Ted Aronson is an asset manager and the founder of AJO Partners, a quantitative investment management firm. He gained recognition in the investment community for his approach to portfolio management and his willingness to share his family’s taxable account strategy publicly.
The Aronson Family Taxable Portfolio has been featured and tracked by MarketWatch.com’s lazy portfolios, maintained by Paul Farrell. It gained popularity as a “lazy” portfolio due to its simple, low-maintenance approach to investing. The portfolio is designed for taxable accounts and aims to provide broad diversification across various asset classes.
The term “lazy portfolio” refers to a passive investment strategy that requires minimal maintenance and frequent adjustments. These portfolios typically consist of a small number of low-cost index funds or ETFs that provide broad market exposure.
Portfolio Composition
The Aronson Family Taxable Portfolio consists of 11 funds covering four major asset classes: Emerging Market Equity, US Equity, Fixed Income, and Foreign Equity. Here’s the breakdown of the portfolio’s composition:
Asset Allocation:
- 70% Stocks
- 30% Fixed Income
Specific Allocations:
– 20% in Vanguard Emerging Markets Stock Index (VEIEX) (ETF: VWO)
– 15% in Vanguard 500 Index (VFINX) (ETF: VOO)
– 15% in Vanguard Pacific Stock Index (VPACX) (ETF: VPL)
– 10% in Vanguard Extended Market Index (VEXMX) (ETF: VXF)
– 10% in Vanguard Inflation-Protected Securities (VIPSX) (ETF: TIP)
– 5% in Vanguard European Stock Index (VEURX) (ETF: VGK)
– 5% in Vanguard High-Yield Corporate (VWEHX) (ETF: JNK)
– 5% in Vanguard Long-Term U.S. Treasury (VUSTX) (ETF: VGLT)
– 5% in Vanguard Small Cap Growth (VISGX) (ETF: VBK)
– 5% in Vanguard Small Cap Value Index (VISVX) (ETF: VBR)
– 5% in Vanguard Total Stock Market Index (VTSMX) (ETF: VTI)
Application for Retirement Accounts (401(k) and IRA)
This portfolio can be adapted for retirement accounts with minor adjustments:
For 401(k) Investors:
- Match each ETF to the closest available fund in your 401(k) plan. For example:
- VTI/VV → Use a US total stock market or S&P 500 index fund.
- EEM → Use an emerging markets fund or international stock fund.
- TLT/TIP → Use a long-term Treasury or inflation-protected bond fund.
- If a specific fund (e.g., IJS or VGK) isn’t available, allocate to the broader asset class (e.g., small-cap value → US small-cap; VGK → international developed stocks).
For IRA Investors:
- IRAs offer more flexibility, so you can replicate the portfolio exactly using the listed ETFs.
- Consider tax efficiency: Place bond-heavy ETFs (e.g., TLT, HYG) in tax-advantaged accounts and equity ETFs in taxable accounts.
This portfolio is suitable for investors seeking a balanced, long-term strategy with moderate risk. Regular rebalancing (annually or semi-annually) is recommended to maintain the target allocations.
Rule of Thumb:
- For stock funds, prioritize index funds, especially low-cost index funds.
- For bond funds, prioritize core bond funds or high-guality actively managed total return bond funds (if available).