How To Build A 3 Fund ‘Lazy Portfolio’ To Simplify Your Investments

lazy portfolio

Most people aren’t cut out for active investing. And that is just fine. As long as you understand the value of investing and are willing to create a simple, 3 fund lazy portfolio, you can set it and (mostly) forget it.

Creating lazy portfolios that consist mostly of ETFs or Mutual Funds has been the rage of the F.I.R.E. community for years. Even Warren Buffett suggests that most people should invest in index funds — rather than picking individual stocks — on their path to building wealth.

“A low-cost index fund is the most sensible equity investment for the great majority of investors,” said Buffett. “By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.”

If the idea of a 3 fund lazy portfolio is getting the stamp of approval from Warren Buffett, then it is certainly good enough for anyone who is looking to be a passive investor.

Asset Allocation

Before you dive into buying your funds, you should decide what you want your asset allocation to be.

How do you do that?

We’ve covered the importance of asset allocation before, but it all has to do with your stage of life and tolerance for risk.

An old rule of thumb was taking your age and subtracting it by 100. If you’re 40 then you should have 40% of your money invested in bonds and 60% in stocks. 

With people living longer, subtracting from 120 might make more sense. But everyone needs to determine their own situation and risk tolerance.

What Are Some Lazy Portfolio Funds?

There are no shortage of index funds to invest in. Here are a few lazy portfolio examples. We’ll base this on an allocation of 60% U.S. equities, 20% international equities, and 20% bonds.

Vanguard Lazy Portfolio

VTI (Vanguard Total Stock Market Index Fund ETF) – 60%
VXUS (Vanguard Total International Stock Index Fund ETF) – 20%
BND (Vanguard Total Bond Market Index Fund ETF) – 20%

iShares Lazy Portfolio

ITOT (iShares Core S&P Total US Stock Market ETF) – 60%
IXUS (iShares Core MSCI Total International Stock ETF) – 20%
IUSB (iShares Core Total USD Bond Market ETF) – 20%

SPDR Lazy Portfolio

SPTM (SPDR Portfolio S&P 1500 Composite Stock Market ETF) – 60%
DWX (SPDR S&P International Dividend ETF) – 20%
SPAB (SPDR Portfolio Aggregate Bond ETF) – 20%

These are just examples. You can mix and match. You can choose funds that only follow the S&P 500 like SPY, or funds that focus on delivering higher dividends like VYM. It’s completely up to you.

What Else Should You Consider? 

Fees. You definitely don’t want to pay a lot of fees, especially if you are managing your 3 fund lazy portfolio by yourself. This is why it’s best to use no-load funds and those with low expense ratios.

You should also make sure you choose an online trading platform that offers commission free trades and no hidden fees or balance minimums. We really like the mobile-first experiences with trading apps like M1 Finance or Public. But you can’t go wrong with legacy companies like Vanguard or TD Ameritrade either.

C. James

C. James is the managing editor at Wealth Gang. He has a degree in finance and a passion for creating passive income streams and wealth management.