The Laziest Investment of All

In today’s financial column on CBS’s MarketWatch, Paul B. Farrell writes about “Lazy Portfolios” – i. e. Buy-and-Hold long term, “lazy” strategies that always beat brokers’ and advisors’ more aggressive, managed strategies.

Here’s an excerpt of what he says:

“America’s investors have been ripped off as massively as a bank being held up by a guy with a gun and a mask,” …

Lazy Portfolios give investors a far superior alternative than gambling retirement savings in Wall’s Street’s casino. Simple solutions: Just three to 11 no-load low-cost index funds, and zero trading. And in the past decade we’ve discovered eight great Lazy Portfolios that investors are using as guides to building their own portfolios, without brokers or advisers.

Today, Wall Street, the fund industry and brokers hate these eight Lazy Portfolios even more. Not just because they consistently beat the S&P 500 on a long-term basis. Not because they’re based on the exact same Nobel Prize-winning model Wall Street’s top wealth managers use. Not because you don’t need any fancy algorithms to rebalance your portfolio. And not because Bogle calls industry insiders casino “croupiers” because they skim a third of your market returns off the top, leaving you leftover crumbs.

The more you trade at Wall Street’s casino, the richer your broker gets.

Farrell suggests that you build your own lazy portfolio using just a few index type mutual funds with low loads. Low loads are important, he says, because a typical mutual fund silently skims off about a third of your return, with no great benefit to you but a lot of benefit  to your advisor/broker. He offers six principles of sound investing – all of which are just one principle stated six times: You can’t time the market and you can’t beat the average. You must avoid getting effected by short-term swings and market sentiment. Have a definite time horizon for your investments and you will beat the experts. Don’t even watch the market and your portfolio day to day and have realistic expectations.

Read Farrell’s article here.

Farrell then goes on to give an example of 8 mutual funds that would be great candidates, singly or together, for a lazy portfolio. These are summarized below along with their 1-, 3-, 5- and 10-year returns.

He notices that they beat the S&P 500 over 5 or 10 years.

Mirror Mirror on the Wall. What’s the Best Fund of them All?


As you may know from reading my previous columns I think that the best investment vehicle of all is the simplest index of them all – The Dow Jones Industrial Average, or the Dow as we familiarly call it.

As of this writing how did the Dow fare over the same periods? Here’s how:

Dow Jones Industrial Average with Dividends Re-invested
1-year           11.6%
3-year           22.8%
5-year             4.3%
10-year           5.0%

Over 1-, 3- and 5-year periods the Dow beat all 8 of the lazy portfolios suggested by Farrell. Over the 10-year span the Dow did a bit worse. Over longer spans – 15, 20, 30 or 40 years – the Dow has returned a whopping 11% annual return compounded!

The Dow is easy to invest in – you could buy the ETF with the symbol DIA. You will pay a 0.5% or less total annual fee. Be sure to reinvest dividends automatically.

If you want to save the fee you just need to buy the 30 component stocks – equal shares of each. That’s it. You’re done. Reinvest dividends, and if buying 30 stocks with periodic dividends is too much work, sweep the dividends into DIA.

You will have less volatility than all the 8 “lazy” portfolios mentioned by Farrell and you will have comparable to better results. Best of all you need not waste your time studying and timing, or even watching, the market casino. You will be getting the best returns the house has to offer without making the sharks rich.

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