Comments on: Introduction to Lazy Portfolios

By: Jim

Jim — Wed, 16 Sep 2009 13:45:15 +0000

Yes, Target Retirement funds are the mother of lazy portfolio strategies. If there is a catch, I haven’t seen it.

By: Eric

Eric — Wed, 16 Sep 2009 12:14:17 +0000

Correct me if I’m wrong, but isn’t a Target Retirement Fund the mother of all lazy portfolio strategies?

For example, the Vanguard Target Retirement 2045 Fund (VTIVX) invests in other Vanguard Funds. It currently has about 70% in a Total Stock Market Index Fund, 10% in a Total Bond Market Index Fund, and about 20% in various International Stock Funds.

I assume these holdings are “rebalanced” very frequently by Vanguard without the investor having to lift a finger.

The expense ratio of 0.18% seems reasonable, too.

What’s the catch?

By: Shifterdog

Shifterdog — Sun, 01 Feb 2009 22:47:46 +0000

Paul Farrell claimed that “…all eight Lazy Portfolios are beating the benchmark S&P 500 by anywhere from three to 18 percentage points.”

Technically, he is correct. But if you set aside the fixed portions of these portfolios, none beat the S&P 500 in 2008.

These portfolios are actually balanced portfolios. Comparing balanced portfolios to an equity index is comparing apples to oranges.

By: Dividend Growth Investor

Dividend Growth Investor — Tue, 12 Aug 2008 15:10:53 +0000

Wow, for a moment I thought I was reading Lazyman and Money’s blog.
I agree that 5 year returns are pretty much noise. But then we are constantly reminded that past performance is not an indication of future results, aren’t we?

By: tom

tom — Mon, 11 Aug 2008 15:19:23 +0000

Jim,

Sorry, I wasn’t suggesting that you are trying to push Vanguard funds or that Vanguard was marketing these ideas. I was just pointing out that there are 0 crazy sector funds, 0 single stocks, 0 anything but Vanguard mutual and index funds. Even the investors who push funds for other companies, like Scott Burns and DFA, chose Vanguard for his portfolios. It all comes back to simple, low-fee formulas, and allocations = successful investing.

BTW… I’m a HUGE fan and investor of Vanguard funds, so I am biased a bit…

By: ToughMoneyLove

ToughMoneyLove — Mon, 11 Aug 2008 14:34:54 +0000

It is humorous but probably unfair to refer to some of these portfolios as “lazy” simply because they are designed to have “all weather” asset allocations. If you are a long term investor and have a portfolio that requires frequent changes in allocation (not just re-balancing), then perhaps those should be called “market timer” portfolios. Being a market timer in my book can be worse than being lazy. As for Scott Burns, his Asset Builder firm builds similar couch potato portfolios using DFA funds, which the regular investor can’t buy directly. For the rest of us, check out Scott’s “10 speed” portfolio which does a great job of combining non-correlated asset categories, with some commodity and currency exposure as well. Those are tracked on his site and have more current data than in the article you cited.

By: jim

jim — Mon, 11 Aug 2008 14:17:22 +0000

Jeremy: Rebalance once a year.

tom: For some portfolios, both Vanguard and Fidelity are listed and I just chose Vanguard because I didn’t want to look up a bunch of tickers. I’m not being paid by Vanguard (I should be!) but I am a big fan of them. To my knowledge, the Lazy Portfolio concept isn’t something pushed by Vanguard but I know what you’re getting at. It sounds like it could be a strong marketing idea that is being guerrilla marketed by Vanguard, but part of the reason for the Vanguard emphasis is because I have a bias and because I’m lazy.

By: Anonymous

Anonymous — Mon, 11 Aug 2008 14:04:14 +0000

PS… I hate it when portfolios are judged by the 1, 3, 5 year annualized returns. Those numbers are not great indicators of how well a portfolio is doing. I’ll wait 20 years, then we’ll see which one performed the best.

By: tom

tom — Mon, 11 Aug 2008 13:57:03 +0000

Isn’t it interesting that all of the portfolios listed above are invested 100% in Vanguard?

Even the portfolios by Scott Burns, whos firm invests solely in DFA funds.

By: Jeremy

Jeremy — Mon, 11 Aug 2008 13:39:47 +0000

What does Paul Farrell say when it comes to rebalancing? While they may be lazy in a sense they are easy to set up, they will surely become unbalanced over time. Does he suggest a regular rebalance period such as quarterly or annually, or does he suggest a rebalance when the allocation moves beyond a certain percentage threshold?

By: Dreamer

Dreamer — Mon, 11 Aug 2008 10:27:56 +0000

I just heard an interview on the Sound Investing podcast by Paul Merriman (author of the “FundAdvice Ultimate Buy & Hold portfolio”, tracked on the same page) of the author of the “Second Grader’s Starter” portfolio, who is now in the 5th grade. That’s right. The author of the “Second Grader’s Starter” portfolio was an actual 2nd grader when he came up with it. 60% Vanguard total stock market index, 30% Vanguard total international index, 10% Vanguard total bond index. Invest in everything, and rebalance annually. Not my favorite allocation, but it’s simple, and it seems to work.

And the kids getting an average of 17% annual returns. By the time he’s an adult, I don’t think he’s gonna have to worry to much about money.