5 Reasons Why A Lazy Portfolio Is Right For You

Are you looking for a well-rounded simple portfolio that has good returns? The lazy portfolios can help you. Here are 5 extremely good reasons why you should use a lazy portfolio.

If you’re new to investing and want a true, tried and tested portfolio, look no further! These lazy portfolios promise to give you a mostly hands-off approach to investing. They offer a lot more than easy, however. Dive in to know the 5 extremely good reasons why you should use a lazy portfolio.

5 Reasons Why A Lazy Portfolio Is Right For You

These are the lazy portfolios with returns and risk

A lazy portfolio is just a portfolio that gives you a hands-off approach to investing for long periods of time. At most they require a yearly rebalance and nothing else.

Portfolio NameNumber of asset classes1 year return 2019YTD (incl. December 2019)10 year returnCAGR since 1989DrawdownRisk Level
S&P 500 (Benchmark)
131.25%31.25%12.97%9.84%-37.71%5 - very high risk
David Swensen's Portfolio620.95%20.95%8.86%8.55%-26.20%3 - medium risk
Bill Schultheis Coffeehouse Portfolio719.01%19.01%8.48%8.29%-20.21%2 - low risk
Frank Armstrong Ideal Index Portfolio718.03%18.03%7.48%7.19%-25.74%3 - medium risk
Scott Burns Margaritaville319.23%19.23%7.95%7.24%-28.09%4 - high risk
William Bernstein No Brainer Portfolio419.82%19.82%8.68%7.68%-27.63%4 - high risk
William Bernstein Cowards Portfolio916.87%16.87%7.38%7.88%-19.93%2 - low risk

Lazy portfolio 1 – 2 fund portfolio (Balanced Portfolio 70/30)                       

  • 80.00%  US Total Stock Market   (VTI)
  • 30.00%  Total US Bond Market    (BND)

The balanced portfolios consisting of two asset classes, stocks and bonds are the simplest portfolios to implement. What they lack in flair and sexiness they make up for in simple effectiveness. They can be modeled to almost any risk level. John Bogle, the supreme hero of the investing world, recommends that you hold a total stock market fund and a total bond fund. The percentage of bonds should equal your age, so a 50-year-old should hold 50% VTI and 50% BND.

Lazy portfolio 2 – David Swensen’s Portfolio                         

  1. 30.00%  US Total Stock Market   (VTI)
  2. 20.00%  REITs     (VNQ)
  3. 5.00%    Emerging Markets           (VWO)
  4. 15.00%  International All-World ex-US     (VEU)
  5. 15.00%  Intermediate-Term Treasuries       (VGIT)
  6. 15.00%  TIPS       (VTIP)

David Swensen of the Yale Endowment fund sets forth the portfolio in his book Unconventional Success: A Fundamental Approach to Personal Investment. David Swensen is truly one of the good guys in investing in advocating fiduciary principles, low-cost index investing and being humble about one’s knowledge.

Lazy portfolio 3 – William Bernstein’s Cowards Portfolio                 

  • 10.00%  US Large Cap Value         (VTV)
  • 15.00%  US Large Cap      (VV)
  • 10.00%  US Small Cap Value         (VIOV)
  • 5.00%    US Small Cap      (VIOO)
  • 5.00%    REITs     (VNQ)
  • 5.00%    Emerging Markets           (VWO)
  • 5.00%    Pacific Stocks     (VPL)
  • 5.00%    European Stocks               (VGK)
  • 40.00%  Short Term Treasuries       (VGSH)

Lazy portfolio 4 – William Bernstein’s No Brainer Portfolio                             

  • 25.00%  US Large Cap      (VV)
  • 25.00%  US Small Cap      (VIOO)
  • 25.00%  International All-World ex-US     (VEU)
  • 25.00%  Short Term Treasuries       (VGSH)

William Bernstein, a former doctor, investment consultant and an all-around good guy in the investing world has presented a host of portfolios through his career. His book, The Four Pillars of Investing: Lessons for Building a Winning Portfolio is required reading on investing. His investing philosophy is broad diversification, common sense and a realistic expectation of future returns. Other books that are highly recommended are Rational Expectations: Asset Allocation for Investing Adults and The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk.

Lazy portfolio 5 – Bill Schultheis’ “Coffeehouse” Portfolio               

  • 10.00%  US Large Cap Value         (VTV)
  • 10.00%  US Large Cap      (VV)
  • 10.00%  US Small Cap Value         (VIOV)
  • 10.00%  US Small Cap      (VIOO)
  • 10.00%  REITs     (VNQ)
  • 10.00%  International All-World ex-US     (VEU)
  • 40.00%  Total US Bond Market    (BND)

The very famous Coffeehouse portfolio is categorized as a Lazy Portfolio due to its ease in its implementation and maintenance. It is featured in the book. Bill Schultheis has a beautiful website. Check out his book by the same title The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life.

Lazy portfolio 6 – Frank Armstrong Ideal Index Portfolio                  

  • 9.25%    US Large Cap Value         (VTV)
  • 6.25%    US Large Cap      (VV)
  • 9.25%    US Small Cap Value         (VIOV)
  • 6.25%    US Small Cap Growth     (IJT)
  • 8.00%    REITs     (VNQ)
  • 31.00%  International All-World ex-US     (VEU)
  • 30.00%  Short Term Treasuries       (VGSH)

Frank Armstrong is the author of The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio. In his book, he presents a the Ideal Index Portfolio. Frank Armstrong’s portfolio is tilted towards small-cap and value stocks.

Lazy portfolio 7 – Scott Burns Margaritaville                          

  • 33.33%  US Total Stock Market   (VTI)
  • 33.33%  International All-World ex-US     (VEU)
  • 33.33%  TIPS       (VTIP)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the “Couch Potato Portfolio” investment strategy. In addition to the now-famous couch potato portfolio, he suggests 9 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class.

We highlighted the Couch Potato portfolio in the article The Couch Potato Portfolio; Two Fund Supremacy?

The Couch Potato portfolio is the “little brother” of Margaritaville.

Now for the reasons why you should invest in a lazy portfolio!

# 1 reason why you should use a lazy portfolio – it’s easy

Investing is not hard. Not anymore. And certainly not with ready to portfolios like we offer here on portfolioeinstein.com.

Using a lazy portfolio makes it even easier. They have few asset classes and you can quickly get an overview of the portfolio.

There is some merit in making your portfolio complex. Complexity comes at a cost however and may not be desirable.

The lazy portfolios do not contain any special asset classes so in that regard they are also easy to understand. The laziest of them all has just 2 assets classes! Stocks and bonds – the 2 fund solution. Now that’s easy!

# 2 reason why you should use a lazy portfolio – they offer good returns vs. risk

As you can see from the table above all the lazy portfolios offer a respectable return. To be sure you can get a higher return. See here for which portfolios have done better in the past.

But the higher returns also come with a cost in the form of a higher risk. You would have suffered a 37% drawdown in 2009 holding the S&P500 but you would only have suffered 20-28% with a lazy portfolio.

Take another look at the 2 funds lazy portfolio. It is the most simple and still has the highest performance! Now that’s lazy for you!

# 3 reason why you should use a lazy portfolio – they’re made by known professionals

All of the portfolios above are tied to some of the most respectable people in the investing industry.

David Swensen is chief investment officer at the Yale endowment fund and offered his portfolio in David Swensen – Unconventional Success: A Fundamental Approach to Personal Investment.

The two fund portfolio is offered by supreme investing hero John Bogle in his many books. One of them is a must-read – The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns.

William Bernstein of the two lazy portfolios Cowards portfolio and the No-brainer is also one of the good guys in investing. His book William Bernstein: The Four Pillars of Investing: Lessons for Building a Winning Portfolio is required reading for any investor.

Bill Schultheis is a well know author and investment advisor. His portfolio comes from his fabulous book The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life and his website.

Frank Armstrong’s Ideal Index portfolio is offered by Frank Armstrong in his book The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio.

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the “Couch Potato Portfolio” investment strategy. In addition to the now-famous couch potato portfolio, he suggests 9 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class.

# 4 reason why you should use a lazy portfolio – they are proven and tested

All of the lazy portfolios have stood the test of time. They have survived the out-of-sample test. Meaning that they have proved viable after their initial construction, thereby excusing them of backtest bias or data snooping.

These lazy portfolios are portfolios that will serve you well for many years to come

# 5 reason why you should use a lazy portfolio – it keeps you from doing stupid things

We are investors.

But we are human. We are subject to a host of biases when it comes to investing and money.

Some of them include:

  • Recency bias. We tend to attribute more importance to recent events (like recent stock returns). But recent data may not and certainly is not in investing representative of the long-term performance of investing.
  • Overconfidence bias. We simply think that we are better than we are.
  • Information bias. Information bias is a cognitive bias to seek information when it does not affect action. People can often make better predictions or choices with less information: more information is not always better.

There are many more biases and most of them are detailed fantastically by Jason Zweig in his fabulous book Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich.

We are all affected by biases and they help us navigate the world. They are one of the reasons why so many active managers repeatedly, continuously and consistently fail to beat the market.

James Montier has also written 2 great books on behavioral investing, one is The Little Book of Behavioral Investing: How not to be your own worst enemy and the other and more in-depth is Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance.

If you are concerned with managing your own personality or even know that you are prone to making dumb things with your money, know that you are not alone! The lazy portfolios can help you with this, however. Allocate money to one of the portfolios and stick with it and you will dodge all those nasty biases!

If you want to go to the source of the discovery and documentation of the human bias I recommend  Nobel laureate Daniel Kahneman’s undisputed authority on bias’s  Thinking, Fast and Slow and if you are eager for more why not also read another Nobel laureate who helped shape the field of behavioral finance, Richard Thaler’s Misbehaving: The Making of Behavioral Economics.

Alternatives to lazy portfolios

So you’re intrigued but not convinced of the benefits of the lazy portfolio?

There are many alternatives to a lazy portfolio.

Remember, a lazy portfolio is really just a portfolio with a hands-off approach. As such most portfolios on portfolioeinstein are lazy portfolios. The hardest part (which isn’t so hard) is buying the ETFs or mutual funds.

Go here to see all the portfolios on portfolioeinstein.com and here to see the allocations.

If you need help with rebalancing we got you covered with this cheat-sheet so you can rebalance every year and get it just right!

Other than that we recommend looking at the many one-fund solutions that will get you a well-diversified portfolio in one fund. Target-date funds are an example of this. The article What Is The Best Target Date Fund? will help you here. iShares also has one-fund ETFs: AOR, AOM, AOA, AOK.

Should you have a lazy portfolio?

By now you can answer this question. Only you can answer it, however.

Here are some questions to make your choice easier:

  • Do you want an easy investment portfolio?
  • Do you want an easy to maintain an investment portfolio?
  • Do you want a great overview?
  • Do you want less risk but also less return?

Summary and next steps

Listen, I know investing can be hard. It can be hard to grasp all the details and technical terms. That’s why I made portfolioeinstein.com and why I wrote this article.

Lazy portfolios offer an easy solution to the complicated question of investing. Lazy portfolios offer good returns with low risk. They are made by reputable well knows members of the investing community.

If you’re just starting out or have become disillusioned by the financial industry then go with a lazy portfolio.

Don’t miss our next great tip on how you can get more money from your portfolio.

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