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.

Non-US investors can find related information at Simple non-US portfolios and Canadian versions of lazy portfolios.

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.

Rick Ferri's Two-Fund Portfolio^[1]
% Allocation	Asset Class	Using Mutual Funds	Using ETFs
% Allocation	Asset Class	Vanguard	Vanguard	SPDR
60%	Total World Stock Market	VTWAX (.10%)	VT (.08%)	SPGM (.09%)
40%	Total Bond Market	VBTLX (.05%)	BND (.035%)	SPAB (.03%)

Three-fund lazy portfolios

Main article: Three-fund portfolio

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.

Taylor Larimore's Three-Fund Portfolio^{[note 2]}
% Allocation	Asset Class	Using Mutual Funds			Using ETFs
% Allocation	Asset Class	Vanguard	Fidelity	Schwab^{[note 3]}	Vanguard	iShares
–	Total US Stock Market	VTSAX (.04%)	FSKAX (.015%)	SWTSX (.03%)	VTI (.03%)	ITOT (.03%)
–	Total International Stock Market	VTIAX (.11%)	FTIHX (.06%)	SWISX (.06%)	VXUS (.08%)	IXUS (.09%)
–	Total Bond Market	VBTLX (.05%)	FXNAX (.025%)	SWAGX (.04%)	BND (.035%)	AGG (.04%)

Scott Burns' Margarita Portfolio / Andrew Tobias' Three-Fund Portfolio^[2]
% Allocation	Asset Class	Using Mutual Funds			Using ETFs
% Allocation	Asset Class	Vanguard	Fidelity	Schwab^{[note 3]}	Vanguard	iShares
34%	Total US Stock Market	VTSAX (.04%)	FSKAX (.015%)	SWTSX (.03%)	VTI (.03%)	ITOT (.03%)
33%	Total International Stock Market	VTIAX (.11%)	FTIHX (.06%)	SWISX (.06%)	VXUS (.08%)	IXUS (.09%)
33%	Inflation-Protected Securities	VAIPX (.10%)	FIPDX (.05%)	SWRSX (.05%)	---^{[note 4]}	TIP (.19%)

Rick Ferri's Lazy Three-Fund Portfolio^[1]^{[note 5]}
% Allocation	Asset Class	Using Mutual Funds			Using ETFs
% Allocation	Asset Class	Vanguard	Fidelity	Schwab^{[note 3]}	Vanguard	iShares
40%	Total US Stock Market	VTSAX (.04%)	FSKAX (.015%)	SWTSX (.03%)	VTI (.03%)	ITOT (.03%)
20%	Total International Stock Market	VTIAX (.11%)	FTIHX (.06%)	SWISX (.06%)	VXUS (.08%)	IXUS (.09%)
40%	Total Bond Market	VBTLX (.05%)	FXNAX (.025%)	SWAGX (.04%)	BND (.035%)	AGG (.04%)

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 Ferri's Core Four Portfolio^[1]
Asset Class	Using Mutual Funds			Using ETFs
Asset Class	Vanguard	Fidelity	Schwab^{[note 3]}	Vanguard	iShares
Total US Stock Market	VTSAX (.04%)	FSKAX (.015%)	SWTSX (.03%)	VTI (.03%)	ITOT (.03%)
Total International Stock Market	VTIAX (.11%)	FTIHX (.06%)	SWISX (.06%)	VXUS (.08%)	IXUS (.09%)
Total Bond Market	VBTLX (.05%)	FXNAX (.025%)	SWAGX (.04%)	BND (.035%)	AGG (.04%)
Real Estate Investment Trusts (REIT)	VGSLX (.12%)	FSRNX (.07%)	---^{[note 6]}	VNQ (.12%)	USRT (.08%)

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
Asset Class	% Allocation	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
Asset Class	% Allocation	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
Asset Class	% Allocation	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
Asset Class	% Allocation	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

See also: Craig Rowland and J. M. Lawson

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
% Allocation	Asset Class	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

↑ Paul B. Farrell, who writes MarketWatch columns about various simple portfolios, popularized the term 'Lazy portfolios'.
↑ Taylor Larimore was an early advocate of this approach, which he described in 1999 in a Morningstar posting, Which is better, 15 funds or 4?. The fourth fund is a money market fund used for cash management. You should tailor the portfolio's allocation percentages to your time-frame, risk tolerance and personal financial situation. Discussed in Bogleheads forum topic: "The Three-Fund Portfolio", Taylor Larimore. January 1, 2012.
↑ ^3.0 ^3.1 ^3.2 ^3.3 Schwab's International Index Fund (SWISX) tracks the MSCI EAFE index. This index does not include emerging market stocks, Canadian stocks, and international small-cap stocks.
↑ ^4.0 ^4.1 ^4.2 Vanguard does not offer a similar ETF.
↑ Rick said: "The mix between U.S. stocks and international stocks can be changed to suit your preference for dollar exposure. Another option is to swap the total bond market index fund for an investment-grade corporate bond index fund that provides higher yield or a Treasury Inflation Protected (TIPs) fund the provides inflation protection."
↑ Schwab offers an REIT index ETF: SCHH (.07%).
↑ Discussed in Bogleheads forum topic: "Three Index Funds vs "The Coffeehouse Portfolio"?", Shaoya. September 20, 2009.
↑ Discussed in Bogleheads forum topic: "David Swensen's lazy portfolio", amrogers3. April 10, 2012.
↑ Discussed in Bogleheads forum topic: "Updated Modification of Harry Browne Permanent Portfolio", allenmickers. Mar 26, 2008 and Bogleheads forum topic: "Harry Browne Permanent Portfolio Discussion (Cont'd)", MediumTex. Oct 23, 2010.

References

↑ ^1.0 ^1.1 ^1.2 ^1.3 ^1.4 "Three simple index fund portfolios". Forbes. May 23, 2013.
↑ "Margarita portfolio". Couch Potato Investing. July 29, 2018. Archived from the original on September 20, 2020.
↑ ^3.0 ^3.1 Bogleheads forum topic: "The Core Four". December 30, 2007
↑ Bogleheads forum post: "Rick Ferri looking to internationalize his portfolio", Rick Ferri. June 11, 2015
↑ Asset allocations are from: 3 Investment Gurus Share Their Model Portfolios, Chris Arnold, NPR.org, October 17, 2015. Viewed October 30, 2015.
↑ Permanent Portfolio - Early Retirement Extreme Wiki

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.

v t e Bogleheads® investing start-up kit
Introduction to investing
Asking portfolio questions Behavioral pitfalls Importance of saving early Importance of saving rate Investing start-up kit Investment philosophy Investment policy statement Percentage gain and loss Risk
Asset classes

Bonds Callan periodic table of investment returns CDs Domestic/international Money markets Stocks Treasury Inflation Protected Securities
Funds

ETFs for Bogleheads ETFs vs mutual funds Index fund Indexing Mutual fund Mutual funds and fees Mutual funds for Bogleheads Mutual funds: additional costs Vanguard target retirement funds
Managing a portfolio

Accounts for children Asset allocation Asset allocation in multiple accounts Comparing investments Lazy portfolios Managing a windfall Prioritizing investments Rebalancing Sharia investing for US investors Tactical asset allocation Tax loss harvesting Tax-efficient fund placement Taxable account
Financial advice

Financial planner Investment adviser Robo-adviser
Non-US investors

Getting started for non-US investors My portfolio: seeking advice Building a non-US Boglehead portfolio Investing start-up kit for non-US investors Investment philosophy for non-US investors Simple non-US portfolios

v t e Bogleheads® investing start-up kit
Introduction to investing	Asking portfolio questions Behavioral pitfalls Importance of saving early Importance of saving rate Investing start-up kit Investment philosophy Investment policy statement Percentage gain and loss Risk
Asset classes	Bonds Callan periodic table of investment returns CDs Domestic/international Money markets Stocks Treasury Inflation Protected Securities
Funds	ETFs for Bogleheads ETFs vs mutual funds Index fund Indexing Mutual fund Mutual funds and fees Mutual funds for Bogleheads Mutual funds: additional costs Vanguard target retirement funds
Managing a portfolio	Accounts for children Asset allocation Asset allocation in multiple accounts Comparing investments Lazy portfolios Managing a windfall Prioritizing investments Rebalancing Sharia investing for US investors Tactical asset allocation Tax loss harvesting Tax-efficient fund placement Taxable account
Financial advice	Financial planner Investment adviser Robo-adviser
Non-US investors	Getting started for non-US investors My portfolio: seeking advice Building a non-US Boglehead portfolio Investing start-up kit for non-US investors Investment philosophy for non-US investors Simple non-US portfolios

v t e Portfolios
Sample portfolios
Approximating Vanguard target date funds Lazy portfolios Three-fund portfolio Two-fund portfolio Slice and dice Slice and dice international
Portfolio management

GnuCash How to build a lazy portfolio Investment policy statement Lump sum vs DCA (Dollar cost averaging) Passively managing individual stocks Prioritizing investments Rebalancing Short term portfolio management (6 months) Short term portfolio management (1 year) Short term portfolio management (5 years) Using a spreadsheet to maintain a portfolio Systematic investing Tax loss harvesting Using open source software for portfolio analysis Value averaging
Portfolio withdrawals

Matching strategy Safe withdrawal rates Withdrawal methods
Asset classes

US stocks Non-US stocks Real Estate Bonds Money markets Alternate asset classes

v t e Portfolios
Sample portfolios	Approximating Vanguard target date funds Lazy portfolios Three-fund portfolio Two-fund portfolio Slice and dice Slice and dice international
Portfolio management	GnuCash How to build a lazy portfolio Investment policy statement Lump sum vs DCA (Dollar cost averaging) Passively managing individual stocks Prioritizing investments Rebalancing Short term portfolio management (6 months) Short term portfolio management (1 year) Short term portfolio management (5 years) Using a spreadsheet to maintain a portfolio Systematic investing Tax loss harvesting Using open source software for portfolio analysis Value averaging
Portfolio withdrawals	Matching strategy Safe withdrawal rates Withdrawal methods
Asset classes	US stocks Non-US stocks Real Estate Bonds Money markets Alternate asset classes

FAQs

Are lazy portfolios good? ›

Lazy portfolios are designed to perform well in most market conditions, making them the perfect choice for long-term investors.

What is the 3 portfolio rule? ›

The three-fund portfolio consists of a total stock market index fund, a total international stock index fund, and a total bond market fund. Asset allocation between those three funds is up to the investor based on their age and risk tolerance.

Is 80/20 better than 60/40? ›

Which Mix Is Right for You? If you're a younger investor with a long time horizon and are comfortable taking on more risk, the 80/20 portfolio may be a good fit. However, if you're closer to retirement or prefer a more conservative approach, the 60/40 portfolio may be a better option.

Are 80% stocks and 20% bonds good? ›

Over time, the stock market will probably outperform the yield on bonds, but not without some fluctuations along the way. Generally speaking, younger investors are willing to take on more risk. While there's no standard rule of thumb, a mix of 80% stocks and 20% bonds is aggressive, but not overly so.

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What is the 1234 financial rule? ›

One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance.

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How do I avoid taxes when rebalancing my portfolio? ›

Here are six tactics for rebalancing a portfolio in a more tax-efficient way:

Start with tax-advantaged accounts. ...
Re-direct cash flows in taxable accounts. ...
Consider cost basis. ...
Explore charitable giving and annual gifting. ...
Keep in mind the timing of fund distributions when rebalancing near year-end.

More items...

May 12, 2022

How many times a year should I rebalance my portfolio? ›

Set a time to rebalance. Once a year is sufficient, although some investors prefer to rebalance quarterly or twice per year. There's no wrong or right strategy, although less frequent rebalancing will potentially lead to greater stock allocations and higher overall returns, along with greater volatility.

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What is the best type of portfolio? ›

A good way to minimize risk is by creating a diversified and balanced portfolio with stocks, bonds, and cash that aligns with your short- and long-term goals. From there, you can broaden your portfolio to include other assets like real estate or high-risk investments for an increased likelihood of higher returns.

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What is the most efficient portfolio? ›

1. The market portfolio is an efficient portfolio: its allocation provides the only optimal mix of risky assets; 2. For each asset, its expected return follows a simple linear relationship with the expected return of the market portfolio.

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Are robo portfolios a good idea? ›

For some, the simplicity, accessibility, and lower costs make them a very appealing choice. However, for those desiring more personalized service and sophisticated investment strategies, a human financial advisor may be worth the additional cost.

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What is an example of a lazy portfolio? ›

A 60/40 portfolio is another option for lazy investing. With a 60/40 portfolio, 60% of your portfolio is held in stocks and the other 40% consists of bonds. You can invest in individual stocks or bonds or buy mutual funds, index funds or ETFs. A 60/40 portfolio can be easy to maintain through regular rebalancing.

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