The person that is attracted to investment strategies for lazy people is not necessarily a couch-potato. Lots of busy people, entrepreneurs and those who are career-oriented simply don’t have the time or the energy to devote to developing an investment strategy that is very involved.
They probably don’t have the stomach for the huge volatility of the stock market and may not have the knowledge or the expertise to pick stock winners, but they are also unwilling to pay huge fees to hire the services of those who do.
Financial planners and investment advisors may be able to earn you abnormal returns but their fees are also abnormal and some investors just don’t see the value in this type of arrangement, especially since their fees are more often than not, not tied to the performance of the portfolio in question.
The following are a few tips to help those “lazy investors” who know the importance of earning a return on their money, but don’t have the time to dedicate to a full-on investment plan that requires constant monitoring and rebalancing.
1. Know Your Goals and Understand Time-Lines
The first step to any financial plan is to set your goals. The type of investment vehicles you choose and the size of your investment into each category depends heavily on what you want to achieve and how soon you want to achieve it. This means you need to lay down your main goals along with an estimate on what you think they would cost to bring to fruition.
2. Invest in Index Funds
When you have a fair idea of what you would need to fund your goals you then need to start selecting investment options that don’t need to be constantly watched and attended to. An index fund is a great option because it is designed to mock the performance of a particular market index.
For instance, the Vanguard 500 Index is set up to mimic the movements of the entire S&P 500. Index funds do have associated fees but they are low relative to mutual funds and hiring a personal investment advisor and these funds are closely managed to achieve performance. It is possible to invest in a number of the leading index funds to completely take the place of direct stock investment.
3. Adopt a Buy and Hold Strategy
The infamous stock investor Warren Buffet is a strong proponent of the buy and hold strategy. Although this means getting into the stock market directly it is also not as stressful as other strategies that demand constant monitoring of a stock’s performance to try to time the market for clues of when to buy and when to sell. Of course it also means you must choose stocks wisely to begin with and buy for value not on “hot tips”.
4. Keep a Balanced Portfolio
To truly master the lazy approach to investing you need to ensure you have a balanced portfolio. If your investments are proportionately allocated according to your risk tolerance and goals you do not need to put in as much work monitoring their every move. This means keeping a mix of stocks, bonds and other instruments.
5. Monitor Once Every Quarter
Even the laziest investor has to throw an eye on his portfolio every once in a while. It might be prudent to check on a well-balanced portfolio that was set up to run on automatic once every quarter.
Lazy investment strategies don’t mean lower returns. On the contrary a lazy approach to investing can be more profitable than attempting to take on an investment project that you don’t have the time or the expertise to handle.