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What Is Lazy Portfolio and How to Build It?

UTC by John Caroline · 6 min read
What Is Lazy Portfolio and How to Build It?
Photo: Depositphotos

There have been many incredible strategies to build great wealth, and a lazy portfolio is one of them. Here’s a guide dedicated to providing our readers with an in-depth understanding of a lazy portfolio.

There have been countless approaches to making investments and building wealth for ages. Many approaches fail most of the time, while some yield amazing returns. As a result, there is no exact perfect way to make investments. A good application of an investment strategy would likely not result in regrets. It is amazing how underrated investment methods sometimes outperform the fancied ones. Therefore, it is extremely important for investors who seek to venture into the stock or even digital market to get a vivid understanding of the terms used and the diverse approaches to making investments in the industry and also know-how and when to make use of them. A lazy portfolio is one of the investment styles that may not sound too good at first but yields massive returns for many who have adopted it as a method of investment and decided to build it.

Considering the literal meaning of “lazy” and its implications in general, nothing extremely positive would come to the mind of anyone regarding the word. However, the implication of the world is sometimes far from negative when it comes to the investment world.

A lazy portfolio simply represents a “no stress portfolio”. Experiences from diverse investors over the years have proven the adoption of a lazy portfolio to be very profitable and have been widely practiced by many investors from different parts of the world. Thus, being lazy has never been regarded as a good thing in the practical world, but it is often regarded as a good and profitable idea in the investment world.

We urge our readers to stay tuned as the guide explains all that is needed to know about a lazy portfolio, the proven merits and demerits of the investment style, and how to build a lazy portfolio and enjoy the benefits that come with it.

Lazy Portfolio Definition

A lazy portfolio is a no-efforts investment strategy that allows investors to maintain an allocation of the same assets over an extended period of time. In other words, it is simply a collection of investments that requires little or no effort to maintain.

Such a portfolio often contains a bundle of low-cost funds that are easy to rebalance. It often consists of very few index funds, the maximum number of index funds found in a lazy portfolio is 5. As such, it does not contain more than five index funds, sometimes a lazy portfolio can be made up of just one index fund. It is not expected to beat the investment returns of the major market indexes.

These index funds could be big bundles of stocks or bonds. They are often like common investments that anyone can buy just like shares of regular stock. Hence, a lazy portfolio is regarded as a small composition of index funds. Yet, the best of it is considered the one set up in line with an investor’s risk tolerance and a mandate to rebalance regularly.

How to Build a Lazy Portfolio

A lazy portfolio adopts a very flexible and no complex mode of custom, which makes it very easy to design. It basically requires the selection of at most five index funds like big bundles of stocks, or bonds.

Many experienced institutional investors have provided countless ways to build up the right lazy portfolio. As a result, new investors have the option of choosing at most five index funds out of the thousand index funds available in the market.

Below are some examples of lazy portfolio ideas experts have provided for new investors to adopt and guide them in building a lazy portfolio of their own.

Rick Ferri’s Lazy Three Fund Portfolio

The financial expert Rick Ferri provided an amazing idea for building a lazy portfolio from his expertise. He considered his example a simple, yet effective, lazy portfolio adaptable for new investors who are yet to clearly understand the basics of a lazy portfolio. The expert had suggested the following index funds for new investors to build a good lazy portfolio with:

  • 40% Vanguard Total Bond Market Index Fund (BND).
  • 40% Vanguard Total Stock Market Index Fund (VTI).
  • 20% Vanguard Total International Stock Index Fund (VXUS).

David Weliver’s Fidelity Portfolio

David Weliver’s Fidelity Portfolio has also emerged as a leading example of a perfect lazy portfolio for amateur investors to follow. Weliver suggests four stock markets to build the right lazy portfolio with, namely:

  • 20% iShares Core S&P Total US Stock Market (ITOT).
  • 20% iShares S&P Small Cap 600 Value (IJS).
  • 40% iShares Core MSCI Total International Stock (IXUS).
  • 20% iShares Core US Aggregate Bond (AGG).

Warren Buffet’s 90/10 Portfolio

The popular billionaire suggested an idea that interprets a process of massive returns over very little effort.

This portfolio has been marked as one of the most adopted lazy portfolios. It has proved to be among the best and high-performing investment styles with a very simple process.

The Warren Buffet’s 90/10 Portfolio is made up of just two index funds:

  • 90% Vanguard S&P 500 ETF (VOO).
  • 10% Vanguard Short-Term Treasury Index Fund ETF (VGSH).

Advantages of Lazy Portfolios

As said earlier, benefits for those who build a lazy portfolio have proven to be of good advantages to early investors who have adopted the style of investment. It has as well outperformed many fancied and most strategic investment ideas.

One of the notable benefits enjoyable from a lazy portfolio is the ease and convenience investors enjoy while maintaining the portfolio. This is a very common part of a lazy portfolio, investors enjoy the benefits of easy maintenance with no form of complexities at all.

More so, the ease that comes with lazy portfolios results in very reduced management fees. In other words, investors with lazy portfolios find themselves paying very low management fees all through the course of the investment.

In addition, it is one of the strategies that has yielded the most returns so far. With just little to no investment efforts, lazy portfolios provide investors with good and impressive returns.

Disadvantages of The Lazy Strategy

There have not really been many noticeable demerits on lazy portfolios. However, it is not easy to customize lazy portfolios like any investor can easily do with other portfolios.

Thus, the idea of customizing does not really work with a lazy portfolio as it would perfectly do with other portfolios.

Conclusion

While considering the amazing features of lazy portfolios and the testimonies of many investors with lazy portfolios, it is quite correct to say that, even though lazy workers may be bad, lazy portfolios are actually incredible and great.

Thus, a lazy portfolio can be considered as the best recommendable investment strategy for new investors. It does not involve any form of complexities which can only make them enjoy good returns with so much ease.

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FAQ

What is a lazy portfolio?

A lazy portfolio is a no-efforts investment strategy that allows investors to maintain an allocation of the same assets over an extended period of time. In other words, it is simply a collection of investments that requires little or no effort to maintain.

How to make a lazy portfolio?

A lazy portfolio adopts a very flexible and no complex mode of custom, which makes it very easy to design. It basically requires the selection of at most five index funds like big bundles of stocks, or bonds. Many experienced institutional investors have provided countless ways to build up the right lazy portfolio. As a result, new investors have the option of choosing at most five index funds out of the thousand index funds available in the market.

What are the examples of lazy portfolios?

The following are some examples of lazy portfolios:

  • Warren Buffet’s 90/10 Portfolio;
  • Rick Ferri’s Lazy Three Fund Portfolio;
  • David Weliver’s Fidelity Portfolio.

What are the advantages of lazy portfolios?

The advantages of lazy portfolios include reduced management fees, no complex mode of maintenance, less stress, great returns.

What are the drawbacks of lazy portfolios?

The major setback that comes with lazy portfolios is its resistance to customization.

 

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