Minimalist Approach To Investing 💸 (The "Lazy" 3 Fund Portfolio) #Best Education Page #Online Earning

- Hello once again guys,

welcome back to the channel,

hope you're havin' a great day so far.

So what we're gonna be talking about in this video

is a very interesting topic that I haven't really

ever covered on this channel, and that is basically

the minimalists approach to investing.

Now minimalism is a type of lifestyle

that is actually very appealing,

and it's this lifestyle idea of less is more.

And you wanna have a simple and passive approach

to anything that you are doing,

and basically declutter your life,

and get rid of a lot of these annoyances,

or unnecessary parts of your life

that are consuming you, and bringing stress

towards your life.

And so what I wanna do is take that philosophy

and apply it to investing, and talk about

what might the investing strategy look like

for a minimalist who is looking for

the simplest, low stress approach to investing

and building their wealth.

And so what we have here is what many people

have dubbed the lazy investing strategy.

But what I wanna show you is that

in most cases being lazy is a bad thing,

but when it comes to investing,

being a lazy investor can actually work to your advantage.

And I'm gonna explain exactly why that is in a little bit.

So when it comes to investing in the stock market,

you have a number of different options.

You can go out there

and you can invest in a mutual fund

and let somebody else manage your money for you,

or you can also pick individual stocks yourself,

and be an active stock picker,

or do active portfolio management.

But a lot of people have no interest in researching stocks,

or spending two to three hours a week or more

you know, managing their portfolio,

and they just want a simple solution

that's going to allow them to grow their wealth

without causing them stress or anxiety.

And that solution is index funds rather than buying

into a mutual fund where an active stock picker

is trying to beat the market,

you're instead just going to own the market

through what is called a low fee index fund.

Now why I said the lazy approach

might actually be a better approach

is because these active stock pickers,

these professional stock pickers

are actually doing a terrible job

at beating the market.

So there was a study that looked at the success rate

of you know, mutual funds beating the market.

And what they found is that roughly one in 20 actively

managed funds beat the market, so around 5%.

That means if you looked at 20 professional stock pickers,

one of them out of 20 is going to beat the market.

The other 19 are going to fall in line

with the market, or fall under the market.

So just to summarize this here, you're paying

these professional stock pickers

to manage your money for you,

and 95% of them are failing to do the job

and actually get you a return

that exceeds the market.

And so that is where index funds come in

where you can literally just own the entire market

rather than trying to beat the market.

And you can do this in a very passive way

that aligns with that minimalist lifestyle.

So there's actually two strategies here

for you know, passive investing.

One of them is a hands on style,

that's somebody who wants to be a little bit more

involved with their portfolio.

And then there's a hands off style,

somebody who doesn't wanna do a damn thing,

and we're gonna cover both of those.

So first of all let's talk about the hands on

lazy investing portfolio,

and we're gonna talk about what is dubbed

the three-fund portfolio.

Now this comes right from Bogleheads which is a Wikipedia

page for investors, I'm gonna link it up

in the description below,

this article on the three-fund portfolio.

But it's essentially three ETFs that will allow you

to have well diversified exposure in both stocks and bonds.

The first ETF you're going to own is a domestic,

total stock market ETF.

You're capturing the total United States stock market

in a fund, and one example of this

is a Vanguard ETF called VTI.

Number two, the second component of this portfolio

is an international total stock market ETF.

So you want domestic exposure, as well as exposure

to global markets, and one Vanguard fund

that can accomplish this for you is VXUS

offering you international stock market exposure.

And in the third and final component

to this three-fund portfolio is simply a bond,

total market ETF.

Some exposure to bonds that way you're not so

heavily involved in stocks, and another Vanguard fund

that people often like is BND.

The amount you have in each of these three funds

is going to be different for every person.

In most cases, younger people are going to have

more risk tolerance, they have more time

to allow their money to grow.

So they're gonna have more money in stocks,

and less money in bonds.

As you get older, you wanna have less risk involved

in your portfolio, so you have more money in bonds

and less in stocks.

And overtime, you have to do what is called rebalancing

or basically changing around your portfolio

to make sure that those levels stay the same.

And that is what makes this the hands on lazy approach

to investing, is despite the fact that you're just

plopping your money into these ETFs overtime,

you are going to have to keep an eye on the allocations

and make sure that if you wanted to have 10%

of your money in bonds,

that it stays at that 10%.

Because the prices of these funds are going to change

all the time, and you're going to experience

what is called portfolio drift.

Now is that going to take a crazy amount of time?

Absolutely not,

you could probably accomplish this

with about 30 minutes to one hour a month of work,

even less if you can automate the entire process.

So we're not talking about a lot of time here,

and the advantage to this is this is as low fee

as you can go when it comes to investing.

You're not paying any management fees,

you're not buying into a mutual fund,

you own low fee index funds.

You're capturing exposure to the entire market,

and you're not trying to beat the market,

or actively involve your time with your investments.

Now the second approach to this is the hands off

lazy approach, somebody who doesn't want to be involved

pretty much at all with their investments.

They're not interested in learning about

portfolio allocation, and they know they're gonna

forget to rebalance their portfolio

so they're looking for something to help them with that.

And the solution for that

is the modern brokerage or robo-advisor,

and I'm gonna give you guys two different examples of them.

Now just to be transparent with you guys,

I am affiliated with both of these companies.

I have links in the description

if you choose to use them,

but you absolutely do not have to.

I just leave them there in case you guys

are looking to support, and give back to my channel

at no additional cost.

But number one here is a robo-advisor called Betterment

and what Betterment does for you

is they build a custom portfolio around your goals.

So if you're a 35 year old person who has student loans,

but you're also looking to invest for your future,

and you don't wanna manage your portfolio,

Betterment could build a custom portfolio

based around your situation.

And the advantage here is that they are going

to rebalance that portfolio for you,

and they're going to determine your allocations

and how they're going to change overtime.

The disadvantage, they do charge a 0.25% annual fee

to manage your money.

Betterment does give you peace of mind

because you know you're getting professional guidance

with your money at a very low annual fee,

and you don't have to do anything except for

add more money to that account every month,

or whatever interval that you are doing that.

Now if you're still looking for that hands off approach,

and you're not interested in paying any fees,

number two here is M1 Finance which is a cutting edge

brokerage company that has really disrupted the industry.

And that is because they offer an array of different

pre-built portfolios, they're not customized

or tailored to any one specific person,

but they are fee free,

you're not paying any fees to invest with them.

And one of the popular portfolios they offer

is called a TDF, or a Target Date Fund.

Essentially what you do is you put in

your ideal target retirement date,

and that portfolio is allocated with stocks and bonds

at a risk level that makes sense for that

target retirement date.

Now again, it is not tailored to any specific person,

but these pre-built portfolios are often times

a better option than going in there blind

and trying to figure out

how to allocate your own portfolio.

So that is option number two here,

using a pre-built portfolio

on the M1 Finance investing platform.

Now like I said guys,

if you want to learn more about M1 Finance

or Betterment, I've included some resources down below.

I have review videos of both of these platforms,

but I think they're offering great services

especially for the passive investor

who doesn't wanna be spending hours

every single week managing their money.

And if you do wanna do that,

if you wanna take those additional steps

and save those fees, you can be that hands on investor,

and I would consider looking more into

this three-fund portfolio which again,

is linked up in the description below.

But anyways guys,

that is the minimalist approach to investing.

Let me know in the comment section below

whether you are an active investor,

or are you more of a passive investor,

and why you've decided to you know, do this,

and what your idea is behind your investing strategy.

But thank you guys so much for watching this video,

I hope you enjoyed it, and I will see you in the next one.

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