The Ultimate Lazy Portfolio

One of my favorite blogs is The Kirk Report. There are few days when this Kirk does not provide a variety of thought-provoking and useful material. Yesterday he had a post about Scott Burns’ “Lazy Portfolios” -simple but effective model portfolios meant as a foundation for long-term investing. Here are the portfolios, which are said to have solid long-term track records:

Scott Burns’ Lazy Portfolios (Assetbuilder.com):

Coach Potato Portfolio:

- 50% in Vanguard Total Stock Market Index Fund (VTSMX)

- 50% in Vanguard Inflation Protected Securities Fund (VIPSX)

Margarita Portfolio:

- 33.3% in Vanguard Total Stock Market Index Fund (VTSMX)

- 33.3% in Vanguard Inflation Protected Securities Fund (VIPSX)

- 33.3% in Vanguard Total International Stock Index Fund (VGTSX)

Four Square Portfolio:

- 25% in Vanguard Total Stock Market Index Fund (VTSMX)

- 25% in Vanguard Inflation Protected Securities Fund (VIPSX)

- 25% in Vanguard Total International Stock Index Fund (VGTSX)

- 25% in Vanguard REIT Index (VGSIX)

Five Fold Portfolio:

- 20% in Vanguard Total Stock Market Index Fund (VTSMX)

- 20% in Vanguard Inflation Protected Securities Fund (VIPSX)

- 20% in Vanguard Total International Stock Index Fund (VGTSX)

- 20% in Vanguard REIT Index (VGSIX)

- 20% in American Century International Bond Fund (BEGBX)

Six Ways From Sunday Portfolio:

- 16.65% in Vanguard Total Stock Market Index Fund (VTSMX)

- 16.65% in Vanguard Inflation Protected Securities Fund (VIPSX)

- 16.65% in Vanguard Total International Stock Index Fund (VGTSX)

- 16.65% in Vanguard REIT Index (VGSIX)

- 16.65% in American Century International Bond Fund (BEGBX)

- 16.65% in Vanguard Energy (VGENX)

I agree that simple is good; I especially like the Couch Potato portfolio, but if you really want simple and lazy, how about this?

The Sloth Portfolio: 100% in Vanguard Total Stock Market Index Fund (VTSMX)

VTSMX has outperformed the S&P 500 over the last five years. It has also outperformed VIPSX, although with more volatility; therefore The Sloth Portfolio should have outperformed the Couch Potato Portfolio by a good margin. If someone accumulates shares by dollar-cost averaging they are likely to do quite well with relatively low risk.

I am not recommending that anyone invest in VTSMX - just thinking out loud.

If someone in his 20s, with a good income, but lacking the time and inclination to study the financial markets, were to decide to $1000 a month in VTSMX come hell or high water, and then stick to the plan for 40 years, he should end up with a very nice nest egg indeed!

I think investing in bonds is a losing proposition at this time, due to the low prevailing interest rates, and I don’t think that Treasury Inflation Protected Securities are very much more attractive than conventional bonds. Stocks of profitable companies which regularly raise their dividends offer secure income with better inflation protection, in my opinion. A low rate of return is still a low rate of return, no matter what spin you put on it. But when and if long-term Treasuries are again yielding more than 10%, I will load up on them. In the meantime bonds will continue to occupy a relatively small percentage of my portfolio.