Investing for Ducees Part Tres


Alright Friends, we have made it part 3 of Investing for Ducees. We’ve laughed, we’ve cried, we’ve found out that being lazy isn’t always a bad thing. It’s now time to put all the pieces together and get this passive portfolio off the ground. Think of this post as a 2-fer. Yes, these portfolios work great in your taxable accounts but guess what? You can utilize some of these same portfolios in your Roth IRA and 401(k).

Since I fancy myself as somewhat of a Boglehead, I will use Vanguard funds in these examples. Fret not, you can find a nice little handy dandy table that will give the fund equivalent at another brokerages.

The first step to constructing your lazy portfolio is to revisit our good old friend Asset Allocation. There is no hard and fast rule to asset allocation. It’s strictly based on your risk tolerance. For the sample portfolios, we’ll use a 30 year old with a pretty healthy risk appetite. Our 30 year old is still fairly new in their career and plans on working around another 25-30 years. This means their time horizon is long and they can stomach the market taking some rough turns. We’ll assign them a 90/10 asset allocation. 90% stocks and 10% bonds.

Lazy level 1 – This is the laziest of lazy. This is our one trick pony. One fund. All encompassing. The absolute Mt. Kilimanjaro of passive investing. For this level of lazy investing, we will go with a target-date fund. This fund is exactly what it says: target a date(year) for retirement and buy that fund. The further out the date, the more aggressive the asset allocation. The closer the date, the more conservative the allocation. Our 30 year old wants to let that thang fly, so we’ll go for Vanguard Target Retirement 2050 Fund (ticker:VFIFX). Highly recommended for 401(k)s.

Let’s take a look at the asset allocation for this fund in a beautiful, simple, effective pie chart:

Very close to that 90/10 our 30 year old desires. That’s it. That’s the portfolio.

Lazy level 2 – This is still a fairly simple portfolio but it requires a little more initial work to set up. I see beads of sweat above your eyebrow. You won’t have to do any math. You will have to make a decision between which stock index fund you will use. The two most common will be a Total Stock Market or one based off the S&P 500. The difference is not enough to keep you up at night, but you still gotta choose one. I prefer Total simply because they had a string of bops in the 90s. For bonds, the same, a Total Bond fund *try saying that 3 times fast*.

Your second decision will be whether to use ETFs or mutual funds. The answer to this question lies in your pocketbook. If you’re using Vanguard, I recommend ETFs because their minimums for their index funds can be a high. A note on ETFs is they trade like stocks meaning there is a “price per share” unlike a mutual fund where you can plop down a set amount of money. No biggie, but good to know. Our precocious 30 year old could set up their Lazy Level 2 fund as such:

90% - Total Stock Market ETF (VTI)

10% - Total Bond Market ETF (BND)

Easy peasy, lemon squeezy.

Lazy Level 3 – This level adds in a bit of flavor by means of an international stock fund. Why do you need international stocks? More diversification my friend! US markets and international markets do not move the same. Meaning when one is down, the other could be up (or less down).

There is no rule on how much of your stock asset allocation should go towards international funds. My personal preference is ~20% because it provides a nice chunk of diversity without being too heavy. As you get more comfortable, feel free to readjust your international stock percentages.

Our 30 year old international person of mystery could set up this fund:

70% - Total Stock Market (VTI)

20% - Total International Stock Market (VXUS)

10% - Total Bond Market (BND)

See you didn’t even have to break a sweat! All set.

You can add more funds, but I don’t consider that all too lazy. The key is to keep things simple and let the market take care of itself. Here are a few tips to a successful lazy fund.

  • Invest in them as much as possible. Even if you only buy another share or add a few dollars. Stacking money on top of money that’s compounding will have your investing in overdrive.
  • Don’t overthink! Lazy investing may seem boring. It may seem like a trick or a cheat code. Good! Leave it be. Go watch a movie or something.
  • This piggybacks off point 2: resist making changes for the sake of making changes. Of course as you age readjusting may be needed. If you decide you can’t stomach a 90/10 asset allocation anymore, readjust. Otherwise, leave it be!!

So that’s the scoop on lazy portfolios. I hope you now have the confidence to go out and give one a try. There are more funds out there than the ones I named. No matter which 1, 2, or 3 you use, the concept is the same: simplicity and low fees.

As promised, check below for a table that will give you the Vanguard equivalents at other brokerages. Note: Fidelity and Schwab do not have minimums on their index funds, so I have also included them as well as their ETFs.

Vanguard Fidelity Schwab
Vanguard Total Stock ETF (VTI) Fidelity Zero Total Market Index Fund (FZROX) US Broad Market ETF (SCHB) or Schwab Total Market Index Fund (SWTSX)
Vanguard Total International Stock (VXUS) Fidelity Zero Total International Index Fund (FZILX) International Equity Index ETF (SCHF) or Schwab International Index Fund (SWISX)
Vanguard Total Bond Market ETF (BND) Fidelity US Bond Index Fund (FXNAX) U.S. Aggregate Bond Index ETF (SCHZ) or Schwab U.S. Aggregate Bond Index Fund (SWAGX)