSM is not on par with US. TSM. But also regarding non-US bonds, inflation linked bonds, HY and so on. As any other tilt it can be written as the global capital market portfolio** + a deviation from that (= a long/short factor). and as it is with any other tilt there can be rational or irrational, good or bad, risk or free lunch based reasons to do so. Also, such a portfolio is not about "academic evidence" per se, just about low costs and simplicity.

** see http://papers.ssrn.com/sol3/papers.cfm? ... id=2352932

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Re: "Three Proofs That Total Stock Market is Efficient"

Post by tpm871 » Sat Aug 30, 2014 12:37 pm

Taylor Larimore wrote:
Saying that it (Total Stock Market Index Fund) is "mathematically lowest risk for highest return" is simply untrue.
Not according to this study:

Three Proofs That TSM Is Efficient.

Best wishes.
Taylor
Thanks, Taylor. I'd be interested to hear whether everyone agrees with the assumptions made there.

The first assumption made is that markets are perfectly efficient, and that participants always know how to act in order to maximize their probability of success. While I believe that there is a tendency towards an efficient market, I think that it's a huge stretch to assume that markets are perfectly efficient at all times or that most people are 100% rational.

But this perhaps clarifies one of my own reasons for favoring S&D: I believe that markets aren't perfectly efficient. That's not to say that I know how they aren't efficient or that I somehow change my strategy based on some insight that I think that nobody else knows. I think that having more asset classes and investing new money in the ones that are furthest below your target allocation is a way to systematically benefit from times in which the market isn't perfectly efficient. The more distinct and non-correlated asset classes that you have, the better your chances of participating in such an opportunity.

Perhaps this is higher risk than TSM by definition... but I'm good with that.

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Re: Does anyone have 'Lazy Portfolios'?

Post by dbr » Sat Aug 30, 2014 12:47 pm

Deep Thoughts wrote:
One thing that I find particularly telling is that the usual S&D'er is quite respectful of a 3-fund portfolio and realize that it is a completely sane option. Rarely do I see the same thinking coming from the other direction.
I am not exactly a 3-fund investor but very close to it, and I totally respect the concept of slicing and dicing, and certainly those who choose to do it. I always have the reservation that no one should slice and dice because someone else does or because they see it in a book or on the internet. Rather one should do it when one understands why one would and how it is going to work. I don't tilt/SD because I don't need to and I don't want to.

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 1:00 pm

SuperSaver wrote:Can someone explain to me benefits of putting ANY bonds into a taxable account? I'm high tax bracket, and young. Should I still put some intermediate bond funds in taxable?

I have tax-deferred account, and am putting higher allocation of bonds there. Isn't the mantra here: consider everything as ONE portfolio.

Thanks!
Hi SuperSaver,

There is nothing wrong with bonds in a taxable account. There are two strategies that a Boglehead can use: a) Equal Location - mostly the same funds in each account (with minor differences for bonds) and b) Asset Location - different funds in each account. An investor must determine which strategy works better for them. There is no right or wrong answer.

Related to that is bonds in taxable. You could easily place the Vanguard Intermediate Term Tax Exempt fund as the dividends are exempt from federal taxation. Any Treasury or TIPS bond funds are exempt from state and local taxation.

The benefits are the investor does not have to sell equities only in a taxable account for income or in a market downturn. There are funds available to rebalance into equities.

This is the strategy that Rick Ferri and his firm Portfolio Solutions recommend. You can read an excellent article from Rick on this very subject here:

http://www.rickferri.com/blog/strategy/ ... ake-sense/

Stay the course!
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 1:03 pm

Peterjens wrote:Vanguard Total Stock 35% or thereabouts
Vanguard Intn'l Stock 15% or thereabouts
Vanguard Total Bond 40% or thereabouts
Vanguard Int'l Bond 10% or thereabouts
Hi Peterjens,

This is the exact portfolio that Vanguard now recommends. Vanguard also includes thee four funds in both the Target and Life Strategy funds.

I would be interested in your thoughts and experience thus far with the new Total International Bond Index Fund.

Best.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 1:08 pm

nobsinvestor wrote:Wow, lots of replies since my last post :happy

I still don't get the slice and dicers, but I will say this:

As long as you're regularly investing, using low cost funds and with a good asset allocation for you, the difference in the long run between a slice and dice and a 3 fund portfolio is negligible. You're already miles ahead of most investors. It's splitting hairs. I prefer the 3 fund for simplicity's sake and the strong academic (and real life) evidence behind it.
Hi nobsinvestor,

I would recommend a good investing book that will be well worth the investment of time. Your knowledge will grow. Here are a few I recommend:

1) Any books by Jack Bogle. Consider starting with "The Little Book of Common Sense Investing"
2) Rick Ferri - any books
3) Jack Brennan - "Plain Talk on Investing"
4) David Swensen - "Unconventional Success"

You will have a whole different perspective about true investing.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Does anyone have 'Lazy Portfolios'?

Post by CMartel2 » Sat Aug 30, 2014 1:28 pm

Some of what you're investing in is limited by what is available in your 401K, for instance. Thankfully, one of my available funds is a Vanguard Target Reirement fund. Right now, I'm investing solely in Vanguard Target Retirement funds in that account and then a Small Cap Value Fund in my ROTH with a bit of Total Bond Fund, as well. If you went with all Target funds or potentially LIfeStrategy funds, you'd never have a need to rebalance if you liked that asset allocation because it's constantly being rebalanced for you. I honestly think that makes a lot of sense.

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Re: Does anyone have 'Lazy Portfolios'?

Post by leonard » Sat Aug 30, 2014 1:43 pm

I use a Merriman-type slice and dice approach, using VG funds and ETF's (not DFA).
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