Does anyone have 'Lazy Portfolios'?

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Re: Does anyone have 'Lazy Portfolios'?

Post by dumbbunny » Sat Aug 30, 2014 2:01 pm

abuss368 wrote:
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.
I had a three fund Lazy Portfolio up until last April when my Vanguard Flagship representative suggested adding the int'l bond. My modus operandi has alway been to let Vanguard stay the course for me and my 10% stake fits my risk/reward profile. Since April, it has provided me a 3.34% return vs 2.28% for Total Bond. Appears to be a good decision....for now.
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Re: Does anyone have 'Lazy Portfolios'?

Post by 6miths » Sat Aug 30, 2014 2:16 pm

I have a Couch Potato portfolio but am too lazy to follow it very closely.
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Re: Does anyone have 'Lazy Portfolios'?

Post by Gort » Sat Aug 30, 2014 2:51 pm

berntson wrote: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.
+1

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 3:05 pm

CMartel2 wrote: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.
Hi CMartel2,

I recently helped a family member switch from the Three Fund Portfolio to a Vanguard Target Retirement Fund. When they invested in The Three Fund Portfolio, they were never looking at the account (which may be a good thing) or rebalancing, increasing bonds with age, had no interest in investing, etc. The Target fund was huge for them and has worked very well.

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 3:07 pm

Peterjens wrote:
abuss368 wrote:
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.
I had a three fund Lazy Portfolio up until last April when my Vanguard Flagship representative suggested adding the int'l bond. My modus operandi has alway been to let Vanguard stay the course for me and my 10% stake fits my risk/reward profile. Since April, it has provided me a 3.34% return vs 2.28% for Total Bond. Appears to be a good decision....for now.
Hi Peterjens,

I have enjoyed learning more about this asset class. It is so large that many investment houses are creating funds. I don't know it involves increasing levels of debt. I am interested how this fund will perform in a market downturn compared to U.S. Bonds. I will not be surprised if more investors invest in this asset class in the future.

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 3:09 pm

berntson wrote: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.
I understand the static allocation, but Jack Bogle has always recommended "age in bonds" or something that becomes more conservative with age.
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Correction

Post by Taylor Larimore » Sat Aug 30, 2014 3:13 pm

The main idea behind lazy portfolios: holding a relatively fixed allocation to stocks and bonds throughout your investing career.
Sorry, this is not the main idea behind lazy portfolios. The main idea is to keep investing simple.

Lazy portfolios, like The Three Fund Portfolio, are not designed to hold "a relatively fixed allocation to stocks and bonds throughout your investing career." This could be a major mistake. Nearly all investment authorities (including Mr. Bogle) recommend increasing bonds and reducing stocks as we get older.

Best wishes.
Taylor
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Re: Correction

Post by abuss368 » Sat Aug 30, 2014 3:25 pm

Taylor Larimore wrote:
The main idea behind lazy portfolios: holding a relatively fixed allocation to stocks and bonds throughout your investing career.
Sorry, this is not the main idea behind lazy portfolios. The main idea is to keep investing simple.

Lazy portfolios, like The Three Fund Portfolio, are not designed to hold "a relatively fixed allocation to stocks and bonds throughout your investing career." This could be a major mistake. Nearly all investment authorities (including Mr. Bogle) recommend increasing bonds and reducing stocks as we get older.

Best wishes.
Taylor
Hi Taylor,

Thank you and well said. We have continued to increase our bond allocation with age and this has worked very well.

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

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Re: Correction

Post by retiredjg » Sat Aug 30, 2014 3:52 pm

abuss368 wrote:
Taylor Larimore wrote:
The main idea behind lazy portfolios: holding a relatively fixed allocation to stocks and bonds throughout your investing career.
Sorry, this is not the main idea behind lazy portfolios. The main idea is to keep investing simple.

Lazy portfolios, like The Three Fund Portfolio, are not designed to hold "a relatively fixed allocation to stocks and bonds throughout your investing career." This could be a major mistake. Nearly all investment authorities (including Mr. Bogle) recommend increasing bonds and reducing stocks as we get older.

Best wishes.
Taylor
Hi Taylor,

Thank you and well said. We have continued to increase our bond allocation with age and this has worked very well.

Best.
Which brings us right back to what I said before - people use the term in different ways. The Wiki says one thing, Taylor and others say another thing. The term "lazy portfolio" is used in so many diverging ways, the term is pretty useless.

Kind of like "natural" chicken - very few people know what that term means and it has nothing to do with chickens living a "natural" life....

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Re: Does anyone have 'Lazy Portfolios'?

Post by cfs » Sat Aug 30, 2014 3:57 pm

SWAN.

I don't have a lazy portfolio, I have a SWAN (sleep well at night) portfolio, and it should be noted that there is no set SWAN allocation, it is all up to the individual investor and it is based on the pillow test.

Thanks for reading.
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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 4:01 pm

cfs wrote:SWAN.

I don't have a lazy portfolio, I have a SWAN (sleep well at night) portfolio, and it should be noted that there is no set SWAN allocation, it is all up to the individual investor and it is based on the pillow test.

Thanks for reading.
Hi cfs,

Would you be willing to share what asset classes comprise the SWAN portfolio?

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 cfs » Sat Aug 30, 2014 4:48 pm

abuss368 wrote:
cfs wrote:SWAN.

I don't have a lazy portfolio, I have a SWAN (sleep well at night) portfolio, and it should be noted that there is no set SWAN allocation, it is all up to the individual investor and it is based on the pillow test.

Thanks for reading.
Hi cfs,

Would you be willing to share what asset classes comprise the SWAN portfolio?

Best.
Good Saturday to you, remember that there is NO official SWAN portfolio, but as far as asset classes your "SWAN" will have any asset class you like, as long as you sleep well at night. I have a boring portfolio of good amount of intermediate term bond funds, good amount of municipal bond funds, still holding a small amount on high yield bond fund, good amount of large blend equity, significant amount of small value, still holding one individual stock, and a significant amount in cash reserves, my "SWAN" allocation comes down to approximately 35-40 percent equities and 60-65 in bonds/cash reserves-- I sleep well at night.

Thanks for reading.
~ Member of the Active Retired Force since 2014 ~

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 4:53 pm

cfs wrote: Good Saturday to you, remember that there is NO official SWAN portfolio, but as far as asset classes your "SWAN" will have any asset class you like, as long as you sleep well at night. I have a boring portfolio of good amount of intermediate term bond funds, good amount of municipal bond funds, still holding a small amount on high yield bond fund, good amount of large blend equity, significant amount of small value, still holding one individual stock, and a significant amount in cash reserves, my "SWAN" allocation comes down to approximately 35-40 percent equities and 60-65 in bonds/cash reserves-- I sleep well at night.

Thanks for reading.
Hi cfs,

You have a nice portfolio. I have a follow up question concerning your intermediate term bonds. Are they U.S. only or both U.S. and international?

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 cfs » Sat Aug 30, 2014 5:17 pm

abuss368 wrote:
cfs wrote: Good Saturday to you, remember that there is NO official SWAN portfolio, but as far as asset classes your "SWAN" will have any asset class you like, as long as you sleep well at night. I have a boring portfolio of good amount of intermediate term bond funds, good amount of municipal bond funds, still holding a small amount on high yield bond fund, good amount of large blend equity, significant amount of small value, still holding one individual stock, and a significant amount in cash reserves, my "SWAN" allocation comes down to approximately 35-40 percent equities and 60-65 in bonds/cash reserves-- I sleep well at night.

Thanks for reading.
Hi cfs,

You have a nice portfolio. I have a follow up question concerning your intermediate term bonds. Are they U.S. only or both U.S. and international?

Best.
Actually, my intermediate term bonds are US only, but I left one item out, on the 457 we have a target retirement fund from TR Price (no others available) and that TR fund contains small percentage of international equity and small percentage of international bond. Note that I retired, but my dw is still working and we continue to add to our investments on a bi-weekly basis via the 457 and the taxable account. Again, boring way to invest and I have not tracked earnings in a long time, at the end of the year what I check is for total portfolio Growth (I know what we had at the end of December 2013 and I know what we have as of the end of August 2014, and for me that's the number that counts).

Thanks for reading.
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Re: Does anyone have 'Lazy Portfolios'?

Post by scone » Sat Aug 30, 2014 5:17 pm

Another Merriman-like portfolio here. I particularly wanted to focus on lowering the drawdowns compared to other types of portfolios, and the diversification helps with that goal.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sat Aug 30, 2014 5:18 pm

cfs wrote:
abuss368 wrote:
cfs wrote: Good Saturday to you, remember that there is NO official SWAN portfolio, but as far as asset classes your "SWAN" will have any asset class you like, as long as you sleep well at night. I have a boring portfolio of good amount of intermediate term bond funds, good amount of municipal bond funds, still holding a small amount on high yield bond fund, good amount of large blend equity, significant amount of small value, still holding one individual stock, and a significant amount in cash reserves, my "SWAN" allocation comes down to approximately 35-40 percent equities and 60-65 in bonds/cash reserves-- I sleep well at night.

Thanks for reading.
Hi cfs,

You have a nice portfolio. I have a follow up question concerning your intermediate term bonds. Are they U.S. only or both U.S. and international?

Best.
Actually, my intermediate term bonds are US only, but I left one item out, on the 457 we have a target retirement fund from TR Price (no others available) and that TR fund contains small percentage of international equity and small percentage of international bond. Note that I retired, but my dw is still working and we continue to add to our investments on a bi-weekly basis via the 457 and the taxable account. Again, boring way to invest and I have not tracked earnings in a long time, at the end of the year what I check is for total portfolio Growth (I know what we had at the end of December 2013 and I know what we have as of the end of August 2014, and for me that's the number that counts).

Thanks for reading.
Thanks CFS. That makes a lot of sense.
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Re: Correction

Post by berntson » Sat Aug 30, 2014 6:10 pm

Taylor Larimore wrote:
The main idea behind lazy portfolios: holding a relatively fixed allocation to stocks and bonds throughout your investing career.
Sorry, this is not the main idea behind lazy portfolios. The main idea is to keep investing simple.

Lazy portfolios, like The Three Fund Portfolio, are not designed to hold "a relatively fixed allocation to stocks and bonds throughout your investing career." This could be a major mistake. Nearly all investment authorities (including Mr. Bogle) recommend increasing bonds and reducing stocks as we get older.
This is probably just a verbal disagreement, but it may actually point to a problem with the wiki. The wiki claims that:
Lazy portfolios are designed to perform well in most market conditions. Most contain a small number of low-cost funds that are easy to rebalance. 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.
This suggests that a young investor with a 90/10 three-fund portfolio who intends to buy more bonds as she gets older does not have a lazy portfolio in the intended sense. So while some three-fund portfolios are lazy, others are not. It depends on whether you have a more-or-less fixed asset allocation. If this is not a what lazy portfolio is, someone should clarify the wiki article.

A great portfolio strategy IMO is LifeStyle Growth from start to finish. Investors may wish to hold extra cash at retirement to help deal with sequence of return risk (maybe three or four years in a savings account or CDs to be spent down if there is a market correction.) I just don't see the need for complex formulas or glide paths. This reduces portfolio simplicity. What could be the point of telling a 26 year old that she now needs to sell stocks to buy bonds because she is now 40 years from retirement instead of 41?
Last edited by berntson on Sat Aug 30, 2014 8:52 pm, edited 2 times in total.

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Re: Does anyone have 'Lazy Portfolios'?

Post by berntson » Sat Aug 30, 2014 6:26 pm

abuss368 wrote:
berntson wrote: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.
I understand the static allocation, but Jack Bogle has always recommended "age in bonds" or something that becomes more conservative with age.
Thanks abuss368! I guess what's unclear to me is why this is good advice. I recognize that there is sequence of return risk when a retiree first retires. So I do think that it's worth holding a few years of cash at retirement. I just don't think we need anything as fancy as age in bonds.

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Re: Does anyone have 'Lazy Portfolios'?

Post by telemark » Sun Aug 31, 2014 11:10 am

g3d wrote: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?
The only reference I can find on that is an article by Scott Burns from 2002 where he says
When the Treasury started offering inflation-protected securities in 1997, it opened a new world of opportunity. These securities offer a real return of 2 percent to 3 percent a year plus the rate of inflation -- a return that makes them competitive with conventional bonds. If Vanguard Inflation-Protected Securities fund had been used in the Extra-Crispy 50/50 portfolio this year, its return would have been a loss of only 1.56 percent instead of a loss of 5.5 percent.

My bet is a lot of people out there would like an easy way to lose only 1.56 percent in a bad year -- and make a bunch in a good year.
With benefit of hindsight I am not impressed by this argument and prefer to mix TIPS with either TBM or long term treasuries. But the last few years have made us all more concerned with the bond side of our portfolios.

As far as I know the term "Lazy Portfolios" was first popularized by Paul Farrell in a series of articles for Marketwatch where he discussed a number of them. Context is important here, since Marketwatch is mostly about picking stocks and timing the market and managing your portfolio on a day-to-day basis. In that light any portfolio that you only need to look at once a year seems very lazy indeed, and some of the names (Gone Fishing, Coffeehouse, Couch Potato) suggest this. Bogleheads who think seven funds are too many to manage, and who balk at adjusting their asset allocation once a decade, have attained levels of sloth far beyond the average investor :happy

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Sun Aug 31, 2014 12:34 pm

berntson wrote: Thanks abuss368! I guess what's unclear to me is why this is good advice. I recognize that there is sequence of return risk when a retiree first retires. So I do think that it's worth holding a few years of cash at retirement. I just don't think we need anything as fancy as age in bonds.
Hi berntson,

As we get older, we do not have the time to recoup or make additional contributions. Often it becomes more important to protect what we have than to risk getting more.

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 xxd091 » Mon Sep 01, 2014 4:50 am

As a UK investor of 68 years young who has drunk the Bogleheads Koolaid over many years and made my pile-my Portfolio is getting lazier as I grow older . It is now 26% Vanguard Developed World ex UK Equity Index,4% Vanguard UK FTSE Equity Index and 60% Vanguard Global Bond Index Fund.I will probably put everything into a LifeStrategy Fund as I come near the finish-so easy for my wife to handle .The most wonderful thing John Bogle did was to free us from the Financial Services Industry and let us live our lives without having to look over our shoulders all the time .I raise my glass to him every day!
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Re: Does anyone have 'Lazy Portfolios'?

Post by rustymutt » Mon Sep 01, 2014 6:16 am

Our portfolios are sooo lazy, I make them get up a 5am and run 10 miles, with a full packs. In the snow even.
Soooo lazy. If I had a bull whip.
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Re: Does anyone have 'Lazy Portfolios'?

Post by fourwedge » Tue Sep 02, 2014 11:43 pm

tpm871 wrote:
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.
+1 this post
I think cap weighting is tilting
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Re: Does anyone have 'Lazy Portfolios'?

Post by dbr » Wed Sep 03, 2014 7:56 am

Tilting is not an opinion; it is a definition. That definition can be anything anyone wants to use, but to communicate clearly with others and to have everyone asking the same question, everyone has to agree what definition is used. Almost all the time almost everyone means for the total market to be the definition of not tilted. And yes, it is true that the total market allocation is heavily loaded to a fairly small number of very large companies and very lightly loaded with a very large number of small companies. That is absolutely fine and does not raise any obstacle to asking what would happen if one adds more small companies to the total market. One could also ask how the answer would be different if one started with a different definition. If one wants to do that it is necessary to be clear beforehand what one intends to mean in using various terms.

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Re: Does anyone have 'Lazy Portfolios'?

Post by dbCooperAir » Wed Sep 03, 2014 2:55 pm

Simple 3 funds, spread across 7 accounts with using the best funds as possible in each account. Toss is some I-bonds than its more like 9 accounts.

With funds being added though out the year to 4 of the 7 accounts it can make it fun to maintain the AA at times, as the amount grows the additional funds don't push the AA as much but still need to keep and an eye on it.

I really would not want to deal with 8-10 funds at this time.
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Re: Does anyone have 'Lazy Portfolios'?

Post by k66 » Wed Sep 03, 2014 9:46 pm

I have a lazy-ish 6-fund portfolio, but am too lazy perhaps to make it any lazier. Now that VG-Canada offers more consolidated ETFs, I could consolidate into a 3-fund portfolio... just haven't done so given that it will actually cost me an additional 2 bp + commissions...
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Re: Does anyone have 'Lazy Portfolios'?

Post by stemikger » Thu Sep 04, 2014 3:16 am

g3d wrote: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?
Why do you need to look any further than the 3 fund? It has everything you need. Why complicate things by adding to it? I personally favor the two fund portfolio because like Jack I don't feel the need for international. However, when Jack was asked how many funds should an index investor have in their porfolio. His response was quick and consistent. He said, a person could easily do it with one and his reccomendation was the Vanguard Balanced Index Fund. It doesn't get any lazier than that. You don't even need to rebalance your AA.
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Less is more.

Post by Taylor Larimore » Thu Sep 04, 2014 8:06 am

I know that any time a newbie comes in to ask for advice on asset allocation (myself included), an overwhelming majority of responses advise the three or four fund portfolio.
g3d:

"Less is more" is usually better when designing a portfolio.

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

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Re: Does anyone have 'Lazy Portfolios'?

Post by Crow Hunter » Thu Sep 04, 2014 8:13 am

If I could, I would have it all in a Life Strategy or Target retirement and never look at it. But I can't because of where the accounts are.

S&P 500 Index in my 401k, same in my wife's 401k.

Then our Vanguard accounts have Total Bond, Total International Stock and Total Stock Market with some Extended Market to offset the S&P 500 Index to meet our 70/30 40% International AA.

I can see some definite possible advantages of a Slice and Dice but I frankly don't want to deal with it. If I make at least 3% real between now and when I retire and get 1% real in retirement, I will have twice my current living expenses each year to spend and still have a little left over when I am 90 without running out of money. Dealing with all the accounts that I have to now just to keep up with the 3 fund portfolio gets on my nerves at times.

Now if I didn't have other hobbies and things that I wanted to do, I would probably do the Slice and Dice but it puts more onus on me than I want to deal with.

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Re: Does anyone have 'Lazy Portfolios'?

Post by dbr » Thu Sep 04, 2014 8:24 am

I'm convinced that lazy portfolios have been created by authors who want to publish a book or article and have nothing to sell if they can't concoct a series of steps that can be represented as taking the investor from a "naive" portfolio to a "sophisticated" portfolio. I don't think this has anything to do with generating tilted portfolios based on some possible implications of portfolio theory.

To answer the TIPS question, yes, there are reasons to invest in TIPS but I don't think those reasons support adding small allocations to TIPS among a bunch of other bond holdings.

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Sweeping generalizations

Post by telemark » Thu Sep 04, 2014 2:35 pm

I think it's more useful to focus on what lazy portfolios and the three fund portfolio have in common -- diversification, low costs, using index funds where practical, not timing the market -- than it is to speculate on the motives of people who were, in many cases, writing years before the three fund portfolio was popular or even possible. We can argue forever about what is optimal, but almost any of these* is probably better than what most investors are doing.

* I'll make an exception here for the more complicated Couch Potato portfolios. I don't like using equal weights for everything and making lots of sector bets.

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Re: Does anyone have 'Lazy Portfolios'?

Post by selftalk » Thu Sep 04, 2014 8:30 pm

I put my wife in the second graders portfolio : 60% VTI, 30% VXUS and 10% in BND. She`s doing fine and never looks at it which is a large plus.

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Re: Does anyone have 'Lazy Portfolios'?

Post by graveday » Thu Sep 04, 2014 9:46 pm

rustymutt wrote:Our portfolios are sooo lazy, I make them get up a 5am and run 10 miles, with a full packs. In the snow even.
Soooo lazy. If I had a bull whip.
Sure, but you're only talking a couple basis points and a bull whip can bite back.

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Re: Does anyone have 'Lazy Portfolios'?

Post by placeholder » Fri Sep 05, 2014 8:26 pm

Watch out for the bear whip.

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Re: Does anyone have 'Lazy Portfolios'?

Post by abuss368 » Mon Sep 08, 2014 8:03 am

Hi g3d,

Always remember to keep investing simple and less funds will work much better for you over time. Jack Bogle has often said "We simply do not need 8 mutual funds".

A few Total Market funds is all that is ever "needed".

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 jlgrandam » Mon Sep 08, 2014 8:50 am

I have only Total US or Total International funds along with CDs and Ibonds. I have legacy shares in one stock that I'm working on how to get rid of now.

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Re: Correction

Post by Benjamin Buffett » Fri Jan 17, 2020 5:06 pm

    Taylor Larimore wrote:
    Sat Aug 30, 2014 3:13 pm
    The main idea behind lazy portfolios: holding a relatively fixed allocation to stocks and bonds throughout your investing career.
    Sorry, this is not the main idea behind lazy portfolios. The main idea is to keep investing simple.

    Lazy portfolios, like The Three Fund Portfolio, are not designed to hold "a relatively fixed allocation to stocks and bonds throughout your investing career." This could be a major mistake. Nearly all investment authorities (including Mr. Bogle) recommend increasing bonds and reducing stocks as we get older.

    Best wishes.
    Taylor
    I would have to agree that the idea of a lazy portfolio is to make investing as simple and easy as possible. I know for a fact that my own asset allocation for my chosen lazy portfolio is very aggressive, I have no doubt that as I get closer to retirement I will probably feel the urge to move to a more conservative portfolio.

    However the Bogleheads Wiki does clearly state the aims of lazy portfolio construction, and gives a definition for it:
    "Lazy portfolios are designed to perform well in most market conditions. Most contain a small number of low-cost funds that are easy to rebalance. 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.[note 1] "
    (Emphasis added)

    Wise or unwise, according to the Bogleheads Wiki a lazy portfolio is defined(by our own Wiki here) as a portfolio designed to preform well in most market conditions, and maintain the same allocation for an extended period of time.

    Personally whatever portfolio I chose, I would make every effort to keep it manageable and low cost. My portfolio may not be a "lazy portfolio" should I change it closer to retirement. In my book the best portfolio isn't a "lazy portfolio" but a portfolio that does not take too much, or too little risk for the individual investor, that portfolio can be best defined as a Boglehead Portfolio(A portfolio that is constructed in accordance with Boglehead investing philosophy).

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    Re: Correction

    Post by retiredjg » Fri Jan 17, 2020 5:14 pm

    Benjamin Buffett wrote:
    Fri Jan 17, 2020 5:06 pm
    Wise or unwise, according to the Bogleheads Wiki a lazy portfolio is defined(by our own Wiki here) as a portfolio designed to preform well in most market conditions, and maintain the same allocation for an extended period of time.
    The term "lazy portfolio" is meaningless in my opinion. It has no definition. Well, maybe it has a definition designated for a certain purpose - such as in a certain page in our Wiki. To the general public, there is no telling what it means.

    If a person comes here and says "I want a lazy portfolio" that could many many different things. You absolutely must get them to define it for you before you can have any kind of meaningful conversation.

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    "The Three-Fund Portfolio: The Lazy Way to Invest"

    Post by Taylor Larimore » Fri Jan 17, 2020 7:38 pm

    Bogleheads:

    I find it hard to believe that any of the Market Watch Lazy Portfolios have a stock/bond allocation that cannot be altered when the owner's goals, time-frame, risk-tolerance or financial situation changes.

    In searching, I found this article on the "Just Start Investing" website comparing my Three-Fund Portfolio to a Lazy Portfolio. You may find it helpful.

    Three Fund Portfolio: The Lazy Way To Invest

    Best wishes
    Taylor
    Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
    "Simplicity is the master key to financial success." -- Jack Bogle

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    Re: "The Three-Fund Portfolio: The Lazy Way to Invest"

    Post by Benjamin Buffett » Mon Jan 20, 2020 2:49 pm

    Taylor Larimore wrote:
    Fri Jan 17, 2020 7:38 pm
    Bogleheads:

    I find it hard to believe that any of the Market Watch Lazy Portfolios have a stock/bond allocation that cannot be altered when the owner's goals, time-frame, risk-tolerance or financial situation changes.

    In searching, I found this article on the "Just Start Investing" website comparing my Three-Fund Portfolio to a Lazy Portfolio. You may find it helpful.

    Three Fund Portfolio: The Lazy Way To Invest

    Best wishes
    Taylor
    Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
    I like the simplicity of the article you linked. I have no problem with the three fund portfolio, and think it is one of the best ways to invest. For me the only real issue is the definition of lazy portfolio. If the definition on the wiki is wrong it needs to be changed, if the definition on the wiki is correct and already in the financial lexicon, then using the proper definition would avoid the most confusion.

    My personal investment choice uses two to three funds, and will have a period of time that it behaves as a lazy portfolio:
    I also like a two fund portfolio for its added simplicity. Personally my portfolio of choice for my largest retirement account the three fund, the portfolio has changed its allocation from 100% equities, to 90%, and most recently as I have gotten older to 85% equities. It currently is allocated in 75% Total Stock Market, 20% VTIP, and 5% VXUS. My 401K which has more limited fund options is a two fund portfolio that hovers around 85% VT and 15% VTIP.

    In as much as I intend to keep the basic spread for most my accumulation when I reach 75%-80% equities until I get to where a glide path is appropriate, approximately ten years before retirement, it would then become a portfolio that would be defined as a lazy portfolio. During accumulation X>80% equities feels too spicy as I get older, but X<75% feels too bland, so my personal portfolio is a three fund portfolio that has adjusted its allocation, been simplified, and will hover as a lazy portfolio most of my working life, and then glide to more stability about ten years before pulling the trigger on retirement.

    My point of contention is the definition of a lazy portfolio. The boglehead wiki, and other investment websites all clearly define it as a portfolio with a fixed stock and bond allocation that an investor can keep for an extended period of time.

    Thus a three fund portfolio can be set up as a lazy portfolio, but not all three fund portfolios would be classified as lazy portfolios. Not all lazy portfolios use three funds.

    I still think The Boglehead's Guide to the Three Fund Portfolio is one of the best books on retirement investing ever written, simple, easy to read, and practical. However, until the wiki changes, I still think that a three fund portfolio that continually adjusts its bond allocation does not fit the Boglehead Wiki approved definition of a lazy portfolio.

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by nisiprius » Mon Jan 20, 2020 2:56 pm

    I think the term "lazy portfolio" was coined by Paul T. Farrell of MarketWatch: Paul T. Farrell's Lazy Portfolios.
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    Re: "Three Proofs That Total Stock Market is Efficient"

    Post by Portfolio7 » Mon Jan 20, 2020 11:52 pm

    tpm871 wrote:
    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.
    To be clear, I think a 3 fund portfolio is a fine portfolio, and elegantly simple. If it appeals to you there is certainly no compelling reason to do anything different.

    I slice and dice. I had designed this portfolio before I ever heard of Bogleheads, and see no reason to change it. It's diversified, low cost, mostly index funds plus a couple active funds that are on the passive end of the active spectrum, if that makes sense.

    A true global market portfolio is, I believe, around 40-45% equity and the remaining portion bonds. There are many players in the markets, each with their own set of goals. Foundations, and colleges, and sovereign funds, and Insurance companies... they all have their own goals, and those goals are not the same as yours or mine. In fact, the Global Market Portfolio has gotten more conservative over time, as bond issuance has grown relative to equity. I suspect this is due in large part to organizations that need 'safe' investments to ensure liquidity, and in fact for many companies I believe it's a legal requirement. Pivot now to Taylor's post: a 3-Fund portfolio maximizes the wisdom of the market, and I agree. However, I am not the market. I am an individual who needs to retire in some odd number of years. I think this reasoning is consistent with 3-funders who are 80/20 or 70/30, accumulating for retirement, or else 30/70 to preserve spending power after retirement. All of them hold portfolios that are anything but the actual global market portfolio, but that corresponds to their unique goals.

    S&D just takes it another step, though it's admittedly controversial. I tried to pick well diversified slices of the market that have a strong history of returns, but also higher volatility. I settled on 6 equal slices I liked, plus Fixed Income. I decided to backtest the portfolio just to idiot proof it as well as I was able, and those backtests instead gave very positive results. Years later I'm still happy with the performance. Better yet, I understand why I chose each slice, and that makes it easier for me to stay the course.

    I may make changes in retirement.... low volatility is so key to high SWR's that I think it makes sense to consider a different portfolio than I used for accumulation.
    "An investment in knowledge pays the best interest" - Benjamin Franklin

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by Portfolio7 » Tue Jan 21, 2020 12:01 am

    nisiprius wrote:
    Mon Jan 20, 2020 2:56 pm
    I think the term "lazy portfolio" was coined by Paul T. Farrell of MarketWatch: Paul T. Farrell's Lazy Portfolios.
    I believe so too. I can't even remember how long I've been familiar with them, but if I had to guess it's been a decade or so. He started using the term in his Marketwatch columns, and then after a couple years Marketwatch created a permanent location for them to be tracked. Farrell began writing alarmist doomsday articles that really walked off the long pier, and then mostly disappeared from Marketwatch, but the Lazy Portfolio remains a solid contribution.
    "An investment in knowledge pays the best interest" - Benjamin Franklin

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by dh » Tue Jan 21, 2020 9:51 pm

    Mine is ridiculously lazy, but has been providing a solid return; hence, no complaints.

    US Stock 25%
    International 25%
    REITS 10%
    Fixed Income* 40%

    *My fixed income is a combination of (I-Bonds, TIAA Traditional, Cash, and some Inv. Grade Bonds in Wellington)

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by goblue100 » Wed Jan 22, 2020 8:19 am

    Portfolio7 wrote:
    Tue Jan 21, 2020 12:01 am
    nisiprius wrote:
    Mon Jan 20, 2020 2:56 pm
    I think the term "lazy portfolio" was coined by Paul T. Farrell of MarketWatch: Paul T. Farrell's Lazy Portfolios.
    I believe so too. I can't even remember how long I've been familiar with them, but if I had to guess it's been a decade or so. He started using the term in his Marketwatch columns, and then after a couple years Marketwatch created a permanent location for them to be tracked. Farrell began writing alarmist doomsday articles that really walked off the long pier, and then mostly disappeared from Marketwatch, but the Lazy Portfolio remains a solid contribution.
    I know Scott Burns was writing about the couch potato portfolio in the early 90's. Here is his latest update on the original couch potato(50% US stocks, 50% total bond).
    https://couchpotatoinvesting.com/lets-h ... implicity/
    The only requirement is that you can still fog a mirror and that you can divide by the number 2 with, or without, the aid of a hand-held calculator.

    Here’s how. You use the calculator to divide your investment money into two equal amounts. Then you put one part in a low-cost index fund that mimics the performance of the entire U.S. stock market. After that you put the remaining part in a low-cost index fund that tracks the entire U.S. bond market.
    Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by nisiprius » Wed Jan 22, 2020 9:02 am

    goblue100 wrote:
    Wed Jan 22, 2020 8:19 am
    I know Scott Burns was writing about the couch potato portfolio in the early 90's. Here is his latest update on the original couch potato(50% US stocks, 50% total bond).
    https://couchpotatoinvesting.com/lets-h ... implicity/
    How annoying that he didn't acknowledge, nor include an update, for the "Margarita Portfolio" he developed later, c. 2004, which was 1/3rd each Total Stock, Total International, and Vanguard Inflation Protected Securities (VIPSX/VAIPX). Thus, a hefty boost in stock allocation and swapping in TIPS for Total Bond.
    Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by firebirdparts » Wed Jan 22, 2020 9:15 am

    One takeaway from this thread is that it wouldn't take a whole lot to get a portfolio named after yourself.

    I think I have come around to a lazy portfolio (the original question) according to one of the definitions. I do like to fiddle with my investments which is basically a bad thing. I am trying to control myself.
    A fool and your money are soon partners

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by rixer » Wed Jan 22, 2020 10:30 am

    I'm retired and my portfolio is very lazy. It's comprised of Vanguards Lifestrategy Fund and a 3 year CD ladder in case of a bad market drop. So far, so good.

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by Portfolio7 » Wed Jan 22, 2020 2:27 pm

    firebirdparts wrote:
    Wed Jan 22, 2020 9:15 am
    One takeaway from this thread is that it wouldn't take a whole lot to get a portfolio named after yourself.

    I think I have come around to a lazy portfolio (the original question) according to one of the definitions. I do like to fiddle with my investments which is basically a bad thing. I am trying to control myself.
    I came to this same conclusion several years ago, as I was reading about the 'gone fishing' portfolio. I called mine the Super-8 portfolio just for fun. I admit I wondered if I should write a book centered around it; so many people have done so about unremarkable portfolios!
    "An investment in knowledge pays the best interest" - Benjamin Franklin

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    Re: Does anyone have 'Lazy Portfolios'?

    Post by goblue100 » Wed Jan 22, 2020 6:24 pm

    nisiprius wrote:
    Wed Jan 22, 2020 9:02 am
    goblue100 wrote:
    Wed Jan 22, 2020 8:19 am
    I know Scott Burns was writing about the couch potato portfolio in the early 90's. Here is his latest update on the original couch potato(50% US stocks, 50% total bond).
    https://couchpotatoinvesting.com/lets-h ... implicity/
    How annoying that he didn't acknowledge, nor include an update, for the "Margarita Portfolio" he developed later, c. 2004, which was 1/3rd each Total Stock, Total International, and Vanguard Inflation Protected Securities (VIPSX/VAIPX). Thus, a hefty boost in stock allocation and swapping in TIPS for Total Bond.
    At one point he had a mix from two funds to 10 funds. In this article, he started embracing simplicity:
    https://couchpotatoinvesting.com/the-si ... manifesto/

    Perhaps 3 funds became too many now that he is almost an octogenarian.

    Found this update from early 2019:
    https://couchpotatoinvesting.com/the-lo ... portfolio/

    The results may explain why he is favoring the simple 50/50 portfolio.
    Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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