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‘Lazy Portfolios’ Beat the S&P 500 Again!
By JLP | January 20, 2007
IMPORTANT NOTE: You’ll probably notice that only one of the portfolios listed below actually outperformed the S&P 500 in 2006. The title for the post is based on the total return for the portfolios over the last 5 years. Over the last 5 years the lazy portfolios beat the S&P 500 hands down. To see the results over the last five years, click here.
Paul Ferrell over at MarketWatch wrote an article profiling five ‘Lazy Portfolios,’ which are portfolios created for both simplicity and low cost. The purpose of the lazy portfolios is to give investors a well-rounded portfolio with as little work as possible. All of the portfolios use Vanguard funds (no exchange-traded funds). Anyway, here are the results for 2006:
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11 Funds |
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Fund |
Ticker |
Allo- |
2006 |
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Vanguard 500 Index |
15.00% |
15.64% |
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Vanguard Emerging Markets Stock Index |
20.00% |
29.07% |
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Vanguard European Stock Index |
5.00% |
33.12% |
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Vanguard Extended Market Index |
10.00% |
14.27% |
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Vanguard High-Yield Corporate |
5.00% |
8.24% |
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Vanguard Inflation-Protected Securities |
10.00% |
.43% |
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Vanguard Long-Term U.S. Treasury |
5.00% |
1.74% |
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Vanguard Pacific Stock Index |
15.00% |
11.81% |
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Vanguard Small Cap Growth |
5.00% |
11.95% |
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Vanguard Small Cap Value Index |
5.00% |
19.24% |
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Vanguard Total Stock Market Index |
5.00% |
15.51% |
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Total Portfolio Return |
15.89% |
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S&P 500 Index |
15.79% |
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I don’t quite understand why the Aronson portfolio has so many funds. With the diversity presented, it seems like the Total Market Index fund is unnecessary.
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9 Funds |
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Fund |
Ticker |
Allo- |
2006 |
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Vanguard Emerging Markets Stock Index |
5.00% |
29.07% |
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Vanguard European Stock Index |
5.00% |
33.12% |
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Vanguard Pacific Stock Index |
5.00% |
11.81% |
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Vanguard REIT Index |
5.00% |
35.07% |
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Vanguard Short-Term Investment Grade Index |
40.00% |
4.99% |
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Vanguard Small Cap Index |
5.00% |
15.66% |
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Vanguard Small Cap Value Index |
10.00% |
19.24% |
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Vanguard Total Stock Market Index |
15.00% |
15.51% |
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Vanguard Value Index |
10.00% |
22.15% |
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Total Portfolio Return |
14.70% |
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S&P 500 Index |
15.79% |
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7 Funds |
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Fund |
Ticker |
Allo- |
2006 |
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Vanguard 500 Index |
10.00% |
15.64% |
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Vanguard REIT Index |
10.00% |
35.07% |
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Vanguard Small Cap Index |
10.00% |
15.66% |
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Vanguard Small Cap Value Index |
10.00% |
19.24% |
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Vanguard Total Bond Market Index |
40.00% |
4.27% |
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Vanguard Total International Stock Index |
10.00% |
26.64% |
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Vanguard Value Index |
10.00% |
22.15% |
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Total Portfolio Return |
15.15% |
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S&P 500 Index |
15.79% |
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5 Funds |
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Fund |
Ticker |
Allo- |
2006 |
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Vanguard Inflation-Protected Securities |
15.00% |
.43% |
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Vanguard REIT Index |
20.00% |
35.07% |
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Vanguard Short-Term Treasury Index |
15.00% |
3.77% |
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Vanguard Total International Stock Index |
20.00% |
26.64% |
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Vanguard Total Stock Market Index |
30.00% |
15.51% |
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Total Portfolio Return |
17.62% |
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S&P 500 Index |
15.79% |
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3 Funds |
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Fund |
Ticker |
Allo- |
2006 |
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Vanguard Inflation-Protected Securities |
33.30% |
.43% |
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Vanguard Total International Stock Index |
33.30% |
26.64% |
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Vanguard Total Stock Market Index |
33.30% |
15.51% |
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Total Portfolio Return |
14.19% |
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S&P 500 Index |
15.79% |
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That’s it. For more information on the portfolios, read Paul Ferrell’s article.
Topics: Index Funds, Investing |
January 20th, 2007 at 7:27 pm
The Lazy Portfolio seemed to be aimed at someone closer to retirement, w/ the treasury index and the inflation-protected securities. Do you know if there is a Lazy Portfolio for young 20-somethings?
January 20th, 2007 at 9:03 pm
Wanda,
You could simply take one of the portfolios and either reduce or eliminate the bond portion to make it more aggressive for a younger person.
January 20th, 2007 at 11:38 pm
Count me in for the lazy portfolio, I will try to use this year.
Cheers
January 21st, 2007 at 8:08 am
The lazy portfolio allows for more aggressiveness, just adjust the bond/equity ratio accordingly. BTW: if you haven’t ready _Unconventional Success_, pick it up today (right after you read _A Random Walk Down Wall Street_).
January 21st, 2007 at 1:40 pm
Remember! Past performance is not an indicator of future returns. This was a good year, so returns were much higher than normal across the board. Don’t necessarily expect 17% if you implement the Yale portfolio this year.
January 21st, 2007 at 1:58 pm
fin_indie,
True. But also don’t expect 15.8% from the S&P 500.
January 21st, 2007 at 2:40 pm
I think the reason for the Total Market in the first portfolio would be to get some mid-cap exposure. I would boost this up to 10% and lower the Vanguard 500 to 10%. Then you get 10% in small caps, 10% in large caps, and 10% in everything - probably leading something like 13% large, 13% small and 4% mid-cap. I generally like more mid-cap and would make the Total Index a bigger portion of the portfolio.
January 22nd, 2007 at 10:50 am
[...] Jonathan at MyMoneyBlog starts a series of portfolio analysis based on some widely used models. And sometimes, you can afford to be lazy and still beat the market, according to JLP. [...]