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And the Winner Is ...

Tweedy Browne Co-Managers William and Chris Browne

Not everyone is a fund junkie, and the world is a better place for it. Most people realize savvy investing can help them buy a better house, send their kids to a better college or retire a little sooner, but they see investing as a chore like any other. Maybe they're strictly 401(k) investors. Maybe they just dump cash into an IRA to get a tax deduction. The bottom line is that they're not all that interested.

"There are a lot of people out there who want to know what to do but don't want to be investors for a living," says Scott Cooley, a senior fund analyst with

Morningstar

.

With these folks in mind, I sketched out two diversified portfolios for investors who don't need the money they're investing for at least 10 years, ignoring funds of funds -- funds that invest in other funds -- which sound great but sometimes can be inflexible and expensive.

Each portfolio has relatively few funds that wouldn't warrant more than a casual rebalancing at the end of the year, when I'd add new money to lagging funds to keep the portfolio's allocations on target. As a scribbler for

TheStreet.com

, I'm not allowed to give anyone specific advice. But if I didn't want to deal with a portfolio more than one day a year, these are the portfolios I'd think about building.

The first shows why there's no reason to worry about the oceans of funds out there because one or two funds like these can help you achieve the original and perennial goal of fund investing: Cheap, diversified exposure to the stock market.

I picked the

no-load

(VTSMX) - Get Report

Vanguard Total Stock Market fund because it tracks the broad

Wilshire 5000 Total Stock Market Index

, giving you access to big-, small- and mid-cap stocks from every sector of the market for just a 0.2% expense ratio, compared with 1.5% for the average U.S. stock fund, according to Morningstar. This fund tethers you to the market, and its breadth helps you sleep at night knowing that it's not making big bets for or against any sector or stock.

You could stop there, but I added a 20% allocation to the no-load

(TBGVX) - Get Report

Tweedy Browne Global Value fund to tap into foreign markets via a fund whose managers have an uncanny knack for posting above-average returns. I chose this fund over the

(VWIGX) - Get Report

Vanguard International Growth fund, which I picked a while back in

another model portfolio, because it offers more exposure to small- and mid-cap stocks. The managers of the Tweedy Browne fund

won Morningstar International-Fund Manager of the Year honors this year; for more on them, check out our recent

interview.

If we put this two-fund portfolio under the microscope, we find some pretty good DNA. It covers every part of the market, with sector weightings that are only a bit above or below the

S&P 500's

. It also has about a third of its assets invested in small- and mid-cap stocks, compared with a quarter for the Wilshire 5000. While these stocks can be more volatile than big-caps, they can boost returns for long-term investors.

The portfolio is also cheap, with a 0.44% average expense ratio, compared with 1.5% for the average U.S. stock fund. And it would've lost less than the S&P 500 over the past 12 months, according to Morningstar. If you're unfamiliar with the risk-measure beta, it essentially measures volatility relative to the overall market. A beta below 1.0 indicates a portfolio is less volatile than the market; a beta above 1.0 indicates greater volatility than the market.

Despite this portfolio's lower-risk style, it would've been competitive with the S&P 500, even though that mostly big-cap index is coming off one of its strongest five-year runs. Keep in mind we can't go back 10 years because the Vanguard fund is less than 10 years old.

If you'd dumped $10,000 into this portfolio five years ago and ignored it from there, it would've grown to be worth $22,545 on Jan. 31, according to Morningstar. The same investment in the

(VFINX) - Get Report

Vanguard 500 Index fund, which tracks the S&P 500, would be worth just under $24,000.

Performance

Source: Morningstar. Returns through Jan. 31.

Most financial planners advise against holding bond funds if you've got at least a 10-year time horizon, but if this portfolio seems too aggressive you could add a 10% allocation to a cheap, core bond fund like the no-load

(VBMFX) - Get Report

Vanguard Total Bond Market Index fund or the no-load

(HABDX) - Get Report

Harbor Bond fund run by

Pimco

bond guru Bill Gross, who won Morningstar Fixed-Income Manager of the Year honors for the second time this year.

If you're looking for something a bit more aggressive, you might consider spicing up this portfolio with a 10% allocation to funds focusing on sectors you think have the best long-term growth prospects. For me, these are technology, health care and financial services because I think businesses will keep demanding new and better technology and that the massive wave of aging baby boomers will just keep demanding health care and investing for their retirement. Here's how I'd build a jazzier version of the first portfolio, keeping in mind that I'd still only rebalance at the end of the year.

The majority or core of the portfolio is still spread widely across U.S. and foreign stocks with marketlike weightings to each sector. But with 10% of the portfolio, I'm ensuring a bigger position in sectors I like best for the next 10 to 15 years.

I picked the no-load

(TVFQX)

Firsthand Technology Value fund, even though it carries an above-average 1.91% expense ratio, because portfolio manager Kevin Landis is the heavyweight champ of

tech investing. In 1999 he gained 190%, beating his average peer by more than 50 percentage points, but more impressively his fund only lost 10% last year, a third of the average tech fund's losses. The fund's 38% five-year annualized return beats 97% of its peers and leads the S&P 500 by more than 20 percentage points. I didn't choose this fund in my

Perfect Portfolio column, simply because I didn't realize the fund's steep $10,000 investment minimum is reduced to just $2,500 at

Charles Schwab

, where I have my brokerage account.

In terms of the others, they're actually my second choices. I didn't choose the steady, no-load

(VGHCX) - Get Report

Vanguard Health Care fund run by Ed Owens because it now has a $25,000 investment minimum. And I didn't pick my favorite financial fund, the

(FIDAX) - Get Report

John Hancock Financial Industries fund, because it charges a load, which doesn't make much sense because I'm not using a broker's advice. (Full disclosure: I bought the Hancock fund without a load when I worked at that fund company.)

While you might be more tempted to watch this portfolio closely because of the sector funds, these sectors don't move in lock step and are only 10% of the portfolio. So I think it doesn't require all that much more worry or concern.

In fact, because these sector funds are added in modest doses, they don't skew the portfolio's sector weightings egregiously, especially when you consider that the average big-cap growth fund had 39% of its assets invested in tech stocks at the end of January, according to Morningstar. This fund lineup's average expenses are just a third of the average stock funds', and in its worst year -- 2000 -- its 4.3% slip was less than half that of the S&P 500.

And adding those funds would've boosted performance. This portfolio would've consistently dusted the S&P 500 over the past five years, while hitting fewer bumps in the road. Above-average returns with less risk is nirvana for disinterested and rabid investors alike. A $10,000 investment in this portfolio five years ago would've grown to $24,068 on Jan. 31 if you'd done nothing to it, according to Morningstar. For comparison, that beats the same investment in the Vanguard 500 Index fund by about $100 with less risk along the way.

Performance

Source: Morningstar. Returns through Jan. 31.

I showed these two portfolios to Morningstar's Cooley, an admitted fund-aholic, and he likes them.

"They're both good, solid portfolios. Both are low-cost portfolios, too," he writes in an email. "It's always important to focus on low-cost funds, but if you genuinely intend to invest for the long haul, finding low-cost options is critical."

At the same time he wonders if having a trio of sector funds might lead to more work than a casual investor wants, but I think both portfolios really only merit a cursory gander at quarterly account statements and some year-end rebalancing to keep your allocations on target.

The one problem with this whole idea is that someone who could not care less about investing probably doesn't read

TheStreet.com

. If you know one of these folks who have better things to do than watch

CNBC

all day, do us both a favor and send them this story.

Fund Junkie runs every Monday, Wednesday and Friday, as well as occasional dispatches. Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

imcdonald@thestreet.com, but he cannot give specific financial advice.