Lazy Portfolio for 401k

• Hold the Institutional Index and Extended Market funds in an 81 / 19 ratio, to track the entire US stock market
• Hold the Developed Market and Emerging Market funds in an 79 / 21 ratio, to track the entire ex-US stock market
• Hold your US stocks and ex-US stocks in a 60 / 40 ratio

• Pick a stock / bond ratio per your need, capacity, and tolerance for risk:

  • If you’re just starting out, use 90 / 10 as your baseline.
  • If you’re nearing retirement, use 60 / 40 as your baseline
  • Otherwise, use a ratio in between, such as 80 / 20 or 70 / 30
• A real estate investment trust (REIT) behaves like a third asset class, so consider using it as a portfolio diversifier. Use 5% of your portfolio as your baseline REIT allocation (take it from your stock allocation).

Do you plan to retire in 25+ years and have your assets highly correlated with a single stock? And you’re doing well at your job, and you’re already contributing to a 401(k) or IRA? And you’re comfortable with an aggressive investing style? If so, you’re probably fairly typical of the people reading this but not at all typical of people worldwide. You likely have substantial capital or are on a trajectory to accumulate it. In such circumstances, a straightforward, low-maintenance strategy is highly effective because it minimizes behavioral errors and execution stress. For instance, you could put 100% of your money in stocks, using low-cost exchange-traded funds (ETFs) like VT, VTI, and VNQ. If you possess significant wealth or high risk tolerance, an aggressive strategy is highly appropriate if it matches your long-term plan. Alternatively, electing a 70/30 stock/bond split offers a resilient option. Rebalance every one to two years and re-evaluate your strategy upon major life milestones like marriage or parenthood.

A common guideline is that bonds should comprise a percentage of your portfolio that is close to your age. For more information on stock/bond asset allocation, see the Bogleheads article on Asset Allocation.