All-In-One ETFs: For the Ultimate Lazy Portfolio

Even the laziest investor in ETFs has to make choices: Do you want worldwide exposure to stocks only? Or to stocks and bonds? Do you want the allocation between stocks and bonds to remain the same for the life of your investment? Or do you want that allocation to adjust as you get closer to retirement?

Buy into global ETFs

If you want instant exposure to the broadest possible index of stocks, including U.S. and all sorts of foreign stocks (from both developed and emerging market countries), here are your current options:

  • iShares MSCI ACWI Index Fund (ACWI), with 2,467 stock holdings and management fees of 0.35 percent

  • Vanguard Total World Stock ETF (VT), with 2,894 holdings and management fees that are slightly lower at 0.25 percent

Add bonds to your ETF mix

Not enough diversity for you? Never fear: You can go even broader than the worldwide stock funds, buying one ETF that will give you exposure not only to the entire world of stocks but to bonds as well.

These all-in-one ETFs are referred to as asset allocation funds when they are static, meaning the division between stocks and bonds stays more or less the same for the life of the fund (for example, 50 percent stock and 50 percent bonds). The folks from iShares offer a dozen of these babies, including these:

  • iShares S&P Aggressive Allocation Fund (AOA)

  • iShares S&P Conservative Allocation Fund (AOK)

  • iShares S&P Moderate Allocation Fund (AOM)

These three funds, which carry total management expenses of about 0.46 percent, offer varying exposure to stocks and bonds depending on how aggressive a portfolio you want.

Pick a retirement date and choose your ETFs accordingly

If a fund seeks to change its asset allocation over time, growing more conservative as you get older and less able or willing to handle market risk, it may be called a lifecycle or target-date fund (rather than an asset allocation fund). The iShares people also offer a bevy of these funds, including these three:

  • iShares S&P Target Date 2020 Index Fund (TZG)

  • iShares S&P Target Date 2025 Index Fund (TZI)

  • iShares S&P Target Date 2030 Index Fund (TZL)

The dates refer to anticipated retirement dates. These funds start off more aggressive (stressing stocks over bonds) and wind up, by your expected retirement date, holding a more conservative portfolio. The expense ratio for each is about 0.43 percent.

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