My Lazy Portfolio – How to Easily Invest in Stock Market Without Going Through Pages of Financial Report & Statements

Decide Bond Allocation

Now that you have a broker, you have to decide on your bond allocation of your portfolio. There are many sites and experts who have a formula on how to calculate how much percentage of bond you are supposed to have depending on your age. Do not worry too much about it because these formulas are supposed to be a one size fits all solution.

Bond will work as your safety net when the economy goes down (and it will since economy works in a cyclical way). So, depending on your risk tolerance, 0% – 40% will be fine no matter your age.

If you are investing with your spare money that you can forget about until a long time in the future and you are in your 20s – 30s, you will be fine without any bond allocation. I generally recommend 10% – 20% of bond allocation no matter how old you are. If you are the type who panics easily when you see that your holdings are in the red, then 40% bond allocation will be fine as well.

The point is to hold your holdings long term, because the stock market will eventually rebound and goes up.

Total U.S Stock Market Index

Once you decide your bond allocation, Total U.S Stock Market Index should be 50% of your remaining portfolio, like so

let’s assume for this post that you decide on 20% bond for your $10,000 portfolio, since you want to hold 50% Total U.S Stock Market Index with the remaining available allocation, you will actually be purchasing shares worth $4,000 of Total U.S Stock Market Index

Depending on your broker, most brokerage offers their own index fund so you can save on transaction fee and expense ratio, for example:

• Vanguard: VTI
• Charles Schwab: SWTSX
• Fidelity: FSKAX

I have had Vanguard Account since college so VTI is what I go with, but any of the above choices are fine. One thing that you need to think about is to make sure you go with lowest expense ratio possible. Any money you saved by not paying the expense ratio or transaction fee is money that you can invest.

This portfolio assumes that since U.S has one of the biggest market in the world, most of the big companies in the world want to get listed into the U.S Stock Exchange, and so this index will be your main moneymaker.

Total International Stock Index

With your remaining balance after your bond allocation, you want to invest 40% into Total International Stock Index which covers all the stock market outside of the U.S.

To keep tally of our $10,000 portfolio, so far you will have:

• 20% in Total U.S bonds (or $2,000)
• 50% after bond allocation into Total U.S Index (or $4,000)
• 40% after bond allocation into Total International Index (or $3,200)

Again, depending on your brokers, there are many choices available to you. Just keep an eye out on the expense ratio and transaction fee. Some of the index available to big brokers are:

• Vanguard: VXUS
• Charles Schwab: SWISX
• Fidelity: FSPSX

By investing into the International Stock Index, we are hedging (protecting) ourselves in the event that U.S economy is not doing very well. This holding also covers countries outside of U.S that are doing well (for example, China in 2018).

U.S Real Estate Index

Finally, with our remaining balance, we will invest in U.S Real Estate Index which brings our final tally to

• 20% in Total U.S bonds (or $2,000)
• 50% after bond allocation into Total U.S Index (or $4,000)
• 40% after bond allocation into Total International Index (or $3,200)
• 10% after bond allocation into U.S Real Estate Index (or $800)

Some of the index available are

• Vanguard: VNQ
• Charles Schwab: SCHH
• Fidelity: FREL
• iShares: IYR

By investing in REIT or Real Estate Index, you will be able to earn dividend monthly, but keep in mind, during the economic downturn, REIT usually one of the sectors that get hit the hardest.

Recap (TL;DR Version)

To recap, our allocation consists of

• 0% – 20% Total U.S Bonds. Providing “insurance” to our portfolio because bond generally goes up as economy goes down.
• 50% after bond allocation into Total U.S Stock Market. Main moneymaker that will gives you the most gain during good economy.
• 40% after bond allocation into Total International Stock Market (outside of U.S). Acting as safety net when U.S stock goes down.
• 10% after bond allocation into Total U.S REIT Index. Provides monthly passive income for you to compound your holding or cash.

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