"You've got to be able to hold a lot of contradictory ideas in your mind without going nuts," rock star Bruce Springsteen says. "I feel like to do my job right, when I walk out on stage I've got to feel like it's the most important thing in the world. Also I've got to feel like, well, it's only rock 'n' roll. Somehow you've got to believe both of those things."
Yes, folks, and that's my philosophy, too. Let's call it Flash Crash Zen, because it sure fits today's crazy-making Wall Street. Readers wonder how I can encourage long-term investing in "Lazy Portfolios" and at the same time write columns like "WWIII ahead: Warfare defining human life by 2020."
Springsteen's Zen attitude says it all. And since today's world is nothing but contradictions, you learn to live with confusion, conflict and insanity.
The past few months have been a real test of this Zen way of living. We heard: "Best September since 1939. Market up 9%. Blah, blah, blah." But in August it was down 5%, with talk of inflation, double-dipping and flash-crashing.
Is Wall Street blowing another 1990s bubble? Yes. Setting up for another meltdown? Yes. A new, bigger flash crash? Yes, yes.
Remember folks, Wall Street's been a big fat loser for a decade. Forget this month's 11,000 for the Dow Jones Industrial Average ($INDU). Remember that the market's still down from 11,722, the 2000 peak before the dot-com crash. It's a 10-year loser.
Remember Wall Street's theme song, a 1918 tune: "I'm Forever Blowing Bubbles." It can't stop.
Yes, the losses have been huge since 2000. Wall Street lost 20% of your retirement money the past decade, inflation-adjusted. Worse: Wall Street's down from its 2007 peak of 14,164. Gamble in their casino, you'll lose. Bet on Wall Street, expect more flash crashes.
Seriously, what's Wall Street likely to do in the coming decade? Answer: Lose 20% more of your money. Sure, past performance doesn't guarantee future results. But you'd be a fool not to suspect Wall Street's miserable past "performance" will continue through the next decade.
How can you improve your odds? And do it without all the frantic trading that makes Wall Street richer and you poorer? It's easy: Stick with our Lazy Portfolios. All eight are simple, diversified, well-balanced, easy-to-manage portfolios of just three to 11 low-cost, no-load index funds. There's no active trading; you simply rebalance when you add new savings.
That's all you need to beat the losers at the Wall Street stock market casino.
Yes, we're on a roll. All eight Lazy Portfolios are in positive territory for the past year and for the past five and 10 years. The September rally boosted the benchmark Standard & Poor's 500 Index ($INX) this quarter. But on a 10-year basis, each of the "Fab Eight" is beating the actively traded S&P 500, often by more than 6 percentage points a year.
And remember, all eight lazy portfolios have had little or no changes in asset allocations or trading in the past decade. Proof that Lazy Portfolios work because they're based on the Nobel Prize-winning Modern Portfolio Theory.
First, an overview of all eight, based on Morningstar data through Sept. 30:
| Portfolio | Equity (%) | Number of funds | 1-year return (%) | 3-year annualized return | 5-year annualized return |
|---|---|---|---|---|---|
Aronson Family Taxable | 80 | 11 | 11.63 | -1.77 | 3.94 |
Fund Advice Ultimate Buy and Hold | 60 | 11 | 9.49 | -1.08 | 4.18 |
Dr. Bernstein's Smart Money | 60 | 9 | 10.14 | -1.53 | 3.35 |
Coffeehouse | 60 | 7 | 11.62 | -0.65 | 3.51 |
Yale U Unconventional | 70 | 6 | 14.06 | -1.91 | 3.61 |
Dr. Bernstein's No Brainer | 75 | 4 | 8.82 | -3.28 | 2.94 |
Margaritaville | 67 | 3 | 9.01 | -2.54 | 3.41 |
Second Grader's Starter | 90 | 3 | 9.51 | -5.42 | 2.46 |
Continued: A closer look at the portfolios
