Mad Money Machine

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Lazy Portfolios 2010 Year-End Wrap-Up

As we flip our calendars over to 2011 (or reuse our 1994 calendars), it is time to reflect upon how the various Lazy Portfolios performed for calendar year 2010. See the chart below that shows the cumulative monthly returns and the summary table of 2010 returns. The lazy portfolio that had the highest returns for 2010 was the IFA Index Portfolio 100 Bright Red with a 23% gain. But look at that swing from August through December. And also the swing from April through  June! Next, compare the gain of the Permanent Portfolio Mutual Fund (PRPFX – 18.5%) and the path it took to get there.

Lazy Portfolios 2010

Cumulative Monthly Performance of Select Lazy Portfolios for 2010 (Click for big view. Data from Yahoo! Finance adjusted quotes from 12/31/09 through 12/31/10 except IFA from IFA.com and after max 0.9% advisor fee.)


Portfolio Name 2010 Return
IFA Index Portfolio 100 Bright Red 23.0%
Permanent Portfolio Fund (PRPFX) 18.5%
MMM Do It Yourself Funds 17.5%
Dilbert World’s Simplest 16.8%
Paul Boyer Permanent Portfolio (ETF) 15.8%
Ted Aronson’s Lazy Portfolio 14.9%
Harry Browne Permanent Portfolio (ETF) 14.5%
Scott Burns’ Four Square Portfolio 14.4%
Vanguard Windsor 14.2%
Bill Schultheis’ Coffeehouse Portfolio Vanguard 13.6%
David Swensen’s Yale Endowment 13.5%
IFA Index Portfolio 50 13.0%
David Swensen’s Lazy Portfolio 12.9%
Taylor Larimore 3 Fund 12.2%
Larry Swedroe Simple 12.1%
Rick Ferri Core Four 12.1%
Taylor Larimore 4 Fund 12.1%
William Bernstein’s Basic No-Brainer Portfolio 12.1%
William Bernstein’s No Brainer Cowards Portfolio 12.0%
Scott Burns’ Five Fold Portfolio 10.9%
Scott Burns’ Couch Potato Portfolio 10.6%
Scott Burns’ Six Ways from Sunday Portfolio 10.6%
Scott Burns’ Margarita Portfolio 10.1%
FundAdvice Ultimate Buy & Hold 10.0%
Larry Swedroe Min Fat Tails 8.0%

The IFA 100 portfolio consists of 100% stocks and is designed to be IFA’s riskiest portfolio while the PRPFX is roughly 25% stocks and is designed to be lowest risk for return. Pretty interesting that they are the two highest returning portfolios for 2010. And they reached their peaks taking wildly different paths. The IFA 100 was erratic while the PRPFX was smooth and steady. The HBPP and PBPP were even steadier but with slightly lower returns than PRPFX.

In a fairer comparison of IFA portfolios to permanent portfolios, the IFA 50 had a 13.0% gain. The long term risk of IFA 50 is closer than IFA 100 to that of HBPP.

One of the surprises of 2010 was the relatively poor performance of the Larry Swedroe Minimum Fat Tails portfolio. Its long term risk-adjusted results for the last 30 years were quite good when compared to the HBPP. But not so in 2010. Digging into it shows that 70% of the portfolio is in TIPS or short term Treasuries. They were up 6.1% and 2.3%, respectively. The other 30% of the portfolio is 15% small cap value and 15% emerging market. They helped to bring the whole portfolio up to a 8% return for the year. I have often heard people say that investing in TIPS is protection against inflation. I think I’d rather have gold (up 29.3%) serving as intended in its inflation-protection role.

The purist Harry Browne Permanent Portfolio (ETF version) which invests one quarter in each stocks, bonds, cash, and gold had these respective gains: VTI 17.4%, TLT 9.0%, SHY 2.3%, and GLD 29.3% for a total return of 14.5%.

My variation of Harry Browne’s portfolio was up 15.8% because of a slightly riskier stock position. Instead of putting a quarter in VTI (up 17.4%), I place an eighth in small cap value (VBR up 25.1%) and an eighth in emerging markets (VWO up 19.5%) for a combined stocks gain of 22.3%.

And in a final note, I am finally fully invested in my own portfolio, with some minor variations due to legacy investments (like that amazing SCCO). So with my large cash holding through most of the year, my portfolio gained 11.3% in 2010. Considering that I am counting on an average 6% gain, I dun purty good.

Good luck in 2011. See you right here again in 365 days.

[Returns computed using Yahoo! Finance adjusted historical quotes from 12/31/09 through 12/31/10 except IFA from IFA.com and after 0.9% max advisor fee.]

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Sun, January 2 2011 » Analysis, Blog, Portfolio Smackdown