Some people call it “passive investing”. Some others call it “index investing”. They are all basically an investing strategy that means buying an index fund or ETF. Beating the index, like S&P 500, is not an easy task. Many fund managers are not able to beat the index consistently. Rather than spending time trying to beat the index, why don’t we just stay with the index?
Coach Potato Portfolio
One of the most popular passive investing is The Couch Potato Portfolio, created by Scott Burns. The idea is to invest in:
- S&P 500
- Shearson/Lehman Intermediate Bond Index
Investors can adjust the percentage of allocation based on their risk tolerance. For example, investors with higher tolerance can invest 75% in S&P 500 and 25% in the bond index.
Lazy Portfolio
Another popular passive investing in Lazy Portfolio from Paul B. Farrell. Paul has 8 different lazy portfolios depending on how complicated or how simple you want. One of Paul’s simplest portfolio is Second Grader’s Starter. It invests in Vanguard mutual funds:
- Vanguard Total Stock Index
- Vanguard Total International Stock Index
- Vanguard Total Bond Index
If you are interested to learn more about Paul’s Lazy Portfolio, you can read his book, “The Lazy Person’s Guide to Investing”.
Permanent Portfolio
Harry Browne has passive investing, called Permanent Portfolio, with unique approach since he’s recommending large amount of cash and gold. His permanent portfolio consists of:
- 25% in US stocks
- 25% in long-term US Treasury Bonds
- 25% in cash
- 25% in precious metals (gold especially)
If you are interested to learn more about Harry Browne’s Permanent Portfolio, you can read his book, “Fail-save Investing: Lifelong Financial Security in 30 Minutes”.
