Mutual Fund Portfolio Examples

By looking at examples of different portfolios, we can get a feel for how we should form our portfolio and which mutual funds might be good to look into using.

Remember, as you read through these portfolios, you need to modify these examples to fit your individual financial situation. When you finish, your portfolio might not look like any of these examples. You need to ask yourself, how much risk am I taking and how much reward am I getting for that risk. If you don’t feel comfortable with the risk don’t take it. Money is not worth losing one nights sleep over.

Scott Burns’ Lazy Portfolios (Assetbuilder.com):

Scott Burns’ Lazy Portfolios

Scott Burns is one of the most widely read personal finance writers in the country. Mr. Burns is also in favor of using simple, but effective model portfolios as a foundation for long-term investing. In fact, to illustrate that view, he created five unique portfolios which also have solid long-term track records: Couch Potato, Margarita, Four Square, Five Fold, and Six Ways From Sunday.

Couch Potato Portfolio:
- 50% in Vanguard Total Stock Market Index Fund (VTSMX)
- 50% in Vanguard Inflation Protected Securities Fund (VIPSX)

Margarita Portfolio:
- 33.3% in Vanguard Total Stock Market Index Fund (VTSMX)
- 33.3% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 33.3% in Vanguard Total International Stock Index Fund (VGTSX)

Four Square Portfolio:
- 25% in Vanguard Total Stock Market Index Fund (VTSMX)
- 25% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 25% in Vanguard Total International Stock Index Fund (VGTSX)
- 25% in Vanguard REIT Index (VGSIX)

Five Fold Portfolio:
- 20% in Vanguard Total Stock Market Index Fund (VTSMX)
- 20% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 20% in Vanguard Total International Stock Index Fund (VGTSX)
- 20% in Vanguard REIT Index (VGSIX)
- 20% in American Century International Bond Fund (BEGBX)

Six Ways From Sunday Portfolio:
- 16.65% in Vanguard Total Stock Market Index Fund (VTSMX)
- 16.65% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 16.65% in Vanguard Total International Stock Index Fund (VGTSX)
- 16.65% in Vanguard REIT Index (VGSIX)
- 16.65% in American Century International Bond Fund (BEGBX)
- 16.65% in Vanguard Energy (VGENX)

Ted Aronson’s Lazy Portfolio

I’m not sure I know exactly where the term “lazy portfolio” originated, but if you do a simple Google search using those two words, you’re likely to find information about Ted Aronson and his lazy portfolio strategy which has soundly beaten the S&P 500. Last year’s return was +15.9% and the portfolio has a 5-year annualized return of +13.3%. Below you’ll see how the portfolio is set up:

Ted Aronson (AJO Partners)
- 20% in Vanguard Emerging Markets Stock Index (VEIEX)
- 15% in Vanguard 500 Index (VFINX)
- 15% in Vanguard Pacific Stock Index (VPACX)
- 10% in Vanguard Extended Market Index (VEXMX)
- 10% in Vanguard Inflation-Protected Securities (VIPSX)
- 5% in Vanguard European Stock Index (VEURX)
- 5% in Vanguard High-Yield Corporate (VWEHX)
- 5% in Vanguard Long-Term U.S. Treasury (VUSTX)
- 5% in Vanguard Small Cap Growth (VISGX)
- 5% in Vanguard Small Cap Value Index (VISVX)
- 5% in Vanguard Total Stock Market Index (VTSMX)

William Bernstein’s No-Brainer Portfolios

William Bernstein, a neurologist by trade and well-known author of books like “The Four Pillars of Investing,” has made a name for himself by being a vocal critic to the Wall Street establishment. And, like many others, Bernstein believes 1) you should stick with index funds with a risk-return profile that you desire, and 2) that properly diversified low cost funds offer you the best chance of long-term success.

To meet that goal, here are two of his highly recommended lazy portfolios:

William Bernstein’s Basic No-Brainer Portfolio (Regular or Tax Friendly)
- 25% in Vanguard 500 Index (VFINX)
- 25% in Vanguard Small Cap (NAESX) or (VTMSX)
- 25% in Vanguard Total International (VGTSX) or (VTMGX)
- 25% in Vanguard Total Bond (VBMFX) or (VBISX)

William Bernstein’s No-Brainer Coward’s Portfolio:
- 40% in Vanguard Short Term Investment Grade (VFSTX)
- 15% in Vanguard Total Stock Market (VTSMX)
- 10% in Vanguard Small Cap Value (VISVX)
- 10% in Vanguard Value Index (VIVAX)
- 5% in Vanguard Emerging Markets Stock (VEIEX)
- 5% in Vanguard European Stock (VEURX)
- 5% in Vanguard Pacific Stock (VPACX)
- 5% in Vanguard REIT Index (VGSIX)
- 5% in Vanguard Small Cap Value (NAESX) or (VTMSX)

Bill Schultheis’ Coffeehouse Portfolios

Bill Schultheis, author of the very popular and high-regarded book titled “The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life” is another proponent of the keeping it simple approach. A former broker for Smith Barney and current financial advisor for Pacific Asset Management, offers three principles of investing:

1) Don’t put all your eggs in one basket. (Diversify in different asset classes.)
2) There is no such thing as a free lunch. (Capture the entire return of each basket, or asset class, through low cost index funds.)
3) Save for a rainy day. (Develop a long term financial plan).

If you take time explore Bill’s website, you’ll also discover a fresh perspective about investing and money and its influence over your life. In addition, Bill has provided three basic portfolios for you to consider:

Three ETF Fund Portfolio:
- 33.3% in Vanguard Total Stock Market (VTI)
- 33.3% in iShares International MSCI EAFE Value Index (EFV)
- 33.3% in iShares Lehman Aggregate Bond (AGG)

Coffeehouse Portfolio (ETFs):
- 40% in iShares Lehman Aggregate (AGG)
- 10% in iShares S&P 500 (IVV)
- 10% in iShares S&P 500/Barra Value (IVE)
- 10% in iShares MSCI EAFE (EFA)
- 10% in iShares Dow Jones US Real Estate (IYR)
- 10% in iShares Russell 2000 Value (IWN)
- 10% in iShares Morningstar Small Core (JKJ)

Coffeehouse Portfolio (Vanguard):
- 40% in Vanguard Total Bond Index (VBMFX)
- 10% in Vanguard 500 Index (VFINX)
- 10% in Vanguard Value Index (VIVAX)
- 10% in Vanguard International Stock Index (VGTSX)
- 10% in Vanguard REIT Index (VGSIX)
- 10% in Vanguard Small-Cap Value Index (VISVX)
- 10% in Vanguard Small-Cap Index (NAESX)

David Swensen’s Lazy Portfolio

I have tremendous respect for David Swensen. One of my favorite books last year was his book “Unconventional Success: A Fundamental Approach to Personal Investment” and, if you haven’t read it, I recommend it highly.

David is the chief investment officer of Yale University where he produced a two-decade investment record of +16.1% per year returns. His track record easily places him as one of the best managers of institutional money in the United States. So, what does one of the best money managers around recommend for individual investors? Well, here’s the portfolio:

David Swensen’s Lazy Portfolio:
- 30% in Vanguard Total Stock Market Index (VTSMX)
- 20% in Vanguard REIT Index (VGSIX)
- 20% in Vanguard Total International Stock (VGTSX) or (15% in VDMIX and 5% in VEIEX)
- 15% in Vanguard Inflation Protected Securities (VIPSX)
- 15% in Vanguard Short Term Treasury Index (VFISX

Ben Stein’s Model Portfolios

I like Ben Stein. I’ve read enough of his articles and books through the years that in my opinion I think he’s both sincere and dedicated to helping others.

Not surprising, Ben is also in favor of indexed-focused long-term investing and believes that you should focus your investments on dominant big picture themes to produce even greater returns. For example, Ben has made it clear that he thinks Americans would be smart to have exposure to the world’s emerging markets. In addition, Ben’s portfolio is the only one that I will profile this week that actually sets aside some cash “for a rainy day.” Now, there’s an unusual recommendation!

Ben Stein’s Long-Term Portfolio:
- 30% in Fidelity Spartan Total Market Index (FSTMX) or Total Stock Market ETF (VTI)
- 15% to 20% in iShares MSCI EAFE Index (EFA)
- 10% in iShares MSCI Emerging Markets Index (EEM) or Emerging Markets 50 ADR (ADRE)
- 10% in iShares Cohen & Steers Realty Majors (ICF)
- 10% in iShares Russell 2000 Value Index (IWN)
- 15% in Cash

Jim Lowell’s Sower’s Growth Portfolio

Jim Lowell is a jack of all trades. He’s the editor of several well-known publications (like Fidelity Investor and The ETF Trader at Marketwatch), author of several books including “What Every Fidelity Investor Needs to Know,” a partner at investment advisory firm, and founder of The Ranking Service which offers research for institutions. So what does this Harvard educated guru think that investors should do with their money?

The Sower’s Growth Portfolio:
- 25% in iShares MSCI EAFE (EFA)
- 15% in iShares DJ U.S. Total Market (IYY)
- 15% in Mid Cap SPDR Trust (MDY)
- 10% in Diamonds Trust (DIA)
- 10% in iShares Russell 2000 (IWM)
- 10% in iShares MSCI Emerging Markets (EEM)
- 7.5% in Fidelity NASDAQ Composite (ONEQ)
- 7.5% in Power Shares Dynamic Market (PWC)

This portfolio will be of particular interest to those of you who do not like the offerings at Vanguard which seem to dominate so many other lazy portfolios I will profile this week. Jim has also provided a few alternatives that we haven’t seen before in other portfolios.

Frank Armstrong’s Ideal Index Portfolio

Investment advisor Frank Armstrong is well-known for his book, “The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio” as well founding his own advisory firm. While Frank is a big fan of using funds from Dimensional Fund Advisors (which are only available to institutions and financial advisers), in his view this is as close to an ideal portfolio you can get which offers the best returns with the least amount of risk:

Frank Armstrong’s Ideal Index Portfolio:
- 31% in Vanguard Total International Stock (VGTSX)
- 30% in Vanguard Short-Term Bond (VBISX)
- 9.25% in Vanguard Small Cap Value (VISVX)
- 9.25% in Vanguard Value (VIVAX)
- 8% in Vanguard REIT (VGSIX)
- 6.25% in Vanguard Small-Cap Growth (VISGX)
- 6.25% in Vanguard 500 Index (VFINX)

John Wasik’s Nano Investment Portfolio

John Wasik, author of “The Kitchen-Table Investor,” and columnist for Bloomberg News, has also provided us another lazy portfolio to consider which he calls the nano investment portfolio:

John Wasik’s Nano Investment Portfolio:
- 20% in Vanguard Total Stock Market VIPERS (VTI)
- 20% in Vanguard Total International Stock (VGTSX)
- 20% in Vanguard REIT VIPERS (VNQ)
- 20% in iShares Lehman TIPS Bond (TIP)
- 20% in iShares Lehman Aggregate Bond (AGG)

Source: http://www.kiedaisch.com