KISS: Keep It Simple, Sparky

If all the folderol of investing has you looking favorably on a Mason jar in the backyard, maybe you should look instead into a strategy advocated by Jonathan Burton, the Money & Investing editor at MarketWatch.

He explains it in The Wall Street Journal, which I realize is behind a paywall, but here it is.

All you need are three diversified index-tracking mutual funds or exchange-traded funds—one for U.S. stocks, one for international stocks and one for bonds. The portfolio must be rebalanced at least once a year to ensure that half of the money stays in stocks and half in bonds.

Duh, that's easy. He says:

It's boring and bland and won't score you any points at parties, but this bare-bones approach—call it the "Nifty 50/50 Portfolio"—has made almost as much money as a more aggressive, stock-heavy strategy over the past 25 years and topped it over the past decade. 

Duh, at parties just make something up. Burton uses a comparison of the KISS strategy with an 80/20 mix that commits 65% to U.S. stocks, 15% to international stocks and 20% to bonds. KISS wins over 10 and 15 years, but loses out over 25 to the tune of $10,000. However, he notes:

A difference of almost $10,000 is real money, but was it worth the risk? The 50/50 portfolio achieved 91% of the 80/20 portfolio's gain, but with just two-thirds of the volatility—not a bad trade-off.

In addition, if like many 401(k) investors you had diligently dropped $100 a month into the portfolio, the 50/50 mix would have achieved higher returns over both 10 and 15 years, and come within $1,350 of the riskier 80/20 portfolio over 25 years—essentially a tie.

So where do you go? Cheaper is better, of course. He points to:

At Vanguard Group, mutual funds that fit the bill include Vanguard Total Stock Market Index for U.S. stocks, Vanguard Total International Stock Index and Vanguard Total Bond Market Index. All three funds also have exchange-traded shares available.

Inexpensive choices from Fidelity Investments include Fidelity Spartan Total Market Index, Fidelity Spartan International Index and Fidelity U.S. Bond Index.

Other options among ETFs include iShares Dow Jones U.S. Index for U.S. stocks, iShares MSCI ACWI ex US Index for international stocks and iShares Barclays Aggregate Bond.

KISS me, baby.