Monthly Archives: April 2015

How to Build a Lazy Portfolio

lazy investments

Using the word “lazy” as an adjective isn’t usually a compliment.  Especially when we’re talking about our money, which we’d like to think is working hard for us so one day we won’t have to.  But the phrase “lazy portfolio” is a thing.  And it’s a good thing at that.  It takes the “buy and hold” strategy of investing and takes it to the next level.  A lazy portfolio is a collection of investments that require very little maintenance, and according to Vanguard, combine the passive investor’s highest virtues: simplicity, frugality and humility.  Simplicity in that a lazy portfolio is usually made up of a few index funds that will mirror the marker.  Frugality because these funds should be low cost funds, such a no load funds.  And humility because statistics have shown that those who accept that they can’t beat the market will perform better than those who believe they can.

So how does one build a lazy portfolio, also known as a couch potato portfolio?  (Side note: the term couch potato made me chuckle.  I haven’t heard that term used since the 80’s….wasn’t the couch potato a distant cousin to the California Raisins?  If you’re under 30, you have no idea what I’m talking about.)

Step 1 – Choose Your Funds

This is where the simplicity aspect comes into play.  You don’t want to make things complicated with too many funds in your lazy portfolio, but you also don’t want all your eggs in just one basket either.  Three funds seem to be a magic number, and I mentioned Vanguard earlier because they believe they have the perfect lazy portfolio.  Not to be biased to the other brokers, but I am a big fan of Vanguard for their low cost index funds.  Plus having all your funds in one place adds to the simplicity aspect as well.  Their recommendation is as follows:

  • 40% Vanguard’s Total Stock Market Index Fund
  • 30% Vanguard’s Total International Stock Market Index Fund
  • 30% Vanguard’s Total Bond Market Index Fund

Step 2 – Set Up Automatic Purchases

Talk about lazy, if you set up future purchases of these funds to be automatic (also known as a systematic investment plan or SIP), not only is that one less thing to worry about, you’re employing dollar cost averaging at the same time.  Dollar Cost Averaging, which I did a post on here, means that by buying shares at a fixed amount of money over time, you’re buying more when the price is low and less when the price is high.

Step 3 – Rebalance

Rebalancing your portfolio may sound complicated, but it’s not.  It just means that you are realigning your portfolio to have the same percentages you had when you started.  And even with a lazy portfolio, it’s a good idea to rebalance once a year.  So if you take the Vanguard portfolio mentioned above, each year you would want to buy or sell shares of your 3 funds to restore them to the 40-30-30 balance you originally had.  And if you get closer to retirement, and want a more conservative portfolio (say 50% in bonds, 25% in stocks and 25% in international stocks), you should rebalance to that strategy as well.

If even these lazy portfolios sound like too much work for you, you can always go with a Balanced Fund which already has a mix of stocks, bonds and cash.  Or you could go with a Target Date Mutual Fund that also has a mix of assets and rebalances the fund for you.  Leaving almost no work for you and plenty of couch potato time (with maybe some bonbons thrown in, another 80’s throw back.)

 

Photo Credit: Wikimedia Commons

 

Save the Most on Your Vacation – Part 3 of 3: All the Other Stuff

Europe 2010 142

In this last part of the vacation series, I’m talking about how to save money on car rentals and transportation, meals and sightseeing.  You know, all the stuff that adds up quickly and puts you over your vacation budget. Renting a Car You’re going to pay more during the summer months on a rental car, but you can still save so money with a few tricks.  Going with one of the smaller companies such as Dollar, Fox Rent a Car and Advantage will keep your rate lower.  You can also save quite a bit by not renting at the airport.  Look into rental car locations near but not at the airport, which offer significantly lower rates than their airport partners.  You’ll have to take a train or cab to get there but the savings could be worth it.  Some car rental companies will let you drop the car back off at the airport location as well.  Lastly, since you can cancel most car rental reservations, book as soon as you can but continue to keep an eye out for better deals up until your trip. Uber vs. Taxi Many of you living in big cities already know and love this popular taxi alternative called Uber.  But for some living where Uber isn’t as common, you should get to know this company if you want to save money on cab fare during your trip.  Uber’s rates are based on mileage similar to a cab, however their rates tend to be lower than a cab in most cities.  When you factor in that you don’t tip an Uber driver (and most of us tip cab drivers), you almost always save money.  I say almost because you do need to watch for when Uber fares are surging, which means it’s a peak time and they charge more. Eating Out While On Vacation In my hotel post, I mentioned some tips for saving money on food during your vacation by finding accommodations with a kitchen or kitchenette, free breakfast, happy hour or other meals.  So when eating out, here are some ways to save:

  • Check Yelp for reviews of restaurants in the area that the locals love.  You may find a great place off the beaten path that is within your budget and avoid the tourist traps.
  • Sites like Restaurant.com, Groupon or Living Social list coupons and deals for restaurants by city.
  • If you’re vacationing with your family, any restaurant that offers “kids eat free” should be considered.

Sightseeing Groupon and Living Social are great resources for saving on sightseeing, spas, and anything else you’re looking to do in your vacation destination.  It’s also worth googling what free activities, museum, or parks are available too.

  • Going to New York City?  Look into getting the city pass: http://www.citypass.com/new-york, which combines NYC’s top tourist destinations into one money-saving pass.
  • Planning a trip to Disney Land or Disney World?  The blog Mouse Savers has great deals on all things Disney.
  • Heading to Europe?  A good resource is Rick Steve’s website.  Known as America’s most respected authority on Europe, he wrote about 50 ways to save on your Europe trip here.

What are some money saving tips you’ve found from your travels?