How to Determine Your Asset Allocation

Gold Bars and Some CoinsAsset allocation is probably one of the hardest parts about investing because while we all know it’s important, we don’t really know what we’re supposed to do. We know that diversification is crucial but we aren’t entirely sure why outside of “don’t put all your eggs in one basket.” Fortunately, there are some simple systems out there that can shed some light onto the asset allocation question.

This post is part of the Bargaineering Annual Financial Review week series where we take a closer look at the four major facets of personal finance and see if we can do better. This post is part of day three – taking a closer look at your investments.

(Click to continue reading…)

 Personal Finance 

Four Money Mistakes You Might Not Realize You’re Making

Blind SpotsOne of the biggest challenges in almost anything you do is knowing where your blind spots are. In simpler terms, you don’t know what you don’t know. 🙂

So today, I’ll point out four money mistakes you might be making that you don’t even realize you’re making! Hopefully, you’re making none of them. If you are making one of these, don’t beat yourself over it. Now you know you’re making it and you can take steps to fix it.

(Click to continue reading…)


Lazy Portfolios Revisited

MarketWatch used to only visit lazy portfolios every once and a while (it was hard to justify looking at “lazy” portfolios that performed well when you could point out far sexier returns on sub-prime mortgages!) but with the recent financial woes, Paul Farrell had been checking on them more often. It looks like they’ve turned it into a section on the Marketwatch site and the lazy portfolios aren’t performing very well (not surprising but better than their benchmark, the S&P 500!).

The new Lazy Portfolio center tracks eight lazy portolios:

  • Aronson Family Taxable
  • Fundadvice Ultimate Buy & Hold
  • Dr. Bernstein’s Smart Money
  • Coffeehouse
  • Yale U’s Unconventional
  • Dr. Bernstein’s No Brainer
  • Margaritaville
  • Second Grader’s Starter

For those who aren’t familiar with Lazy Portfolios, they’re allocations of popular index funds. I did a whole writeup on some popular lazy portfolios including Scott Burns’ Couch Potato portfolio and Margaritaville portfolio.


Index Funds Are Only Part of Your Investment Plan

There isn’t a single reason why you shouldn’t like index funds. They’re cheap, they offer market rates of return without fail, and they are simple to buy. They beat actively managed mutual funds a majority of the time and they are often advocated as the best investment the average Joe can put their money in. So why not put all your money into an S&P 500 Index fund like the Fidelity Spartan 500 Index or the Vanguard 500 Index, call it a day and enjoy more time with the family? Because that would be a huge mistake.

(Click to continue reading…)


Introduction to Lazy Portfolios

Ever heard of the Margarita portfolio? How about the Couch Potato portfolio? Or the No-Brainer portfolio? No?

They’re all Lazy Portfolios.

A Lazy Portfolio is one that you can just set it and forget it and relies on low cost index funds or ETFs. There’s nothing particularly special about any Lazy Portfolio, besides their use of low cost index funds, and one isn’t necessarily better than another in all economic scenarios. As with any investing strategy, there are pros and cons. The pros, that it’s simple and you make few decisions, results in cons in that you may become complacent and ignorant of your investment decisions. It’s better to keep it simple and well understood than to make it complex and obfuscated. I’d rather make a choice that turned out wrong than make a decision I didn’t understand.

How They Perform

Paul Farrell of MarketWatch tracks eight Lazy Portfolios each year and in 2008, they have extended their winning streak of beating the S&P 500 for the sixth year (on a three-year and five-year basis). In other words, having a one of the eight Lazy Portfolios over the last six years has gotten you a better return than the stock market itself. (This year, three of the portolio’s got beat because they had a lot of REIT funds, but they are still besting the S&P over the last few years).

Here are the funds with the best names: (some of which weren’t featured in Paul Farrell’s wrapup)

Couch Potato Portfolio

This portfolio is the brainchild of Dallas Morning News columnist Scott Burns and is as simple as they come. All you need is 50% in the Vanguard 500 Index Fund (VFINX) and 50% in the Vanguard Total Bond Fund Index Fund (VBMFX). That’s it. You can go a little more aggressive with the variant Sophisticated Couch Potato Portfolio of 75% in the Vanguard 500 Index Fund and 25% in the Vanguard Total Bond Fund Index Fund.

Margaritaville Portfolio

This portfolio is also another one of Scott Burns’s creations and is the second simplest portfolio with equal parts of three funds: Vanguard Inflation-Protected Securities (VIPSX), Vanguard Total International Stock Index (VGTSX), and Vanguard Total Stock Market Index (VTI).

No-Brainer Portfolio

Created by Dr. William Bernstein, a neurologist known for his work in modern portfolio theory and his book The Four Pillars of Investing, the No-Brainer Portfolio consists of four funds of equal weight: Vanguard 500 Index (VFINX), Vanguard Small Cap (NAESX) or (VTMSX), Vanguard Total International (VGTSX) or (VTMGX), and Vanguard Total Bond (VBMFX) or (VBISX). There is also a No-Brainer Coward’s Portfolio that includes 9 funds.

Coffeehouse Portfolio

This little gem was created by money manager Bill Schultheis, author of The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life, created the Coffeehouse Portfolio that consists of seven funds:

  • 40% in Vanguard Total Bond Index (VBMFX)
  • 10% in Vanguard 500 Index (VFINX)
  • 10% in Vanguard Value Index (VIVAX)
  • 10% in Vanguard International Stock Index (VGTSX)
  • 10% in Vanguard REIT Index (VGSIX)
  • 10% in Vanguard Small-Cap Value Index (VISVX)
  • 10% in Vanguard Small-Cap Index (NAESX)

Those are the cooler sounding ones but there are many many others out there!

Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2016 by All rights reserved.