Lazy portfolios - Bogleheads (2024)

This article contains details specific to United States (US) investors. For non-US investors, acting on fund or ETF suggestions in it may have harmful US tax consequences.

Lazy portfolios are designed to perform well in most market conditions. Most contain a small number of low-cost funds that are easy to rebalance. They are "lazy" in that you can maintain the same asset allocation for an extended period, as they generally contain 30-40% bonds, suitable for most pre-retirement investors.^{[note 1]}

You can find historical performance for many of the "lazy portfolios" on our site's blog. See Portfolios - Financial Page.

Two-fund portfolio

You can invest in broad US and International markets, as well as bonds, using only two funds. Rick Ferri proposed a two-fund portfolio containing the total world stock market, and a diversified US bond market index fund as follows.^[1] Expense ratios are shown in parentheses.

Three-fund lazy portfolios

A number of popular authors and columnists have suggested three-fund lazy portfolios. These usually consist of three equal parts of bonds (total bond market or TIPS), total US market and total international market. While the "% allocation" is different from those listed below, these funds typically make up the core of Vanguard's Target Retirement and Lifestrategy funds. Expense ratios are shown in parentheses.

In addition, there are several close alternatives to these funds, especially when purchasing through Vanguard. For example, the "Vanguard Inflation-Protected Securities Fund" also has a short term alternative, "Vanguard Short-Term Inflation-Protected Securities Index Fund" (tickers VTIPX or VTAPX) which can offer slightly less volatility in NAV.

Core four portfolios

As Rick Ferri proposed on the Bogleheads forum, the 'Core Four'^[3] are four funds which form the "cornerstone" of a portfolio. Low-cost, total market fund examples are shown below (with expense ratios in parentheses).

Rick proposes that investors first determine their bond allocation. With the remaining funds, allocate 50% to US stock, 40% to international and 10% to REIT.^[4] For example, for 60/40 and 80/20 portfolios, you would end up with the following^[1]:

Core Four Portfolio, Asset Allocations

Desired Stock/Bond Allocation Total US Stock Market Index Fund Total International Stock Index Fund Total Bond Market Index Fund REIT Index Fund 60 / 40 30% 24% 40% 6% 80 / 20 40% 32% 20% 8%

Rick stresses that the exact allocation percentages are not important; to the nearest 5% is fine.^[3]

The Core Four is just a low cost foundation for your portfolio. You could add a slice of value stocks (US and/or International). You could split the bond portion between Treasury Inflation Protected Securities and nominal bonds, which would result in a slightly more conservative version of David Swensen's model portfolio (less international stock and less REIT, but otherwise the same four base funds plus TIPS.

More lazy portfolios

Beyond the simple three- and four-fund lazy portfolios are more complex portfolios. These are still "lazy" in that they contain enough bonds (typically 30-40%) to allow you to maintain the same asset allocation for much of your accumulation phase. The more complex funds add REITs, and 'slice and dice' the US and/or International stocks, adding large and small value to the mix. In some of the cases outlined below, a simpler portfolio can accomplish similar goals. For example, you can 'tilt' away from a total stock market fund by adding a small cap value fund.

Bill Schultheis's "Coffeehouse" portfolio

Bill Schultheis made this simple seven-fund portfolio popular in his book The Coffeehouse Investor. He advocates 40% in a total market bond fund and 10% each in various stock funds. You can find more information at The Coffeehouse Investor. The Coffeehouse Portfolio contains only 10% international stocks (17% of total equities). It slices up the domestic portion, but uses a total international fund.^{[note 7]}

Asset Class % Allocation Using ETFs Vanguard iShares Large Blend 10% VOO (.03%) IVV (.03%) Large Value 10% VTV (.04%) IUSV (.04%) Small Blend 10% VB (.05%) ISCB (.04%) Small Value 10% VBR (.07%) ISCV (.06%) Total International 10% VXUS (.08%) IXUS (.09%) REIT 10% VNQ (.12%) USRT (.08%) Total Bond 40% BND (.035%) AGG (.04%)

William Bernstein's "Coward's" portfolio

William Bernstein is the author of several books including The Intelligent Asset Allocator and The Four Pillars of Investing. He introduced the Coward's Portfolio in 1996. The "coward" refers not to risk tolerance but to the strategy of hedging your bets and having slices of a number of asset classes. This portfolio is similar to the Coffeehouse Portfolio, except that it uses short term bonds, and divides the international portion into equal slices of Europe, Pacific and Emerging markets.

Asset Class % Allocation Using ETFs Vanguard iShares Total Stock Mkt 15% VTI (.03%) ITOT (.03%) Large Value 10% VTV (.04%) IUSV (.04%) Small Blend 5% VB (.05%) ISCB (.04%) Small Value 10% VBR (.07%) ICSV (.06%) Europe 5% VGK (.08%) IEUR (.09%) Pacific 5% VPL (.08%) IPAC (.09%) Emerging Markets 5% VWO (.10%) IEMG (.11%) REIT 5% VNQ (.12%) USRT (.08%) Short Term Bond 40% BSV (.05%) ISTB (.06%)

Frank Armstrong's "Ideal Index" portfolio

Frank Armstrong, author of The Informed Investor, proposed this portfolio in an MSN Money article^{[dead link]}. It contains a smaller allocation to bonds, and a much larger allocation to international stocks (in fact the equities, excluding REIT, are split 50/50 between domestic and international). Like Bernstein he advocates short term bonds. If the domestic slices were replaced by a total market fund, this portfolio would be very close to the three-fund portfolios, with a slice of REIT added.

Asset Class % Allocation Using ETFs Vanguard iShares Large Blend 7% VOO (.03%) IVV (.03%) Large Value 9% VTV (.04%) IUSV (.04%) Small Blend 6% VB (.05%) ISCB (.04%) Small Value 9% VBR (.07%) ICSV (.06%) Total International 31% VXUS (.08%) IXUS (.09%) REIT 8% VNQ (.12%) USRT (.08%) Short Term Bond 30% BSV (.05%) ISTB (.06%)

David Swensen's lazy portfolio

David Swensen is CIO of Yale University and author of Unconventional Success. His lazy portfolio uses low-cost, tax-efficient total market funds, a healthy dose of real estate, and inflation-protected securities (TIPS).^{[5][note 8]}

Asset Class % Allocation Using ETFs Vanguard iShares SPDR Total Stock Market 30% VTI (.03%) ITOT (.03%) SPTM (.03%) Intl Developed Market 15% VEA (.05%) IDEV (.05%) SPDW (.04%) Emerging Markets 10% VWO (.10%) IEMG (.11%) SPEM (.11%) Real Estate 15% VNQ (.12%) USRT (.08%) XLRE (.12%) US Treasury Bonds 15% VGIT (.05%) GOVT (.05%) SPTI (.06%) TIPS 15% ---[note 4] TIP (.19%) SPIP (.12%)

Permanent Portfolio

Free-market investment analyst Harry Browne devised the Permanent Portfolio in the 1980s, as a buy-and-hold portfolio that contains a healthy allocation to gold. The portfolio holds equal allocations of domestic stocks, gold, short-term treasury bonds, and long term treasury bonds.^{[6][note 9]}

Forum members Craig Rowland and J. M. Lawson have written a book, The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy, detailing every aspect of the Permanent Portfolio.

You can build this portfolio with an investment in a low cost US total stock market index fund, along with direct investments in gold bullion coins, US treasury bills, and US treasury bonds. Or alternatively, with low-cost exchange-traded funds. See Blackrock iShares for an ETF version of the portfolio.

US Permanent Portfolio % Allocation Asset Class Using ETFs Vanguard iShares 25% US Total Stock Market VTI (.03%) ITOT (.03%) 25% Gold Bullion ---[note 4] IAU (.25%) 25% US Treasury Bills VGSH (.05%) SHY (.15%) 25% US Long-Term Treasury VGLT (.05%) TLT (.15%)

Notes

See also

• How to build a lazy portfolio
• Madsinger monthly reports, monthly returns for several portfolios
• Three-fund portfolio
• Vanguard four fund portfolio
• Vanguard target retirement funds
• Vanguard LifeStrategy funds

References

External links

• Couch Potato Cookbook, from assetbuilder.com - A set of lazy portfolios containing from two to ten funds.
• Bogleheads forum topic: "The Three Fund Portfolio", Taylor Larimore. January 1, 2012.
• Lazy Portfolios, Google Sheets source for charts (Core four, David Swensen).

Portfolio return data

• The Couch Potato Portfolios, from assetbuilder.com - Construction and returns for the Couch Potato portfolios.
• Portfolios, from site blog.