Boglehead’s Lazy Portfolios

Lazy portfolios are low-cost strategies built from a few diversified index funds or ETFs, rebalanced periodically to hold a chosen risk level. The appeal is exactly what the name promises: broad diversification, low fees, and almost no maintenance.

Two-fund portfolio

You can invest in broad U.S. and international markets, as well as bonds, using only two funds as shown in Table 11.10. Expense ratios are in braces.

This approach provides exposure to global equities and a stable bond component, ensuring diversification and simplicity.

Three Fund Portfolio

Several popular authors and columnists advocate for three-fund lazy portfolios, which generally consist of three equal parts: bonds (either total bond market or TIPS), the total U.S. stock market, and the total international stock market. While the specific percentage allocations may vary, these funds typically form the core of Vanguard’s Target Retirement and LifeStrategy funds. The expense ratios for these funds are in braces.

Adjust your allocation as described in age-based models, based on your risk tolerance and horizon — and treat any age-only bond formula as a starting point, for the reasons given there.

Four Fund Portfolio

Rick Ferri proposed the “Core Four” portfolio, consisting of four low-cost, total market funds that form the cornerstone of a diversified investment strategy. Exact allocation percentages are not critical; rounding to the nearest 5% is acceptable.

Investors can customize it further by adding value stocks (both US and international) or by splitting the bond portion between TIPS and nominal bonds. This adjustment would create a slightly more conservative version of David Swensen’s model portfolio, which includes less international stock and REIT exposure but maintains the same four base funds plus TIPS.

David Swensen’s Portfolio

David Swensen, the Chief Investment Officer of Yale University and author of Unconventional Success: A Fundamental Approach to Personal Investment,¹⁰³ also advocates for a “lazy portfolio” strategy. His approach centers on low-cost, tax-efficient total market funds, a significant allocation to real estate, and TIPS as illustrated in Table 11.14. The recommended portfolio splits its allocation with 70% equities and 30% fixed income. However, the portfolio can be adjusted to reflect alternative equity/bond allocations. Note that different weightings of international stocks would result in varying returns. Swensen’s strategy is designed to be simple yet diversified, aiming to achieve steady growth while minimizing costs and taxes.