Lazy Portfolios (2024)

FAQs

Are lazy portfolios good? ›

Lazy portfolios are designed to perform well in most market conditions, making them the perfect choice for long-term investors.

Run Risk and Return Analysis

Total annual return (assuming reinvested distributions) served as our return measure. Our analysis found that: Each Lazy Portfolio had a maximum drawdown exceeding -35% over the past ten years. Some of the worst Lazy Portfolios exceeded -40% in the same time frame.

The current David Swensen Lazy Portfolio Sharpe ratio is 1.00. A Sharpe ratio greater than 1.0 is considered acceptable.

VTI is a total U.S. market fund and holds more than 3,500 stocks. VTI is better diversified and benefits from small and mid-cap stocks that grow into large caps. VOO is less diversified, tracking the performance of the S&P 500 Index. VOO excludes small and mid-cap stocks.

High-IQ investors' aggregate stock purchases subsequently outperform low-IQ investors' purchases, particularly in the near future.

Traders can have a maximum Daily Drawdown of 5% from their starting equity (including all floating losses & profits). The 24-hour period starts at 00:00 GMT+3 server time . For example: If you have a starting balance of $200,000, 5% drawdown equals to a $10,000 loss.

*The max drawdown period for the 60/40 portfolio was from February–March 2020 (2 months). **The max drawdown period for the 60/40 portfolio was from December 1980–September 1981 (10 months). For all other periods the max drawdown period for equities and the 60/40 portfolio were the same.

In practice, investors want to see maximum drawdowns that are half the annual portfolio return or less. That means if the maximum drawdown is 10% over a given period, investors want a return of 20% (RoMaD = 2). So the larger a fund's drawdowns, the higher the expectation for returns.

Understanding the Sharpe Ratio

Usually, any Sharpe ratio greater than 1.0 is considered acceptable to good by investors. A ratio higher than 2.0 is rated as very good. A ratio of 3.0 or higher is considered excellent. A ratio under 1.0 is considered sub-optimal.

As a rule of thumb, a Sortino ratio of 2 and above is considered ideal.

What is a very good Sharpe ratio? ›

This tells us that with a Sharpe ratio of 2, Portfolio B provides a superior return on a risk-adjusted basis. Generally speaking, a Sharpe ratio between 1 and 2 is considered good. A ratio between 2 and 3 is very good, and any result higher than 3 is excellent.

Introduction. Bogleheads emphasize regular saving, broad diversification, and sticking to an investment plan regardless of market conditions. We follow a small number of simple investment principles that proved over time to produce risk-adjusted returns far greater than those achieved by the average investor.

It invests in primarily equity, and to a lesser extent, fixed income asset classes with a target allocation of 70% equities and 30% fixed income. Target allocations can vary +/-5%.

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

The efficient portfolios are those that have the highest expected return for a given standard deviation value. These portfolios are the green dots starting with the global minimum variance portfolio at the tip of the Markowitz bullet.

A Lazy Portfolio is a collection of investments that requires very little maintenance.

To Copy Buffett, Prepare To Be Patient

If you haven't figured it out already, copy trading Buffett is not a strategy for those who want to get rich quickly. Warren Buffett is one of the richest people in the world, but 99% of that net worth was created after he turned 50 years old.

Building Your Lazy Portfolio

The 3 funds are US stocks (total US stock market), international stocks (total international stock market), and bonds. “It really can be that simple. You can buy an ETF for each of the three funds, set it and forget it.” said Zigmont.