Slow Fortune

Lazy Investing (Canadian Lazy Portfolios)

The Little Book of Common Sense Investing, written by Vanguard Founder John C. Bogle, explains that trying to beat the stock market
is theoretically a zero-sum game (for every winner there must be a loser), and after the substantial costs of investing are deducted, it becomes a loser's game.

People who try to beat the stock market inevitably end up buying and selling lots of equity and paying outrageous fees (e.g. The average Canadian mutual fund expense ratio is 2.25%), which in turn, absolutely kills compound returns over the long term. However, one group successes from this type of investing: the brokers, investment bankers, money managers, marketers, accountants, lawyers, and operations departments of our financial system. But rarely the individual investor.

Bogle also demonstrates in the book that history and common sense show us that the simplest and the most efficient and effective investment strategy is to buy and hold a good chunk of the stock market, and with very low fees.

Lazy investing is to be a great way to beat Wall Street (And Bay Street), while spending only a few hours per year managing your portfolio.

What does lazy investing mean?

Paul Farrell, JD, PhD, columnist for CBS MarketWatch and author of Lazy Person's Guide to Investing defines lazy investing:

  1. Do it yourself, and always be sure to purchase no-load mutual funds [or low MER ETFs]. You should never have to pay a substaintial broker's commission when building your lazy portfolio.

  2. Build a winning, well-diversified portfolio with 11 funds or less.

  3. Follow a buy-and-hold strategy. Buy quality upfront, intending never to sell. Lazy portfolios win by being average, so make low-cost index funds part of your lazy portfolio. Active trading kills your returns. This happens because transaction costs can double your expenses and taxes. Never actively trade.

  4. Trust the power of compounding by starting early and saving regularly.

Example Lazy Portfolio

Here is an example Lazy Portfolio from Bill Schultheis, author of the The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life.

One of his Lazy Portolios, is his Three ETF Fund Portfolio.

- 33.3% in Vanguard Total Stock Market (VTI) (Domestic Stock Exposure)

The Vanguard® Total Stock Market ETF seeks to track the performance of a benchmarkA benchmark is a standard against which the performance of a security, index, or investor can be measured. As an example, mostequity managers use the s&p 500 index as a broad-based benchmark of U.S. companies. An investor cannot invest directly in an index which is unmanaged. index that measures the investment return of the overall stock market.

- 33.3% in iShares International MSCI EAFE Value Index (EFV) (International Stock Exposure)

The iShares MSCI EAFE Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index.

- 33.3% in iShares Lehman Aggregate Bond (AGG) (Bond Exposure)

This fund is the only ETF tracking the entire domestic-bond market.

So, if you had $10,000, you would invest $3,300 in each of VTI, EFV, and AGG. In matters not whether this portfolio is in a taxable or non-taxable account (e.g. RRSP, or IRA).

These allocation percentages will change over time depending on their return or less. Whenever it is time to reinvest money, you would add money to those funds in order to rebalance the levels to 33% each. Rinse and repeat ad infinitum.

Sound easy? It is. This lazy portfolio has a good asset mix, bonds to minimize risk, and decent exposure to international equity. Other lazy portfolio's have more funds, some have less, and other's are designed to have different states depending on where you are in life (how many years until retirement, what your goals are, etc).

Lazy Portfolios

For a list of Lazy Portfolios, and Canadian versions of them, please visit our Lazy portfolio listings page.