While researching investment strategies for my retirement savings, I’ve been reading a lot of books. There are hundreds of authors offering thousands of tips for turning a small pile of gold into a big pile of gold. Sometimes it’s difficult to tell whose advice to heed.

To be honest, I find the simplest investment strategies most appealing. I just finished reading Paul Farrell’s The Lazy Person’s Guide to Investing, for example, and I found myself drawn to the “lazy portfolios” he describes. Lazy portfolios are collections of index funds. Because these portfolios are balanced — they contain stocks and bonds — they mitigate risk while providing excellent returns. Best of all, they take very little time to maintain.

Reminder: An index fund is a low-cost mutual fund designed to mimic the movement of a specific market index. A Vanguard 500 index fund (like VFINX), for example, tracks the performance of the S&P 500. The chief virtue of index funds is that, over the long-term, they deliver better returns than most actively-managed mutual funds.

Five lazy portfolios
It turns out that some of my favorite financial writers are also huge fans of lazy portfolios. In fact, many of these writers have designed portfolios of their own. Here are some of the more prominent examples:

The Couch Potato Portfolio from Scott Burns

  • 50% — Vanguard 500 Index (VFINX)
  • 50% — Vanguard Total Bond Market Index (VBMFX)

This two-fund portfolio from financial columnist Scott Burns may be the simplest way to achieve balance. It’s an even split between stocks and bonds, and should appeal to those investors who are both lazy and risk-averse.

The Three-Fund Portfolio from Andrew Tobias

  • 33.3% — Vanguard Total Stock Market Index (VTSMX)
  • 33.3% — Vanguard Inflation-Protected Securities (VIPSX)
  • 33.3% — Vanguard Total International Stock Index (VGTSX)

This three-fund portfolio from Andrew Tobias is exactly the same as Scott Burns’ Margarita Portfolio. It introduces foreign stocks to provide additional diversification.

The No-Brainer Portfolio from William Bernstein

  • 25% — Vanguard 500 Index (VFINX)
  • 25% — Vanguard Small-Cap Index (NAESX)
  • 25% — Vanguard Total International Stock Index (VGTSX)
  • 25% — Vanguard Total Bond Market Index (VBMFX)

William Bernstein is a retired neurologist who has turned his attention to financial matters. He wrote The Four Pillars of Investing, which is one of the best books on investing I’ve ever read (my review). In that book, he offers a variety of possible investment portfolios. This “no-brainer” collection of index funds keeps things simple.

The Coffeehouse Portfolio from Bill Schultheis

  • 40% — Vanguard Total Bond Index (VBMFX)
  • 10% — Vanguard 500 Index Fund (VFINX)
  • 10% — Vanguard Value Index (VIVAX)
  • 10% — Vanguard Total International Stock Index (VGTSX)
  • 10% — Vanguard REIT Index (VGSIX)
  • 10% — Vanguard Small-Cap Value Index (VISVX)
  • 10% — Vanguard Small-Cap Index (NAESX)

The author of The Coffeehouse Investor believes that the secret to financial success is mastering the basics: saving, asset allocation, and matching the market. The latter can be done through a lazy portfolio. (Schultheis recently shared a guest post at Get Rich Slowly.)

The Perfect Portfolio from Frank Armstrong

  • 31% — Vanguard Total International Stock Index (VGTSX)
  • 30% — Vanguard Short-Term Bond Index (VBISX)
  • 9.25% — Vanguard Small-Cap Value Index (VISVX)
  • 9.25% — Vanguard Value Index (VIVAX)
  • 8% — Vanguard REIT Index (VGSIX)
  • 6.25% — Vanguard Small-Cap Growth Index (VISGX)
  • 6.25% — Vanguard 500 Index Fund (VFINX)

Frank Armstrong III is president of a financial planning firm in Florida. He shared this portfolio with MSN Money.

Note: These portfolios were constructed using mutual funds from Vanguard. Vanguard is probably the best source for index funds, but it’s not the only source. My money is actually with Fidelity, which seems to have plenty of options.

Single-fund solutions
Building a portfolio of index funds may be lazy, but it’s not for everyone. Some investors crave greater complexity or more control — or they believe they can outperform the market on their own. Others have no interest in building portfolios (even of just three or four funds) or are unable to afford the minimum investments. For this last group of people, there a range of single-fund solutions.

Many mutual fund companies now offer target-date funds, which attempt to create a diversified portfolio appropriate for a specific age group. Born around 1970? You may want to consider a fund like Fidelity Freedom 2035, which automatically adjusts its investment structure as time goes on. (You might also consider building your own target-date fund).

There are other single-fund solutions, too, including these:

  • Vanguard STAR Fund (VGSTX)
  • T. Rowe Price Personal Strategy Balanced (TRPBX)
  • Fidelity Four-in-One Index (FFNOX)

Actually, the bulk of my retirement savings is currently in that last Fidelity fund. I’ve been too lazy to create a more detailed asset allocation. (And I do need to make some changes. FFNOX allocates 85% to stocks, and that’s too much risk for me.)

Final notes
If you adopt one of these lazy portfolios, remember to rebalance the funds every year. Over time, they’ll get out of balance. Your Couch Potato Portfolio may have started with a 50/50 split in January 2008, but it was likely very different in January 2009. Rebalancing controls risk.

For more information on lazy portfolios, check out some of these articles at other sites:

Lazy portfolios appeal to me. The more involved I become with my day-to-day investment decisions, the more mistakes I make. I could save myself a lot of grief by putting my money into a lazy portfolio and then forgetting about it.

Are you a lazy investor? If so, what does your portfolio look like? How do you decide which funds to buy? How often do you check how well your funds are performing? Any advice for those of us who are considering this strategy?

Photo by superbomba.

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