Lazy investing with a lazy portfolio

Are you interested in lazy investing? This post is for you.
Read calmly; it’s a post for lazy people!

Financial activity:	Investing
Knowledge level:	Beginner
Reading time:	4 minutes

Summary
What’s a lazy portfolio
Advantages of the lazy investing method
Requirements of the method.
The Permanent Portfolio by Harry Browne
More lazy portfolios
Conclusions

What’s a lazy portfolio

A lazy portfolio is a collection of financial investments based on the “buy and hold” technique.

It’s a portfolio built with funds and ETFs that require very little or no maintenance. Therefore the initial phase of the selection of financial products will be the only complex and tiring one, after which we will let them work waiting for them to bear fruit without too much effort on our part. So the time horizon of a lazy portfolio is very long, at least ten years.

Advantages of the lazy investing method

This is a list of the main reasons to apply this investment method:

• The lazy method is simple (make your choice and let it work).
• The lazy method is cheap (usually, under 1% of invested capital).
• The lazy method is resistant through economic cycles, from crises to periods of expansion.
• The lazy method has produced gains in the past. it’s profitable!
• The lazy method does not require specific financial skills.

Requirements of the method.

It requires two things only:

• The lazy method requires capital to invest from the start.
• The lazy method requires being patient (for many years)!

Let’s see some examples.

The Permanent Portfolio by Harry Browne

First of all, I want to propose to you a classic example.

This is the composition planned for the Permanent Portfolio by its creator, Harry Browne, who created this subdivision in the 1980s, for an American audience:

• 25% US Long-Term Bonds.
• 25% US Short-Term Bonds.
• 25% US Stocks market.
• 25% Gold.

Author's elaboration – Source: Google Sheets.

The purpose of this solution is to create a portfolio that is less volatile than equity or balanced (and therefore less vulnerable to stock market crashes). Still, it’s less profitable because less risk = less gain.

There are some problems, too: it is clear that 25% of Gold is a disproportionate percentage. Perhaps it’s a better solution to re-distribute this percentual through some different commodities.

It can also be implemented with low-cost exchange-traded funds (Blackrock iShares built an ETF version of this portfolio).

More lazy portfolios

All the portfolios that I presented in the previous posts (What is a Financial Portfolio? and An evolution of the Classic 60/40 portfolio: the Three-Fund portfolio) can be built as lazy portfolios using Mutual Funds or ETFs (Bogleheads-Lazy portfolios).

Many other lazy portfolios are created adding international stocks and bonds, and Real Estate Investment Trusts (REIT).

Example: the “Core Four” portfolio by Rick Ferri.
This is the composition (60/40):

• 30% US Stocks Market.
• 24% International Stock Market.
• 6%   Real Estate Investment Trusts.
• 40% US Bonds.

Author's elaboration – Source: Google Sheets.

Conclusions

Takeaways:

• The lazy method seems like a stupid method of investing your savings, but instead, it is a smart method that offers many benefits (simple, cheap, resistant, profitable, etc.).
• The lazy method requires only an initial choice, capital, and patience.

A sincere wish of good work to all!


Written by F. GRAMOLA (*).

(*) Member of S.I.A.T., the Italian Society of Technical Analysis (member society of I.F.T.A. – International Federation of Technical Analysts).

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Initial photo by Ibrahim Boran on Unsplash.