Why a Lazy Portfolio?
A Lazy Portfolio eliminates ten major investment risks:
Remember: Time, not money, is your most precious resource. It is perishable, irreplaceable and, unlike money, cannot be saved.
The real beauty of Lazy Portfolios is that they allow you to redirect your time to high-value activities, whether that's spending more time researching healthy habits, sleeping, exercising, work you enjoy, part-time income generating opportunities, pursuing your favorite activities, or just relaxing with your friends and family. A Lazy Portfolio gives you a superb opportunity to grow your wealth. But it guarantees you more time to devote to the people and pastimes you love. Perhaps that is what recommends Lazy Portfolios the most.
- Alex Green
In the 20 years ending Dec. 31, 2012, the Standard & Poor's 500 Index compounded at 8.2% while the average investor in U.S. equity funds made only 4.3%. In other words, nearly half the return of the market was lost.
How did investors lose half the return of the market? Where did it go? Three powerful forces took it away.
Those numbers refer to equity funds. The results were much worse with bond funds. In that same 10 years, the Barclays Aggregate Bond Index returned 6.3% a year; but average investors in bond funds made only 1%. It's bad enough that equity investors received only 52% of the return of the market. Bond investors, however, got only about 15% of what they could have gotten with a bond index.
There's not much mystery about the source of the problem with investing in bonds. For many years the bond market has been overshadowed with the threat of higher interest rates, a threat that has received plenty of attention in the media. This has kept many investors away from longer-term bonds, which have more interest-rate risk, even while interest rates continued to decline, seemingly against all odds. The media, as well as many securities salespeople, repeatedly warned investors in 2011 to steer clear of long-term government bonds. In that year, those bonds returned 27%.
"No matter what the state of the mutual fund industry, boom or bust: Investment results are more dependent on investor behavior than on fund performance. Mutual fund investors who hold on to their investments are more successful than those who time the market."
I think the most dependable way to achieve the full returns of the market is to invest in a diversified mix of index funds with low expenses [a Lazy Portfolio]. If you couple this with patience and with enough bond funds to keep you within your comfort level, then I think you are likely to be more successful than 99% of all other investors.
- Paul Merriman
A humorous example of why you should use a diversified lazy portfolio consisting of index funds instead of a non-diversified portfolio of actively managed funds.
© 2010-2016 www.lazyportfolioadvice.com All Rights Reserved.