It’s been a few years running now (2011, 2010) where I pointed out the the contrived beauty and simplicity of the “Lazy Portfolios” regurgitated by MarketWatch’s Paul Farrel ad nauseam is nonsense. See, these nifty portfolios were set up with the benefit of hindsight and spewed out a few years ago when virtually every asset class was trouncing US stocks (using the S&P500 index as a proxy). Of course emerging markets, commodities and bonds looked great as US stocks were crashing! Duh. However, I warned that moving forward, these asset classes are no more likely to beat the US equity indices than random chance. And I was right. My argument remains the same, but the results are just embarrassing for the proponents of these tools. What is more embarrassing than the performance though is the complete lack of acknowledgement of their under-performance and lack of utility. Let me be clear – I’m all for diversification, risk management, investment horizons and all that good stuff. What I’m criticizing here is the claims of superiority of portfolios which are clearly NOT superior, have not been for years, and are no more likely to be in the future than throwing darts at the ticker section of a newspaper. Check out this screenshot:
Check this out. Not only did the S&P500 outperform ALL (yes, ALL) of these wonderful portfolios over the 3 year period, but also over the prior year (this spans the timeframe of my posts). You might tout the .12% difference of the Yale portfolio last year, but consider the higher expense ratios and commissions involved in buying multiple instruments as opposed to simply picking up SPY, one of the lowest-cost ETFs, so for all intents and purposes, SPY also outperformed ALL over the prior 1 year period. This is what I stated was entirely plausible in last year’s article (Told Ya So) and I’ll probably be writing the same thing next year – that any of these portfolios may or may not beat the S&P500, but they are no more likely to do so, regardless of the claims of the proponents.
Here’s what’s really shameless. Today, with this complete trouncing in clear view, MarketWatch publishes a piece of screed barely worthy of mention were it not for the complete and utter irony contained within “6 Reasons Wall Street Hates Lazy Portfolios“. Hilariously, there is no mention at all of the performance of the lazy portfolios to the US benchmark, only platitudes chastising investors for NOT following their bad advice. They make statements like:
- “Lazy Portfolios give investors a far superior alternative than gambling retirement savings in Wall’s Street’s casino” (umm, no, my 100% US equity exposure in my 401(k) is kicking their ass)
- “they consistently beat the S&P 500 on a long-term basis” (first off, no they don’t. Next, you used historical returns of top performing asset classes to build them. Hindsight is 20/20)
- “create a long-term portfolio that wins in bear and bull markets” (That is a lie. We are in a bull market and NOT a ONE of these portfolios is beating a simple SPY ETF.)
- “You’ll win, and more important, you’ll have lots of time left to enjoy what really counts: your family, friends, career, sports, hobbies, living life to the fullest.” (No, you’re not winning. And if you spend hours analyzing these stupid portfolios, that’s WAY more time than just buying the US market – 1 fund. More BS.)
The premise here is not to tell you to avoid diversification. It is not to tell you to avoid low-fee ETFs and mutual funds. It is to tell you not to believe everything you read, consider the source (and their motives) and that in general, the mainstream media is completely and utterly full of crap and the sheeple blindly follow.
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