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Investing and Economics Blog

Lazy Portfolio Results

Lazy Portfolios update by Paul Farrell provides some examples of how to use index funds to manage your investments:

These portfolios are virtually “zero maintenance!” Set them and forget them. Plus you can ignore Wall Street’s relentless, misleading chatter about markets and the economy. Seriously. After customizing your own Lazy Portfolio you can ignore the news and focus on what’s really important: your family, loved ones, friends, your career, hobbies, travel — you name it — anything but wasting time tracking and playing the market.

I think the article is a bit misleading in showing the out-performance of the S&P 500 index (during periods where the S&P 500 index does very well these portfolios will under-perform it). The out-performance shown in the article is largely due to the great performance of international markets recently. Still the strategy is well worth reading about. The strategy is based on using index funds from Vanguard (very well run mutual funds with very low fees). But don’t get tied into Vanguard, if they start to focus on lining their pockets by increasing your fees look for alternatives.

Overall, I give this concept high marks. Dollar cost average appropriate levels of money into such a strategy and you will give yourself a good chance at positive results.

My preference would be to include significant levels of international and developing stocks. For aggressive long term investing I like something like:

40% USA total stock market
15% Real Estate
25% international developed stock market index
20% developing stock market index

When aiming for more security and preserving capital (over growth) I favor something like:

30% USA total stock market
10% Real Estate
25% international developed stock market index
10% developing stock market index
10% short term bond index
15% money market

Of course all sorts of personal financial factors need to be considered for any specific person’s allocations.

Related: Allocating Retirement Account Assets – Why Investing is Safer Overseas – Saving for Retirement – 12 stocks for 10 years – what is a mutual fund?

April 10th, 2008 by John Hunter | 1 Comment | Tags: Financial Literacy, Investing, Personal finance, Saving, Stocks, Tips, quote

Comments

1 Comment so far

  1. Lazy Portfolios Seven-year Winning Streak at Curious Cat Investing Blog on August 3, 2009 9:35 pm

    “In short, even though we know that the average compensation of portfolio managers is often $400,000 to more than a $1 million, the hot-shot managers of these actively managed funds provided no value-added to their funds’ performance..”

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