Lazy Portfolios (2024)

FAQs

What is the lazy portfolio? ›

A lazy portfolio is a collection of investments that require minimal management. It typically consists of a few (or even one) diversified, low-cost index funds or ETFs (exchange-traded funds). You can also get index mutual funds that will also do the job.

The breakdown for the 60/20/20 budget looks like: 60% of your income is on living expenses – rent/mortgage, groceries, utilities and transportation. 20% of your income on financial goals – debt reduction, emergency fund and investments. 20% of your income on discretionary spending – entertainment, travel and eating out.

The key principles of a lazy portfolio are diversification, low fees, and patience. Instead of actively building and managing a portfolio, you invest in a handful of low-cost index funds and hold onto them for the long term.

A three-fund portfolio is an investment strategy that involves holding mutual funds or ETFs that invest in U.S. stocks, international stocks and bonds. The strategy is popular with followers of the late Vanguard founder John Bogle, who valued simplicity in investing and keeping investment costs low.

Quote by Henry David Thoreau: “Goodness is the only investment that never fails.”

This is a rule that aims to aid diversification in an investment portfolio. It states that one should not hold more than 5% of the total value of the portfolio in a single security.

What does the 4% rule do? It's intended to make sure you have a safe retirement withdrawal rate and don't outlive your savings in your final years. By pulling out only 4% of your total funds and allowing the rest of your investments to continue to grow, you can budget a safe withdrawal rate for 30 years or more.

It suggests that 10% of your portfolio should be allocated to high-risk, high-reward investments, 5% to medium-risk investments, and 3% to low-risk investments. By following this rule, you can spread your investment risk across different asset classes and investment types, such as stocks, bonds, real estate, and cash.

One method for using the 80-20 rule in portfolio construction is to place 80% of the portfolio assets in a less volatile investment, such as Treasury bonds or index funds while placing the other 20% in growth stocks.

Simply divide 72 by your anticipated rate of return to get the number of years it will take for your money to double. For example, if you expect an investment to generate a 6% yearly return, you'd divide 72 by that number to get 12 — meaning, you should expect your money to double every 12 years.

What is the dumb money strategy? ›

Consequently, the “dumb money” group tends to buy and sell investments at the worst possible time. They buy stocks when prices are on the rise and sell those stocks when prices start to decline. For the average investor, the stocks they buy go on to underperform, and the stocks they sell go on to perform very well.

How much would I need to be financially free? Luckily there is actually a very easy way to calculate this. The 4% Rule (or rule of 300) gives you a very good estimate of how much money you will need in retirement. Based on this rule, we put together a plan to become financially free by 2030.

Rule No.

1 is never lose money. Rule No. 2 is never forget Rule No. 1.” The Oracle of Omaha's advice stresses the importance of avoiding loss in your portfolio.

It's important to note that both the 60/40 and 70/30 asset allocations are considered moderately risky. But the exact amount of risk you are comfortable with will depend on your specific needs and goals.

The 2% rule for retirement represents the most conservative approach among the withdrawal rate strategies. This strategy suggests retirees withdraw only 2% of their total retirement corpus in the first year of retirement, with subsequent annual adjustments for inflation.

An inefficient portfolio is one that delivers an expected return that is too low for the amount of risk taken on. Conversely, an inefficient portfolio also refers to one that requires too much risk for a given expected return. In general, an inefficient portfolio has a poor risk-to-reward ratio.

This portfolio invests in stocks, bonds, and gold, allowing it to avoid significant losses in any economic scenario. Although it reduces volatility, the golden butterfly has much lower long-term returns than stock-heavy portfolios.

Also referred to as passive or index investing, couch potato investing requires less effort and time than traditional investing. The strategy is simple: invest in low-cost index funds or exchange-traded funds ( ETF s) for the long-term, turn on autopilot, and check-in periodically.