The Simple Money Portfolio in 2021

Table of Contents

Introduction

If you are interested in saving money for the future, you may be looking at stocks, bonds, and mutual funds, trying to figure out what is right for you. One portfolio you may have heard about is called the Simple Money Portfolio, which has been promoted by Tim Maurer. This is a derivation of the traditional 60/40 split of stocks and bonds.

Spoiler: We don’t recommend this portfolio the way we have reconstructed it. It has high volatility but does not deliver as good returns as other Lazy Portfolios. It might be possible to reconstruct this portfolio using other ETFs that will produce better results. See Performance.

We would still like to provide you with full analysis and breakdown of the portfolio so you can learn from it.

What Is the Simple Money Portfolio by Tim Maurer?

The Simple Money Portfolio is exactly as it sounds. It has been designed to make investing easy. Described by Tim Maurer in his book titled Simple Money. Only requiring a handful of ETFs, this is one of the ways to set up your portfolio to access safe, steady returns in the market. 

When you are putting together the Simple Money Portfolio, there are a few concepts that you are going to follow. These include:

  • This portfolio has been tilted slightly more toward stocks because stocks usually have higher returns than bonds 
  • This portfolio has also been tilted slightly more toward small-cap stocks
  • It has also been tilted toward value stocks more than growth stocks value stocks


When we say that the portfolio has been tilted, we simply mean that the portfolio tends to weigh heavily toward one side than the other. It doesn’t necessarily mean that the portfolio is ignoring anything entirely. There are still plenty of bonds in this portfolio; however, there are more stocks present. 

The specific makeup of the Simple Money Portfolio is as follows:

  • 7.5 percent US Large Cap Stocks
  • 7.5 percent US Large Cap Value
  • 7.5 percent US Small Cap Stocks
  • 7.5 percent US Small Cap Value
  • 15 percent International Developed Markets Small Cap Stocks
  • 15 percent International Developed Markets Value Stocks
  • 40 percent Intermediate Treasury Bonds


One of the major benefits of this portfolio is that it has been diversifying more than traditional portfolios, as it also has International exposure. In addition, it also includes treasury bonds instead of Total Bond Market funds because treasury bonds usually have lower volatility to counteract relatively high stock weight.

The Benefits of the Simple Money Portfolio

After reviewing what is included in the portfolio, it is time to go through the benefits and drawbacks. This is a relatively straightforward strategy that has a handful of upsides.

  • This is fairly easy portfolio to set up.
  • Another option for “Set it and forget it” portfolio. 
  • You will not take on a significant amount of risk with this portfolio, as it still includes 40 percent bonds.
  • Portfolio still produces reliable returns, although lower than some of other portfolios discussed on the site.
  • This portfolio is more diversified than some of the others as it invests in large and small cap stocks and not total stock market like other portfolios tend to do.

If you are looking for a relatively simple portfolio that you do not have to follow on a daily basis, yet will still provide you with a steady rate of returns, this could be the option for you. 

The Drawbacks of the Simple Money Portfolio

As with any investing strategy, it is also important to understand a few of the drawbacks. There are a few factors to consider, including: 

  • Because this portfolio does tend to focus on smaller stocks, it may be more volatile than some other investment strategies. And in fact, it does. It has higher volatility while delivering lower historical returns.
  • Relatively high fees (With ETFs we used to reconstruct it) compared to other lazy portfolios like the All Weather or Golden Butterfly.
  • This portfolio does include 40 percent bonds, which does tend to have lower yields, causing the portfolio to fall behind more aggressive investment strategies.  

As you are trying to figure out what you are doing with your investments, keep in mind that this portfolio is probably not going to grow as quickly as a portfolio that has 100 equities; however, a portfolio with 100 percent equities does take on more risk. 

Is the Simple Money Portfolio Right for You?

Although it is one of the popular lazy portfolios we don’t like it as much as the others. Looking at historical performance, it has underperformed while being more risky. We recommend you look at some of our other portfolio ideas or take the investment guide quiz.

However, as mentioned many times before, historical returns don’t guarantee future results. So, it is possible that the Simple Money Portfolio will outperform other popular lazy portfolios.

Composition & Logic

Although named Simple Money Portfolio, it is in fact more complex than a simple 60/40 portfolio. 60% in stocks and 40% in bonds. In theory 60/40 portfolio can be constructed using just two ETFs. The Simple Money portfolio adds some layers of complexity to it by splitting 60% of stocks into 6 categories: Small & Large Cap, Value stocks and total stocks, U.S and international stocks.

Here is the reconstructed Simple Money Portfolio using popular ETFs.

WeightTickerTicker Info
7.5%IJR
7.5%IJS
7.5%VTV
7.5%VV 
15%SCZ
15%EFV
40%IEI

Historical Performance vs. S&P500

Let’s compare The Simple Money Portfolio performance to S&P 500. To make it simpler we will compare it to SPY ETF. Here are the results starting in 2008.

The portfolio despite being heavily exposed to stocks, was able to outperform the S&P during the crisis but not by much. 40% bond exposure was the reason that the portfolio fell in value but less than the broader market. In 2013 when S&P 500 caught up to it, Simple Money portfolio started to deliver lower returns compared to SPY.

 

Performance vs. Volatility

[visualizer id=”2080″ lazy=”no” class=””]

Being highly exposed to stocks, this portfolio delivers steady returns lower than SPY but still has some volatility. During worst of times other Lazy Portfolios were able to deliver safer returns. 

Asset Breakdown

Asset types we buy when we purchase this portfolio:

40% US Bonds, 30% US Stocks and 30% is in international stocks.

Stock sectors we buy into when we purchase this portfolio:

Highest exposure is to Financial Services industry at 19%, followed by Industrials at 16%. Lowest exposure is to Utilities at 4% and Energy at 4%. 

Fees and Risks

Fees
This portfolio is constructed using ETFs that you can see under composition section. ETFs are professionally managed and carry a fee called MERs. This fee is part of your return so it is not charged separately. Here is the breakdown of the fees.

The most expensive ETFs are SCZ and EFV at 0.4% and 0.39%. SCZ tracks small-cap developed market stocks excluding U.S and Canada while EFV tracks developed market stocks that are considered value buys also excluding U.S and Canada. It is understandable while these two ETFs will carry a higher fee as these are not your typical domestic market tracking ETFs.

Risks
Any investment carries some risk of loss. Risk is captured by portfolio’s volatility.  Here is the summary of how much each ETF contributes to portfolio’s volatility as a % of total. 

Not surprisingly not only SCZ and EFV are the most expensive on the list, they are also the most risky and contribute almost equally to the overall volatility of this portfolio. 

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WeightTickerTicker Info
7.5%IJR
7.5%IJS
7.5%VTV
7.5%VV 
15%SCZ
15%EFV
40%IEI

Notes on results:

Performance analysis is not of the exact portfolio offered by a 3rd party service. For back testing purposes, portfolios are reconstructed using best available information. 

Past performance is no guarantee of future results, which may vary. Please see our terms of use.

Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.

All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.

The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.

The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.

The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.

CAGR = Compound Annual Growth Rate

Stdev = Annualized standard deviation of monthly returns

The results assume annual rebalancing of portfolio assets to match the specified allocation