William Bernstein Smart Money
0.46%April 17 | MyPlanIQ portfolio symbol P_20738

Portfolio Overview

Overview of the William Bernstein Smart Money Lazy Portfolio

Background Information on the Author and Philosophy

The William Bernstein Smart Money Lazy Portfolio is inspired by Dr. William J. Bernstein, a neurologist turned financial theorist and author. Bernstein is renowned for his contributions to modern portfolio theory, emphasizing low-cost, diversified investing strategies. His philosophy centers around the idea that individual investors can achieve strong long-term returns without excessive effort or active management by focusing on broad market index funds.

Bernstein advocates for lazy portfolios , which are simple, static allocations designed to minimize maintenance while maximizing diversification and risk-adjusted returns. The "Smart Money" lazy portfolio reflects his belief in balancing domestic and international equities, value and small-cap tilts, real estate exposure, and a significant allocation to fixed income. This particular portfolio is geared toward conservative investors seeking steady growth with reduced volatility.

This Smart Money lazy portfolio is one of the most famous and popular lazy portfolios proposed by William Berstein.

Asset Allocation and Holdings Analysis

Asset Allocation Breakdown:

• US Equity (40%) :
  • VTSMX (Total Stock Market): Broad exposure to the entire U.S. stock market.
  • VISVX (Small-Cap Value): Focuses on smaller companies with value characteristics.
  • VIVAX (Value Index): Tracks large-cap value stocks.
  • NAESX (Small-Cap Index): Provides exposure to smaller U.S. companies.
• International Equity (15%) :
  • VEIEX (Emerging Markets): Exposure to developing economies.
  • VEURX (European Stocks): Focuses on developed European markets.
  • VPACX (Pacific Stocks): Covers Japan, Australia, and other Pacific nations.
• Real Estate (5%) :
  • VGSIX (REIT Index): Invests in real estate investment trusts (REITs), offering income and diversification benefits.
• Fixed Income (40%) :
  • VFSTX (Short-Term Investment-Grade Bonds): Low-risk bond fund providing stability and liquidity.

Diversification:

This portfolio achieves excellent diversification across asset classes, geographies, and investment styles:

• Equity Diversification : Includes large-cap, small-cap, value, and growth stocks from the U.S., Europe, emerging markets, and the Pacific region.
• Geographic Diversification : Balances domestic and international investments, reducing reliance on any single economy.
• Style Diversification : Combines broad-market exposure with specific tilts toward value and small-cap stocks, which historically have outperformed over the long term but come with higher risk.
• Alternative Asset Class (Real Estate) : REITs add non-correlated returns and inflation protection.

Risk Level:

The portfolio has a moderate-to-conservative risk profile, primarily due to its high allocation to short-term bonds (40%). It's a 60/40 stocks/bonds allocation. While equities inherently carry more risk, the inclusion of international and small-cap/value tilts introduces additional volatility. However, the overall design mitigates extreme fluctuations through fixed-income stabilization.

We also believe the 40% US Equity + 5% US REITs vs. 15% International Equity is a good break down. The allocations of 10% Value, 15% Small Cap stocks in the 40% US stocks indicates that the portfolio's tilt to value and small cap stocks.

Pros and Cons:

• Pros :
  • Simple and easy to maintain.
  • Low-cost index funds reduce fees.
  • Broad diversification reduces unsystematic risk.
  • Suitable for hands-off investors who prefer minimal rebalancing.
  • Fixed-income cushion provides stability during market downturns.
• Cons :
  • Conservative bond-heavy allocation may limit growth potential for younger investors.
  • Emerging markets and small-cap/value segments can be volatile.
  • Limited flexibility; not tailored to changing economic conditions.

3. Application for Retirement Investors (401(k) and IRA)

For 401(k) Accounts:

Many employer-sponsored 401(k) plans offer a selection of mutual funds or target-date funds, but they may not include all the exact funds listed in the Smart Money Lazy Portfolio. Here's how an investor can approximate the holdings:

1. US Equity Funds :
   • Look for total stock market index funds or S&P 500 index funds as substitutes for VTSMX.
   • Small-cap and value funds might be labeled explicitly or found within style-specific options.
2. International Equity Funds :
   • Search for international or global stock funds that cover emerging markets, Europe, and the Pacific region.
   • If no regional breakdown exists, use a broad international fund as a proxy for VEIEX, VEURX, and VPACX combined.
3. Real Estate :
   • Some 401(k) plans include REIT funds directly; if unavailable, consider adding one in your IRA instead.
4. Fixed Income :
   • Most plans will have short-term bond funds or intermediate-term bond funds as alternatives to VFSTX.
5. Rebalancing :
   • Set up automatic contributions to mirror the target weights as closely as possible.
   • Rebalance annually or semi-annually when permitted by the plan administrator.

For IRAs:

IRAs typically offer greater flexibility, allowing direct purchase of Vanguard funds or equivalent ETFs. An investor could replicate the portfolio exactly using the specified funds or their ETF equivalents (e.g., VTI for VTSMX). Online brokerage platforms like Fidelity, Schwab, or Vanguard make it straightforward to implement this strategy.

Summaries

The William Bernstein Smart Money Lazy Portfolio is ideal for retirement investors seeking simplicity, diversification, and lower risk. Its heavy bond allocation makes it particularly suitable for those nearing or already in retirement, prioritizing capital preservation over aggressive growth. Younger investors might consider reducing the bond allocation to enhance long-term returns. By carefully mapping available options in their 401(k) plans and supplementing with an IRA, individuals can effectively adopt this proven strategy for building wealth over time.

The William Bernstein Smart Money Lazy Portfolio offers a balanced, diversified approach to investing, combining U.S. and international equities, real estate, and fixed income. It is well-suited for retirement accounts like 401(k)s and IRAs, where investors can approximate its holdings using available fund options.

Asset Allocation

Historical Performance

William Bernstein Smart Money Return Calculator

Calculators

Dollar Cost Average Calculator for William Bernstein Smart Money

Retirement Spending Calculator for William Bernstein Smart Money

Rolling Returns

From 12/31/1999 to 04/17/2025, the worst annualized return of 5-year rolling returns for William Bernstein Smart Money is -1.57%.

From 12/31/1999 to 04/17/2025, the worst annualized return of 10-year rolling returns for William Bernstein Smart Money is 4.57%.

Maximum Drawdown

William Bernstein Smart Money Maximum Drawdown