If you’re looking for a set-it-and-forget-it investment strategy, lazy portfolios are one of the smartest — and simplest — options available. Built around low-cost index funds or ETFs, lazy portfolios require minimal effort, low maintenance, and no market timing.
Whether you’re a beginner investor or just want to take the stress out of investing, this guide will walk you through how lazy portfolios work, and how to build your own using just one, two, or three funds.
What Is a Lazy Portfolio?
A lazy portfolio is a diversified investment portfolio made up of just a few index funds or exchange-traded funds (ETFs). It’s designed to give you exposure to the entire market with minimal effort, low fees, and automatic rebalancing (if you choose the right setup).
There are three common types:
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One-fund portfolios (typically a target date fund)
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Two-fund portfolios (stocks + bonds)
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Three-fund portfolios (U.S. stocks + international stocks + bonds)
Let’s break them down.
1. The One-Fund Portfolio: Target Date Funds
The simplest lazy portfolio is just one fund — a target date fund. These funds automatically adjust your asset allocation over time, shifting from higher-risk (more stocks) to lower-risk (more bonds) as your retirement date approaches.
How They Work
You choose a fund based on your planned retirement year — for example:
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iShares LifePath 2070 ETF (ITDJ): For investors retiring around 2070
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iShares LifePath 2045 ETF (ITDE): For mid-career investors
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iShares LifePath 2030 ETF (ITDB): For those near retirement
Target date funds are available as both mutual funds (e.g., from Vanguard, Fidelity, etc.) and ETFs (for brokerage accounts that don’t support mutual funds). You can also use them for non-retirement goals, such as college savings — just choose a “target date” that aligns with the year of the expense.
💡 Average cost: As of 2024, target date funds had an average expense ratio of 0.29% — lower than many actively managed funds, but higher than DIY index investing.
2. The Two-Fund Portfolio: Stocks + Bonds
This version of a lazy portfolio keeps things simple with two building blocks:
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One stock index fund
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One bond index fund
You can go global or U.S.-only:
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Global: Vanguard Total World Stock ETF (VT) + Fidelity Total Bond ETF (FBND)
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U.S.-only: S&P 500 ETF + short-term U.S. Treasury bond ETF
Sample Starting Allocation:
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80% Stocks
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20% Bonds
As you get closer to retirement, gradually shift the allocation:
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End-stage options: 60% bonds / 40% stocks, or even 80% bonds / 20% stocks depending on your risk tolerance.
3. The Three-Fund Portfolio: Add International Diversification
The two-fund model works — but it lacks international exposure. Enter the three-fund portfolio, which adds a non-U.S. stock fund to the mix.
The Three Core Components:
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U.S. Stock Fund (e.g., S&P 500 ETF)
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International Stock Fund (e.g., iShares Core MSCI Total International Stock ETF – IXUS)
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Bond Fund (e.g., Fidelity Total Bond ETF – FBND)
Global Market Rule of Thumb:
The U.S. makes up about 70% of global stock market cap, so a proportional three-fund portfolio might look like:
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55% U.S. Stocks
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25% International Stocks
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20% Bonds
Just like the two-fund strategy, gradually reduce stock exposure and increase bond holdings as you approach your target date.
How to Maintain a Lazy Portfolio
While lazy portfolios are low-maintenance, they’re not totally hands-off. Here’s how to manage one effectively:
1. Dollar-Cost Averaging
Instead of trying to time the market, invest the same amount consistently — every paycheck or every month. This strategy smooths out the average price you pay over time.
2. Rebalancing Annually
Portfolios naturally drift out of balance as markets move. Annual rebalancing helps bring your allocation back to target and ensures you’re not taking on too much or too little risk.
🧠 According to a 2022 Vanguard study, annual rebalancing strikes the best balance between performance, costs, and risk — without generating excessive fees or tax consequences.
3. Adjust Your Allocation Over Time
As you approach retirement or any financial goal, your portfolio should shift toward safety. Here’s a simple example:
Let’s say:
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You start with 80% stocks / 20% bonds
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Your goal is 40% stocks / 60% bonds
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You have 40 years to reach that goal
Every year, reduce stock exposure by 1% and increase bond exposure by 1%. This slow glidepath keeps your risk in check as your investment timeline shrinks.
Final Thoughts: Are Lazy Portfolios Right for You?
If you’re not looking to day-trade, pick stocks, or stress about market swings — lazy portfolios are one of the most effective long-term strategies you can use.
They’re:
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Low-cost
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Diversified
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Easy to manage
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Designed for growth + safety over time
And best of all, they free up your time so you can focus on living your life — while your money works quietly in the background.
Want help setting up a lazy portfolio that matches your goals? Stay tuned to Creditvana for curated investing guides, fund comparisons, and savings tips — all designed to help you grow your money, not your stress.
