Hello, YieldAlley readers! In this issue:
Introducing the Lazy Portfolio: A Straightforward Approach to Successful Investing
U.S. Markets Snap Losing Streaks as Fed Holds Rates Steady Amid Increased Economic Uncertainty
Robinhood Offering 2% Uncapped Brokerage Transfer Bonus
And more!
NEWS
Standout Stories
📈 Does Your Index Fund Actually Represent the Market?(Morningstar)
🚫 How to spot bad tax advice (Fast Company)
🤖 Inside Google’s Two-Year Frenzy to Catch Up With OpenAI (Wired)
🍷 California winemakers uneasy about Trump’s threat to place 200% tariff on European wine imports (CNN)
🎧 A record 100 million Americans now pay for a music subscription (Sherwood)
MARKET THOUGHTS
U.S. Markets Snap Losing Streaks as Fed Holds Rates Steady Amid Increased Economic Uncertainty
ECONOMY
The Federal Reserve held interest rates steady at 4.25%-4.5% in its March meeting as widely expected, maintaining its projection of 50 basis points (0.5 percentage points) of rate cuts this year. Fed officials did note "increased uncertainty around the economic outlook" while raising inflation expectations for 2025 and lowering GDP growth forecasts, though Fed Chair Powell expressed that the "base case" is for tariff impacts to be transitory and that longer-term inflation expectations remain consistent with the central bank's 2% target. Recent economic data painted a mixed picture, with February retail sales rising just 0.2%, well below consensus estimates of 0.7%, while January's figure was revised down to -1.2%, marking the steepest decline since July 2021. The housing market showed more positive signs with existing home sales increasing 4.2% in February due to improved supply, and housing starts jumped 11.2% from January to an annual rate of 1.5 million, though this still represented a 2.9% year-over-year decline. The Empire State Manufacturing Survey indicated that "business activity dropped significantly" in March, with optimism about the outlook waning for a second consecutive month.
STOCKS
U.S. stocks closed the week higher, breaking multi-week losing streaks for most indexes. The Dow Jones Industrial Average (a price-weighted average of 30 significant stocks traded on the New York Stock Exchange) performed best, advancing 1.2% to 41,985.35 (-1.31% YTD), while the S&P MidCap 400 (tracking mid-sized companies with market caps typically between $1.5 billion and $13 billion) posted its first weekly gain since January, closing at 2,945.77 (-5.61% YTD). Large-cap technology stocks generally underperformed, weighing on the technology-heavy Nasdaq Composite (representing all stocks listed on the Nasdaq stock exchange), which rose marginally to 17,784.05 (-7.91% YTD) but was the worst-performing major index for the week. The S&P 500 (tracking the performance of 500 large companies listed on U.S. stock exchanges) advanced slightly to 5,667.56 (-3.64% YTD), while the Russell 2000 (measuring the performance of approximately 2,000 smallest-cap American companies) closed at 2,056.98 (-7.77% YTD). Value stocks outperformed growth stocks for the fifth consecutive week according to Russell 1000 indexes, bringing the total year-to-date outperformance to 897 basis points (8.97 percentage points). Trading volumes were notably light throughout most of the week—including the lightest daily volumes this year on Thursday—as investors continued to process changes related to new policies, economic forecasts, and geopolitical risks.
FIXED INCOME
U.S. Treasuries (government debt securities issued by the U.S. Department of the Treasury) generated positive returns heading into Friday as yields across most maturities declined following the Federal Reserve's policy meeting. Municipal bonds (debt securities issued by states, cities, counties and other governmental entities) also posted positive returns despite heavy issuance during the week. Investment-grade bond (securities with high credit ratings from agencies like S&P and Moody's) spreads tightened, and new issuance in the market was generally in line with expectations. High yield bond (lower-rated, higher-risk debt also known as "junk bonds") market volumes were muted early in the week, but the asset class gained momentum alongside equities following the Fed meeting on Wednesday. The bond market appeared to respond positively to the Fed's generally dovish tone despite its acknowledgment of increased economic uncertainty, with most fixed income sectors benefiting from the central bank's maintained outlook for interest rate cuts this year despite upward revisions to 2025 inflation expectations.
INCOME BUILDING
Introducing the Lazy Portfolio: A Straightforward Approach to Successful Investing
Lazy portfolios have become increasingly popular among investors seeking effective, low-maintenance investment strategies. These portfolios, despite their casual name, represent a sophisticated approach to long-term investing based on sound financial principles.
What Is a Lazy Portfolio?
Lazy portfolios are designed to perform well in most market conditions. Most contain a small number of low-cost funds that are easy to rebalance. They are "lazy" in that you can maintain the same asset allocation for an extended period, as they generally contain 30-40% bonds, suitable for most pre-retirement investors.
The term refers to the minimal maintenance required rather than the portfolio's effectiveness. By focusing on simplicity, diversification, and low costs, lazy portfolios eliminate the need for constant monitoring and adjustment.
The Power of Simplicity in Investing
Jack Bogle, founder of Vanguard and pioneer of index investing, advocated for the "majesty of simplicity" in investment strategies. Lazy portfolios exemplify this philosophy, enabling investors to achieve their financial goals without the complexity and stress often associated with active management approaches.
Research consistently demonstrates that simple, low-cost index investing frequently outperforms active management strategies over the long term. By eliminating market timing and stock picking, investors can avoid common behavioral mistakes that often lead to underperformance.
Notable Lazy Portfolio Models
Many great investors have created model portfolios using index funds or ETFs that require minimal maintenance. These can be implemented in both IRA and taxable investment accounts. The beauty of these approaches is that they provide proven frameworks for investors of all experience levels.
Two-Fund Portfolio
Rick Ferri, an investment advisor and author of several books on index investing, proposed a two-fund portfolio consisting of just two broad market funds. This remarkably simple approach allocates 60% to a total world stock market fund and 40% to a total US bond market fund.
With just these two funds, investors gain exposure to the entire global equity market and a diversified bond portfolio. This approach provides comprehensive diversification with minimal complexity and maintenance requirements. For Vanguard investors, this could be implemented using Vanguard Total World Stock ETF (VT) and Vanguard Total Bond Market ETF (BND).
Three-Fund Portfolio
We talked about the Bogleheads three-fund portfolio a few weeks ago, which is a form of lazy portfolio as well. This portfolio contains a domestic stock "total market" index fund, an international stock "total market" index fund, and a bond "total market" index fund. This widely discussed approach offers diversification across over 10,000 worldwide securities, very low costs, tax efficiency, no manager risk, and ease of rebalancing.
Taylor Larimore, co-author of "The Bogleheads' Guide To Investing," notes that this approach is "mathematically certain to out-perform most investors." While specific fund selections vary by brokerage, Vanguard investors might use Total Stock Market Index Fund (VTSAX), Total International Stock Index Fund (VTIAX), and Total Bond Market Fund (VBTLX).
Some popular variations of the three-fund portfolio include:
Taylor Larimore's Three-Fund Portfolio with flexible allocations based on risk tolerance
Scott Burns' Margarita Portfolio with equal 33% allocations to each fund
Rick Ferri's Lazy Three-Fund Portfolio with 40% US stocks, 20% international stocks, and 40% bonds
More Specialized Lazy Portfolios
For investors seeking additional diversification, several experts have created more elaborate lazy portfolios that are available on famous lazy portfolios:
David Swensen's Yale Portfolio: The Yale endowment manager's model covers seven asset classes including US Equity, Foreign Equity, Emerging Market Equity, REITs, and various bond types for excellent diversification across distinct major asset classes.
Harry Browne's Permanent Portfolio: This balanced approach uses equal 25% allocations to US stocks, gold, short-term treasury bills, and long-term treasury bonds, designed to perform well in various economic conditions including inflation, deflation, and prosperity.
Professor Israelsen's 7Twelve Portfolio: Consisting of 12 index funds covering six major asset classes, this model provides extensive diversification across both major and important minor asset classes.
Bill Schultheis' Coffee House Portfolio: With seven funds covering four major asset classes, this approach emphasizes small cap and value funds while maintaining simplicity.
Implementing a Lazy Portfolio Strategy
To create your own lazy portfolio:
Select a portfolio model aligned with your risk tolerance and investment horizon
Choose low-cost index funds or ETFs to represent each asset class
Set up a regular investment schedule
Rebalance annually or when allocations drift significantly
Maintain discipline through market volatility
The most successful investment strategies are often those that investors can maintain consistently through market cycles. Lazy portfolios, with their inherent simplicity and effectiveness, enable investors to achieve this consistency without requiring constant attention or adjustment.
By focusing on fundamental investment principles rather than complex strategies, lazy portfolios offer a practical path to long-term financial success for investors of all experience levels. In the coming weeks, we’ll dive into various portfolio types and review the pros and cons and performance of them.
INCOME BUILDING
Cash Rates
Government Money Market Funds (7-Day Yields)
SNVXX (Schwab Government Money Fund - Investor Shares): 4.05%
SPAXX (Fidelity Government Money Market Fund): 3.96%
TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 4.17%
VMFXX (Federal Money Market Fund): 4.21%
Brokered CD Rates (6-Month Rate)
Charles Schwab: 4.30%
E*Trade: 4.25%
Fidelity: 4.25%
Merrill Edge and Merrill Lynch: —
Vanguard: 4.30%
ETFs (30-Day Yields)
SGOV (iShares 0-3 Month Treasury Bond ETF): 4.20%
BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 4.13%
USFR (WisdomTree Floating Rate Treasury Fund): 4.20%
TFLO (iShares Treasury Floating Rate Bond ETF): 4.22%
Robinhood Offering 2% Uncapped Brokerage Transfer Bonus
Robinhood is currently offering a 2% bonus on all brokerage assets transferred to their platform during their "Gold Month" promotion running through March 31, 2025. Unlike many other transfer bonuses, this offer is completely uncapped, making it particularly attractive for larger portfolios.
Offer Details
The promotion provides a 2% cash bonus based on the value of assets transferred into a Robinhood brokerage account. To qualify, you must:
Transfer assets from an external brokerage account by March 31, 2025
Maintain a Robinhood Gold membership ($5/month) for at least one year from the date the transfer is complete
Hold the value of your transferred assets in your Robinhood brokerage account for 5 years
There's no upper limit to the bonus amount, making this especially valuable for larger accounts. For example, a $100,000 transfer would earn a $2,000 bonus, while a $500,000 transfer would net $10,000.
Important Considerations
The 5-year holding requirement is significantly longer than most brokerage bonuses, which typically require holding periods of 3-12 months. If you're someone who likes to move assets frequently to take advantage of different promotional offers, this requirement is a major factor to consider.
However, for investors planning to hold their assets long-term anyway, the uncapped 2% bonus could represent a substantial immediate return on your portfolio, especially for larger account balances.
For complete terms and conditions, visit: https://go.robinhood.com/goldmonth If you don’t have a Robinhood account, and would like to receive a free stock when you sign up, you can use the referral link here.
Picture of the Week
