Building a lazy portfolio is maybe one of the few things in investing that’s both simple and still worth doing. No constant tweaking. No checking headlines every morning. Just a quiet system that runs in the background.
You start with a few index funds — or ETFs if you prefer — that give you exposure to the whole market. Total U.S. stocks, maybe international too. Add in some bonds, depending on your risk tolerance. That’s really it. You don’t need 10 steps or a spreadsheet.
The real beauty? Once it’s set up, you mostly leave it alone. Maybe rebalance once a year. Maybe not even that. Costs stay low, taxes stay low, and you’re not waking up in the middle of the night wondering what Powell said.
This kind of portfolio won’t win cocktail party bragging rights. But over the long term? It quietly beats most of the noise.
1. Getting Started: Open a Brokerage Account and Invest
The easiest way to start is to first open a brokerage account — could be a regular taxable one, or an IRA. From there, it’s just about picking a few low-cost index funds or ETFs that match how you want to be allocated.
Say you’re doing 60% U.S. stocks, 20% international, 20% bonds. That’s three funds. Nothing complicated. Total U.S. market, total international, and a broad bond fund. You can pick one from the list we show on the Lazy Portfolios page.
Once you’re in, the only real job left is to stick with it. Add money when you can. Reinvest dividends. Don’t panic when markets drop. It’s not flashy, but compounding doesn’t need to be. You just have to give it time. Plenty of time.
For example:
- Use Vanguard Total Stock Market Index Fund (VTI) for U.S. stocks.
- Use Vanguard Total International Stock Index Fund (VXUS) for international stocks.
- Use Vanguard Total Bond Market Index Fund (BND) for bonds.
This straightforward process makes lazy portfolios accessible even to novice investors who don’t want to spend hours researching individual stocks or timing the market.
2. Choosing Between Mutual Funds and ETFs
While many lazy portfolios recommend specific index mutual funds, sometimes you may prefer ETFs or other varieties due to cost differences or personal preferences. Obviously, ETFs are virtually available in all brokerages and that makes it more universal.
Let’s explore two scenarios:
2.1 Why ETFs Are Often Preferable
In most cases, ETFs are preferable to traditional index mutual funds because they tend to have lower expense ratios. For instance:
- Vanguard S&P 500 ETF (VOO) has an expense ratio of just 0.03%, whereas its mutual fund counterpart, Vanguard 500 Index Fund Investor Shares (VFINX) , comes with a higher expense ratio of 0.14%.
Lower expenses mean more of your money stays invested, which compounds over time into greater returns. Additionally, ETFs are generally more tax-efficient than mutual funds since they typically generate fewer capital gains distributions. This is particularly advantageous in taxable accounts where minimizing taxes can significantly enhance net returns.
2.2 Exploring Other Varieties
Vanguard still sits at the top — no question there. If you’re building a lazy portfolio, it’s the default. Has been for a while. But there are others creeping in around the edges now. One of the more interesting ones? Dimensional Fund Advisors, or DFA.
They don’t run traditional index funds, exactly. Feels like indexing, but if you look closer, it’s more like a slight remix. Not cap-weighted. Instead, they tilt toward things like small caps, value stocks — basically, the kind of stuff that’s historically shown some outperformance, depending on the window you look at. So in theory, you’re getting the low-cost, rules-based flavor of indexing, but with a few knobs turned.
Advisors seem to like them. Maybe because DFA spent years catering to that group — building relationships, offering tools, staying out of the direct-to-consumer game. That’s changing now, slowly. They’re getting into 401(k)s. Launched some ETFs. Trying to meet folks where they are.
Does it actually beat traditional indexing? Hard to say. Some data shows a slight edge. But it’s not overwhelming. Maybe it adds up in the long run. Maybe not. Still very much a “we’ll see” kind of thing.
If you’re intrigued by DFA products but still want to stick to a lazy portfolio philosophy, you could substitute some core holdings with DFA equivalents. Just make sure that any substitutions matches the same asset classes or categories. See February 27, 2023: Dimensional Fund Advisors and Capital Group ETFs for more discussions on DFA ETFs.
3. Regular Rebalancing: Keep It Simple
One of the core appeals of lazy portfolios is you don’t have to fuss with them all the time. But even the most hands-off approach needs a little nudge now and then. That’s where rebalancing comes in.
Over time, your portfolio drifts. It just does. Some parts run ahead — U.S. stocks, say — while others fall behind. Bonds, internationals, whatever. Before long, you’re no longer holding what you originally signed up for. The portfolio might look the same, but the risk profile shifts. Quietly.
That’s why we usually suggest rebalancing once a year. It’s not a hard rule. You could do it twice a year. Or once every two. Some people tie it to their birthday. Some forget for a while and come back to it later. That’s okay. Missing a year won’t ruin you.
What matters more is the spirit of it: periodically pulling things back into balance. It’s not just for neatness. Rebalancing — done consistently over time — helps you stick to your original plan. It might even give a modest performance bump by making you do the uncomfortable thing: trim the winners, buy the laggards. The whole “buy low, sell high” thing we always hear about, but rarely act on.
Now, whether rebalancing on this date versus that one makes a difference? Probably not in any predictable way. If there’s an optimal day of the year to rebalance, no one’s found it yet. Or if they have, they’re not telling.
Here’s how to rebalance:
- Review your current asset allocation.
- Compare it to your target weights.
- Sell excess holdings in overweighted categories and buy more in underweighted ones to restore balance.
The key takeaway? There’s no need to obsess over precise dates or rigid schedules. Flexibility is part of what makes lazy portfolios appealing.
4. Tweaking Allocations Based on Your Needs
Sometimes, your financial situation or goals may evolve, prompting you to tweak your lazy portfolio’s allocations. For instance, you might decide you want more exposure to U.S. stocks or less reliance on bonds as you near retirement. To make informed decisions, consider using tools like the MyPlanIQ Asset Allocation Calculator , which evaluates your risk tolerance and suggests appropriate allocations based on your inputs.
Steps to adjust your portfolio:
- Assess your updated risk tolerance using an online calculator or similar tool.
- Determine new target weights for each asset class.
- Gradually reallocate your investments to reflect these changes without disrupting your long-term strategy.
Remember, minor tweaks are fine, but avoid frequent changes driven by short-term market trends. Sticking to a disciplined approach is crucial for maximizing the benefits of a lazy portfolio.
Conclusions
The beauty of a lazy portfolio is that you don’t need to know everything. You don’t need to watch the market every day or react to every headline. You just need a plan that’s simple enough to stick with.
Whether you’re using mutual funds or ETFs — or some mix — doesn’t matter much. Whether you rebalance once a year or every other year, same story. You can even adjust allocations slowly over time, as life changes. That’s fine. The core idea stays the same: keep costs down, spread your bets (diversify), and give things enough time to work.
Because time really does do the heavy lifting here. Not timing. Not tinkering. Just time.
So if you’re doing those basic things — and you’re not constantly second-guessing yourself — you’re probably already ahead of most. It’s not flashy, but it’s sturdy. And that’s kind of the point.