The Three-Fund Portfolio

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Da5id
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Re: The Three-Fund Portfolio

Post by Da5id »

hustler wrote: Mon May 31, 2021 8:23 am
Da5id wrote: Mon May 31, 2021 8:17 am
hustler wrote: Mon May 31, 2021 8:13 am I am seriously considering improving my investment strategy for Taxable and non-taxable account. Currently it is - Fidelity Managed Account with close to 1% management fees.

My current strategy has given me 2021 YTD returns of (after all the fees):

7.88% on Taxable Investment accounts
7.30% on non-taxable investment accounts

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?
Comparisons aren't very valid unless similar risks assumed. And YTD comparisons are particularly shallow.

1% AUM fee is pretty high. I don't know your situation and how much you need an advisor. But if you need an advisor at least PAS is cheaper.
Good point. It's roughly speaking 80% stock, 20% conservative portfolio, if that helps. Also will update in original post.
Vanguard Life Strategy Growth is a good reference fund then. But YTD is not in my opinion a useful comparison.
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ruralavalon
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Re: The Three-Fund Portfolio

Post by ruralavalon »

hustler wrote: Mon May 31, 2021 8:13 am I am seriously considering improving my investment strategy for Taxable and non-taxable account. Currently it is - Fidelity Managed Account with close to 1% management fees. It's roughly 80% stocks and 20% conservative investments portfolio

My current strategy has given me following 2021 YTD returns, after taking off all the fees (management fees + expense ratios):

7.88% on Taxable Investment accounts
7.30% on non-taxable investment accounts

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?
See What are you up YTD? [Year To Date]. It depends on the asset allocation.


Age 75, retired, our asset allocation is 50/50.

Total return of our portfolio is 6.36% year to date, enough to live on for about 3 years.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
hustler
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Re: The Three-Fund Portfolio

Post by hustler »

Thanks for the replies so far. I understand, YTD is perhaps not enough, here's larger performance data:

Taxable Fidelity Managed account - 80/20 portfolio. (Below is Annual Return performances after taking off the management fees)

1 Month: +1.14%
3 Month: +6.84%
YTD: +9.12%
1 year:+32.58%
3 years:+11.32%
5 years: +11.47%

Same Questions again:

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?


Thanks a bunch for you time!
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LadyGeek
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Re: The Three-Fund Portfolio

Post by LadyGeek »

hustler - Instead of asking how the 3-fund portfolio applies to your situation, may I suggest you start a new thread in the Personal Investments forum and post your portfolio information in that thread using the Asking Portfolio Questions format? It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask them in the new thread.
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ruralavalon
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Re: The Three-Fund Portfolio

Post by ruralavalon »

hustler wrote: Tue Jun 01, 2021 9:37 am Thanks for the replies so far. I understand, YTD is perhaps not enough, here's larger performance data:

Taxable Fidelity Managed account - 80/20 portfolio. (Below is Annual Return performances after taking off the management fees)

1 Month: +1.14%
3 Month: +6.84%
YTD: +9.12%
1 year:+32.58%
3 years:+11.32%
5 years: +11.47%

Same Questions again:

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?


Thanks a bunch for you time!
It does not look like the management effort has added value, but hasn't done poorly.

Vanguard LifeStrategy Growth Fund (VASGX) ER 0.14%, which is composed of 4 index funds, has an 80/20 asset allocation. VASGX's performance as of 5/31/2021 has been:
1 month 1.25%
3 months 6.92%
Year to date 8.65%
1 year 33.73%
3 years 12.65%
5 years 12.55%
10 years 9.58%

Vanguard LifeStrategy Growth Fund (VASGX) is basically a three-fund type portfolio with the addition of a small allocation to international bonds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
hustler
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Re: The Three-Fund Portfolio

Post by hustler »

LadyGeek wrote: Tue Jun 01, 2021 10:22 am hustler - Instead of asking how the 3-fund portfolio applies to your situation, may I suggest you start a new thread in the Personal Investments forum and post your portfolio information in that thread using the Asking Portfolio Questions format? It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask them in the new thread.
Agree, will do that soon, thanks!
hustler
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Re: The Three-Fund Portfolio

Post by hustler »

ruralavalon wrote: Tue Jun 01, 2021 10:26 am
hustler wrote: Tue Jun 01, 2021 9:37 am Thanks for the replies so far. I understand, YTD is perhaps not enough, here's larger performance data:

Taxable Fidelity Managed account - 80/20 portfolio. (Below is Annual Return performances after taking off the management fees)

1 Month: +1.14%
3 Month: +6.84%
YTD: +9.12%
1 year:+32.58%
3 years:+11.32%
5 years: +11.47%

Same Questions again:

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?


Thanks a bunch for you time!
It does not look like the management effort has added value, but hasn't done poorly.

Vanguard LifeStrategy Growth Fund (VASGX) ER 0.14%, which is composed of 4 index funds, has an 80/20 asset allocation. VASGX's performance as of 5/31/2021 has been:
1 month 1.25%
3 months 6.92%
Year to date 8.65%
1 year 33.73%
3 years 12.65%
5 years 12.55%
10 years 9.58%

Vanguard LifeStrategy Growth Fund (VASGX) is basically a three-fund type portfolio with the addition of a small allocation to international bonds.
Thanks for sharing, thing is that, I am not very sure if I had keep my money in VASGX for straight 5 years if I would have chosen to keep the control with me instead of giving it to Fidelity Managed Account team.
DB2
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Re: The Three-Fund Portfolio

Post by DB2 »

hustler wrote: Tue Jun 01, 2021 4:38 pm
ruralavalon wrote: Tue Jun 01, 2021 10:26 am
hustler wrote: Tue Jun 01, 2021 9:37 am Thanks for the replies so far. I understand, YTD is perhaps not enough, here's larger performance data:

Taxable Fidelity Managed account - 80/20 portfolio. (Below is Annual Return performances after taking off the management fees)

1 Month: +1.14%
3 Month: +6.84%
YTD: +9.12%
1 year:+32.58%
3 years:+11.32%
5 years: +11.47%

Same Questions again:

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?


Thanks a bunch for you time!
It does not look like the management effort has added value, but hasn't done poorly.

Vanguard LifeStrategy Growth Fund (VASGX) ER 0.14%, which is composed of 4 index funds, has an 80/20 asset allocation. VASGX's performance as of 5/31/2021 has been:
1 month 1.25%
3 months 6.92%
Year to date 8.65%
1 year 33.73%
3 years 12.65%
5 years 12.55%
10 years 9.58%

Vanguard LifeStrategy Growth Fund (VASGX) is basically a three-fund type portfolio with the addition of a small allocation to international bonds.
Thanks for sharing, thing is that, I am not very sure if I had keep my money in VASGX for straight 5 years if I would have chosen to keep the control with me instead of giving it to Fidelity Managed Account team.
Keep in mind too, a 1% yearly average difference in return can be staggering over several decades. Maybe someone can post a chart from Portfolio Visualizer or elsewhere to show the difference.

Prior to going primarily index, I had a managed portfolio with TD Ameritrade paying around 1% in fees. Once I started doing more homework, like Fidelity, I discovered TD Ameritrade too could not match the indexes. In fact, while they had me in an "aggressive" portfolio that was closer to something like 85/15, they had me in 20 mutual funds(!). I started looking into these funds and many were very speculative, high risk type stuff. Dodge and Cox was probably the most credible one I saw (or what I deemed as credible). However, the Vanguard LifeStrategy Moderate Growth (60/40) was MATCHING this aggressive (85/15) portfolio I was in, yet with much less volatility and less potential for drawdowns. It was a no-brainer for me. Of course, Lifestrategy Growth (80/20) was outperforming the managed portfolio I was in. So I would seriously try to exercise self-control and behavior tendencies in order to take advantage of taking this into your own hands. However, I do understand for some that is difficult where as someone else managing their money still just works better for them. All of the best either way.
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Re: The Three-Fund Portfolio

Post by GaryA505 »

hustler wrote: Tue Jun 01, 2021 9:37 am Thanks for the replies so far. I understand, YTD is perhaps not enough, here's larger performance data:

Taxable Fidelity Managed account - 80/20 portfolio. (Below is Annual Return performances after taking off the management fees)

1 Month: +1.14%
3 Month: +6.84%
YTD: +9.12%
1 year:+32.58%
3 years:+11.32%
5 years: +11.47%

Same Questions again:

Question:
- How would you rate the performance?
- Would you share your YTD % return numbers and your Investment strategy?
- Do you think I would have better off doing a 3 fun portfolio / Vanguard PAS?


Thanks a bunch for you time!
I suspect this portfolio has little international stock so I'm not sure VASGX is a good comparison. A better comparison would probably be Vanguard Balanced (VBIAX).
Through the end of May 2021,
1 year: 24.47%
3 years: 13.06%
5 years: 11.72

Except for the last year, the Fidelity Managed account performance doesn't look so good. The 1 year performance looks great but when you look at the 3 and 5-year performance it doesn't seem so good.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
DB2
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Re: The Three-Fund Portfolio

Post by DB2 »

Here are the (lagging) TD Ameritrade managed portfolios. They too are using a 60:40 breakdown of US to International equities like Lifestrategy.

Mind you, TD's "Growth" portfolio is 69% equities vs VSMGX which is 60% equity- and yet VSMGX still outperforms each period 3/5/10yr period. The same goes for other AA allocations. :happy

https://www.tdameritrade.com/investment ... portfolios.
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Taylor Larimore
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Three-Fund Portfolio Update

Post by Taylor Larimore »

Bogleheads:

"Optimized Portfolio" recently updated their recommendation for The Three Fund Portfolio. This is the link:

Bogleheads 3 Fund Portfolio Review and Vanguard ETFs To Use

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by robirdayehear »

Having read "The Little Book of Common Sense Investing" and both the 2nd addition of "Bogleheads Guide to Investing" and the "Bogleheads Guide to the Three-fund Portfolio", I have the following questions and comments:

1. Can one rely on Vanguard's Intermediate Term Bond Market ETF rather than Vanguard's Total Bond Market ETF for the lions share of one's bond exposure? Pro's and con's, and how might that vary depending upon one's retirement status and adequacy of other income such as a pension?

2. Does "The Guide to the Three-fund Portfolio" (published 2018) preclude using TIP's? This guide makes no reference to the earlier written "Guide to Investing" (published 2014) and its recommendations. I'm presuming the earlier guide's recommendations regarding TIP's are still valid, may provide some additional diversity and safeguard, and just come with added complexity and associated maintenance effort. Is this the case? If one is able and willing to take on extra complexity is it advisable to add TIP's?

3. If including TIP's in one's portfolio, any sense to split the task between a short term and intermediate term TIP funds?

4. I feel some discussion in a future edition of "The Guide to the Three-fund Portfolio" could provide some useful clarity regarding how the two books recommendations interrelate, AND AN ACKNOWLEDGEMENT THAT THE EARLIER GUIDE STILL PROVIDES USEFUL INSIGHTS.

PS: Having futilely chased top performing mutual funds for years and then exhaustingly juggled innumerable index funds, I am deeply indebted[ and grateful to Bogle and Bogleheads for introducing me to a simpler, saner and more productive wealth building strategy. THANKS SO MUCH FOR HAVING CONCERN FOR ALL OF US!
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ruralavalon
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Re: The Three-Fund Portfolio

Post by ruralavalon »

We use Vanguard Intermediate-term Bond Index Fund (VBILX) for our only bond fund, the ETF version is Vanguard Intermediate-Term Bond ETF (BIV). I think that's a reasonable choice for a three-fund portfolio. I don't think that this fund's suitability varies depending on retirement status or the existence of a pension.

That fund has more corporate bonds than total bond market, is roughly 1/2 government bonds and 1/2 corporate bonds with no mortgage backed securities (MBS).

I don't believe that a TIPS fund is a good idea unless retired or very close retirement, if then.
Last edited by ruralavalon on Fri Jun 18, 2021 5:57 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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bertilak
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Re: The Three-Fund Portfolio

Post by bertilak »

ruralavalon wrote: Fri Jun 18, 2021 5:52 pm I don't believe that a TIPS fund is a good idea unless retired or very close retirement, if then.
Isn't the real consideration one's tax bracket? TIPS saves on taxes but generally have a lower return, so it is a balancing act: lower taxes or higher return.

Am I missing something?
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

robirdayehear wrote: Fri Jun 18, 2021 5:15 pm Having read "The Little Book of Common Sense Investing" and both the 2nd addition of "Bogleheads Guide to Investing" and the "Bogleheads Guide to the Three-fund Portfolio", I have the following questions and comments:

1. Can one rely on Vanguard's Intermediate Term Bond Market ETF rather than Vanguard's Total Bond Market ETF for the lion's share of one's bond exposure? Pro's and con's, and how might that vary depending upon one's retirement status and adequacy of other income such as a pension?

In my opinion, either bond fund will provide safety and income in a portfolio. I slightly prefer Total Bond Market Index Fund for it's greater diversification.

2. Does "The Guide to the Three-fund Portfolio" (published 2018) preclude using TIP's? This guide makes no reference to the earlier written "Guide to Investing" (published 2014) and its recommendations. I'm presuming the earlier guide's recommendations regarding TIP's are still valid, may provide some additional diversity and safeguard, and just come with added complexity and associated maintenance effort. Is this the case? If one is able and willing to take on extra complexity is it advisable to add TIP's?
The highest annual inflation rate since 1947 was 14.4% (paying for WWII). Next highest was 13.5% in 1980 when Total Bond returned 1.9% and the S&P returned 18.4%. -- handily beating inflation using The Three-Fund Portfolio.

3. If including TIP's in one's portfolio, any sense to split the task between a short term and intermediate term TIP funds?

See above. Strive for simplicity--not complexity

4. I feel some discussion in a future edition of "The Guide to the Three-fund Portfolio" could provide some useful clarity regarding how the two books recommendations interrelate, AND AN ACKNOWLEDGEMENT THAT THE EARLIER GUIDE STILL PROVIDES USEFUL INSIGHTS.

"Investors seeking more advanced information, often in place of an advisor, should read The Bogleheads' Guide to Investing and/or The Bogleheads' Guide to Retirement Planning." (Page 16 of The Bogleheads' Guide To The Three-Fund Portfolio)

PS: Having futilely chased top performing mutual funds for years and then exhaustingly juggled innumerable index funds, I am deeply indebted[ and grateful to Bogle and Bogleheads for introducing me to a simpler, saner and more productive wealth building strategy. THANKS SO MUCH FOR HAVING CONCERN FOR ALL OF US!
Thank you for your final remark.

Taylor
Jack Bogle's Words of Wisdom: "Deep Down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holding in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund."
"Simplicity is the master key to financial success." -- Jack Bogle
sman09
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Re: The Three-Fund Portfolio

Post by sman09 »

Thank you for this great post, Taylor! Really appreciate the efforts that have gone in to making the original post and your subsequent responses in this thread.

Every now and then I seem to get bit by the "additional returns chasing" bug :) , in wondering whether to have a small amount of VGT or QQQ in my portfolio. At my core I know I want simplicity but do get swayed by what I hear in my social circles.

So, returned to re-read this post trying to internalize the points

Just a couple of clarifications please:

What do you mean by " If full [...]" in this sentence. My understanding was one could always swap investments or sell some of say stocks and make room for bonds. I think I am not understanding the intended advice.
Taylor Larimore wrote: Sun Jan 01, 2012 5:02 pm
Fund Placement For Maximum Tax-Efficiency: Place Total Bond Market in tax-advantaged account(s). If full, use a tax-exempt bond fund in a taxable account.
Also, as you make reference to "(best)", just wanted to clarify whether your suggestion would be that one has as much investments as possible in tax-advantaged accounts and consider a taxable only if unavoidable?
Taylor Larimore wrote: Sun Jan 01, 2012 5:02 pm Place Total Stock Market and Total International Stock Market in either a tax-advantaged account (best) or a taxable account.
Finally, would it be too bad an idea to have a Total Bond or an Intermediate Term Bond Market fund in Taxable, esp. if one is not an high income earner.

I thought of having a mix of total, international and bond fund in the same proportion in both my tax-advantaged/tax-deferred and taxable so that i could easily rebalance within those accounts.

Thank you!
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

sman09 wrote: Thu Jun 24, 2021 12:39 pm Thank you for this great post, Taylor! Really appreciate the efforts that have gone in to making the original post and your subsequent responses in this thread.

Every now and then I seem to get bit by the "additional returns chasing" bug :) , in wondering whether to have a small amount of VGT or QQQ in my portfolio. At my core I know I want simplicity but do get swayed by what I hear in my social circles.

So, returned to re-read this post trying to internalize the points

Just a couple of clarifications please:

What do you mean by "full"
I mean: if your tax-advantaged accounts are full of taxable bonds.
Also, as you make reference to "(best)", just wanted to clarify whether your suggestion would be that one has as much investments as possible in tax-advantaged accounts and consider a taxable only if unavoidable?
Yes.
Finally, would it be too bad an idea to have a Total Bond or an Intermediate Term Bond Market fund in Taxable, esp. if one is not an high income earner.
Not "too bad" but probably not ideal.
I thought of having a mix of total, international and bond fund in the same proportion in both my tax-advantaged/tax-deferred and taxable so that i could easily rebalance within those accounts.
Probably not a good idea. Put tax-inefficient funds (bonds) in tax-advantaged account and put tax Efficient funds in taxable accounts..

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "A tax that is deferred is the functional equivalent of an interest-free loan from the U.S. Treasury Department."
"Simplicity is the master key to financial success." -- Jack Bogle
sman09
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Re: The Three-Fund Portfolio

Post by sman09 »

Taylor Larimore wrote: Thu Jun 24, 2021 1:24 pm
sman09 wrote: Thu Jun 24, 2021 12:39 pm Thank you for this great post, Taylor! Really appreciate the efforts that have gone in to making the original post and your subsequent responses in this thread.

Every now and then I seem to get bit by the "additional returns chasing" bug :) , in wondering whether to have a small amount of VGT or QQQ in my portfolio. At my core I know I want simplicity but do get swayed by what I hear in my social circles.

So, returned to re-read this post trying to internalize the points

Just a couple of clarifications please:

What do you mean by "full"



I mean: if your tax-advantaged accounts are full of taxable bonds.
Also, as you make reference to "(best)", just wanted to clarify whether your suggestion would be that one has as much investments as possible in tax-advantaged accounts and consider a taxable only if unavoidable?
Yes.
Finally, would it be too bad an idea to have a Total Bond or an Intermediate Term Bond Market fund in Taxable, esp. if one is not an high income earner.
Not "too bad" but probably not ideal.
I thought of having a mix of total, international and bond fund in the same proportion in both my tax-advantaged/tax-deferred and taxable so that i could easily rebalance within those accounts.
Probably not a good idea. Put tax-inefficient funds (bonds) in tax-advantaged account and put tax Efficient funds in taxable accounts..

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "A tax that is deferred is the functional equivalent of an interest-free loan from the U.S. Treasury Department."

Thank you for the quick response and answer to all my queries! Really appreciate it, Taylor.
sman09
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Re: The Three-Fund Portfolio

Post by sman09 »

ruralavalon wrote: Fri Jun 18, 2021 5:52 pm We use Vanguard Intermediate-term Bond Index Fund (VBILX) for our only bond fund, the ETF version is Vanguard Intermediate-Term Bond ETF (BIV). I think that's a reasonable choice for a three-fund portfolio. I don't think that this fund's suitability varies depending on retirement status or the existence of a pension.

That fund has more corporate bonds than total bond market, is roughly 1/2 government bonds and 1/2 corporate bonds with no mortgage backed securities (MBS).
The information above is helpful for someone like me new to VBILX. Thank you!

Were you suggesting it in the context of tax-advantaged accounts or taxable also?

Would the Vanguard Tax Exempt Bond fund (VTEB): https://investor.vanguard.com/etf/profile/VTEB be a good fund to have for the Bond component in Taxable - more as a place to park some emergency fund?

Thank you!
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Re: The Three-Fund Portfolio

Post by tj »

sman09 wrote: Thu Jun 24, 2021 6:34 pm
ruralavalon wrote: Fri Jun 18, 2021 5:52 pm We use Vanguard Intermediate-term Bond Index Fund (VBILX) for our only bond fund, the ETF version is Vanguard Intermediate-Term Bond ETF (BIV). I think that's a reasonable choice for a three-fund portfolio. I don't think that this fund's suitability varies depending on retirement status or the existence of a pension.

That fund has more corporate bonds than total bond market, is roughly 1/2 government bonds and 1/2 corporate bonds with no mortgage backed securities (MBS).
The information above is helpful for someone like me new to VBILX. Thank you!

Were you suggesting it in the context of tax-advantaged accounts or taxable also?

Would the Vanguard Tax Exempt Bond fund (VTEB): https://investor.vanguard.com/etf/profile/VTEB be a good fund to have for the Bond component in Taxable - more as a place to park some emergency fund?

Thank you!
So long as you're okay with your "emergency fund" losing value.
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ruralavalon
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Re: The Three-Fund Portfolio

Post by ruralavalon »

sman09 wrote: Thu Jun 24, 2021 6:34 pm
ruralavalon wrote: Fri Jun 18, 2021 5:52 pm We use Vanguard Intermediate-term Bond Index Fund (VBILX) for our only bond fund, the ETF version is Vanguard Intermediate-Term Bond ETF (BIV). I think that's a reasonable choice for a three-fund portfolio. I don't think that this fund's suitability varies depending on retirement status or the existence of a pension.

That fund has more corporate bonds than total bond market, is roughly 1/2 government bonds and 1/2 corporate bonds with no mortgage backed securities (MBS).
The information above is helpful for someone like me new to VBILX. Thank you!

Were you suggesting it in the context of tax-advantaged accounts or taxable also?

Would the Vanguard Tax Exempt Bond fund (VTEB): https://investor.vanguard.com/etf/profile/VTEB be a good fund to have for the Bond component in Taxable - more as a place to park some emergency fund?

Thank you!
We have Vanguard Intermediate-term Bond Index Fund (VBILX) in my rollover IRA. It's not very tax-efficient, so I do not hold the fund in our joint taxable account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
robirdayehear
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Re: The Three-Fund Portfolio

Post by robirdayehear »

Taylor Larimore wrote: Fri Jun 18, 2021 7:25 pm
robirdayehear wrote: Fri Jun 18, 2021 5:15 pm Having read "The Little Book of Common Sense Investing" and both the 2nd addition of "Bogleheads Guide to Investing" and the "Bogleheads Guide to the Three-fund Portfolio", I have the following questions and comments:

1. Can one rely on Vanguard's Intermediate Term Bond Market ETF rather than Vanguard's Total Bond Market ETF for the lion's share of one's bond exposure? Pro's and con's, and how might that vary depending upon one's retirement status and adequacy of other income such as a pension?

In my opinion, either bond fund will provide safety and income in a portfolio. I slightly prefer Total Bond Market Index Fund for it's greater diversification.

2. Does "The Guide to the Three-fund Portfolio" (published 2018) preclude using TIP's? This guide makes no reference to the earlier written "Guide to Investing" (published 2014) and its recommendations. I'm presuming the earlier guide's recommendations regarding TIP's are still valid, may provide some additional diversity and safeguard, and just come with added complexity and associated maintenance effort. Is this the case? If one is able and willing to take on extra complexity is it advisable to add TIP's?
The highest annual inflation rate since 1947 was 14.4% (paying for WWII). Next highest was 13.5% in 1980 when Total Bond returned 1.9% and the S&P returned 18.4%. -- handily beating inflation using The Three-Fund Portfolio.

3. If including TIP's in one's portfolio, any sense to split the task between a short term and intermediate term TIP funds?

See above. Strive for simplicity--not complexity

4. I feel some discussion in a future edition of "The Guide to the Three-fund Portfolio" could provide some useful clarity regarding how the two books recommendations interrelate, AND AN ACKNOWLEDGEMENT THAT THE EARLIER GUIDE STILL PROVIDES USEFUL INSIGHTS.

"Investors seeking more advanced information, often in place of an advisor, should read The Bogleheads' Guide to Investing and/or The Bogleheads' Guide to Retirement Planning." (Page 16 of The Bogleheads' Guide To The Three-Fund Portfolio)

PS: Having futilely chased top performing mutual funds for years and then exhaustingly juggled innumerable index funds, I am deeply indebted[ and grateful to Bogle and Bogleheads for introducing me to a simpler, saner and more productive wealth building strategy. THANKS SO MUCH FOR HAVING CONCERN FOR ALL OF US!
Thank you for your final remark.

Taylor
Jack Bogle's Words of Wisdom: "Deep Down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holding in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund."



Taylor,

I am gratefu for your reply to my 3 fund portfolio inquiry and for all who make this website available.
I do have a few follow-up questions I'd like to run by you:

As I indicated above I have read the 2014 (2nd addition) "Bogleheads Guide to Investing," It was its discussion on p. 103 regarding adding TIPs to one's' portfolio that made me curious how to square those recommendations with those in the "Guide to the Three Fund Portfolio." The "Guide to Investing" says "As your portfolio increases in size, it's time to consider adding a different type of bond -- Treasury Inflation-Protected Securities." Consistent with the Portfolio Guidelines on p. 105, I had placed half our bond position into TIPs (half in Vanguard's short term and half in their intermediate term TIPs).

[Our portfolio has grown to be quite substantial. I'm 74, retired and have a good pension which together with SS meets all our needs for the time being, Our 2021 effective federal tax rate is about 12% and my pension is exempt from state taxes.]

1. Although adding the TIPs to our largely 4 fund portfolio (Tot Stk Mkt, Tot internl Stk Mkt, Tot Bnd & Tot Internl Bnd) added complexity, was this an advisable action consistent with the "Guide to Investing"?

2. Did this increased diversity likely improve the safety of my portfolio holdings?

3. Are the "Bogleheads Guide to Investing" recommendations regarding TIP's still valid or have your thoughts evolved? In the context to a 3 fund portfolio Is there not much gained for the added effort and complexity?

4. And if they're still valid how does one square its recommendations with those of the "Bogleheads Guide to the Three Fund Portfolio"?

I have distributed copies of "Bogleheads Guide to Investing," "Bogleheads Guide to the Three Fund Portfolio" along with "The Little Book of Common Sense Investing" to my adult children, brother and sisters, other relatives and close friends. I am convinced of their life changing wisdom and value. Through this inquiry I am seeking clarification (for myself, family and friends) of how to square the apparently different recommendations in these two Boglehead books.

Thanks for your attention to my concerns.
User avatar
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Taylor Larimore
Posts: 32842
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Location: Miami FL

Re: The Three-Fund Portfolio

Post by Taylor Larimore »

robirdayehear wrote:
I am grateful for your reply to my 3 fund portfolio inquiry and for all who make this website available.
I do have a few follow-up questions I'd like to run by you:

As I indicated above I have read the 2014 (2nd addition) "Bogleheads Guide to Investing," It was its discussion on p. 103 regarding adding TIPs to one's' portfolio that made me curious how to square those recommendations with those in the "Guide to the Three Fund Portfolio." The "Guide to Investing" says "As your portfolio increases in size, it's time to consider adding a different type of bond -- Treasury Inflation-Protected Securities." Consistent with the Portfolio Guidelines on p. 105, I had placed half our bond position into TIPs (half in Vanguard's short term and half in their intermediate term TIPs).

[Our portfolio has grown to be quite substantial. I'm 74, retired and have a good pension which together with SS meets all our needs for the time being, Our 2021 effective federal tax rate is about 12% and my pension is exempt from state taxes.
robirdayehear:

I will attempt to answer your questions below:
1. Although adding the TIPs to our largely 4 fund portfolio (Tot Stk Mkt, Tot internl Stk Mkt, Tot Bnd & Tot Internl Bnd) added complexity, was this an advisable action consistent with the "Guide to Investing"?
I suspect it has made little difference.
2. Did this increased diversity the safety of my portfolio holdings?
It probably made little difference.
3. Are the "Bogleheads Guide to Investing" recommendations regarding TIP's still valid or have your thoughts evolved? In the context to a 3 fund portfolio Is there not much gained for the added effort and complexity?
The last edition of 'The Bogleheads' Guide to Investing' was published in 2014. We now have additional data about TIPS. The content was the combined opinion of its three authors. "The Bogleheads' Guide to The Three-Fund Portfolio" was written by me, alone. It should not be a surprise that the recommendations of the two books are slightly different.
4. And if they're still valid how does one square its recommendations with those of the "Bogleheads Guide to the Three Fund Portfolio"?
See above.
I have distributed copies of "Bogleheads Guide to Investing," "Bogleheads Guide to the Three Fund Portfolio" along with "The Little Book of Common Sense Investing" to my adult children, brother and sisters, other relatives and close friends. I am convinced of their life changing wisdom and value. Through this inquiry I am seeking clarification (for myself, family and friends) of how to square the apparently different recommendations in these two Boglehead books.
I am very pleased that you found our Boglehead books contained "life changing wisdom and value" and that you were sufficiently impressed to give them your family members.

There is more than one road to Dublin.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: “The greatest enemy of a good plan is the dream of a perfect plan.”
"Simplicity is the master key to financial success." -- Jack Bogle
GoneOnTilt
Posts: 1841
Joined: Fri Sep 28, 2018 4:59 pm

Re: The Three-Fund Portfolio

Post by GoneOnTilt »

Taylor Larimore wrote: Sat Jun 26, 2021 11:21 am robirdayehear wrote:
I am grateful for your reply to my 3 fund portfolio inquiry and for all who make this website available.
I do have a few follow-up questions I'd like to run by you:

As I indicated above I have read the 2014 (2nd addition) "Bogleheads Guide to Investing," It was its discussion on p. 103 regarding adding TIPs to one's' portfolio that made me curious how to square those recommendations with those in the "Guide to the Three Fund Portfolio." The "Guide to Investing" says "As your portfolio increases in size, it's time to consider adding a different type of bond -- Treasury Inflation-Protected Securities." Consistent with the Portfolio Guidelines on p. 105, I had placed half our bond position into TIPs (half in Vanguard's short term and half in their intermediate term TIPs).

[Our portfolio has grown to be quite substantial. I'm 74, retired and have a good pension which together with SS meets all our needs for the time being, Our 2021 effective federal tax rate is about 12% and my pension is exempt from state taxes.
robirdayehear:

I will attempt to answer your questions below:
1. Although adding the TIPs to our largely 4 fund portfolio (Tot Stk Mkt, Tot internl Stk Mkt, Tot Bnd & Tot Internl Bnd) added complexity, was this an advisable action consistent with the "Guide to Investing"?
I suspect it has made little difference.
2. Did this increased diversity the safety of my portfolio holdings?
It probably made little difference.
3. Are the "Bogleheads Guide to Investing" recommendations regarding TIP's still valid or have your thoughts evolved? In the context to a 3 fund portfolio Is there not much gained for the added effort and complexity?
The last edition of 'The Bogleheads' Guide to Investing' was published in 2014. We now have additional data about TIPS. The content was the combined opinion of its three authors. "The Bogleheads' Guide to The Three-Fund Portfolio" was written by me, alone. It should not be a surprise that the recommendations of the two books are slightly different.
4. And if they're still valid how does one square its recommendations with those of the "Bogleheads Guide to the Three Fund Portfolio"?
See above.
I have distributed copies of "Bogleheads Guide to Investing," "Bogleheads Guide to the Three Fund Portfolio" along with "The Little Book of Common Sense Investing" to my adult children, brother and sisters, other relatives and close friends. I am convinced of their life changing wisdom and value. Through this inquiry I am seeking clarification (for myself, family and friends) of how to square the apparently different recommendations in these two Boglehead books.
I am very pleased that you found our Boglehead books contained "life changing wisdom and value" and that you were sufficiently impressed to give them your family members.

There is more than one road to Dublin.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: “The greatest enemy of a good plan is the dream of a perfect plan.”
Taylor,

Your books and wisdom, and that of our mentor Jack Bogle, have changed my financial life. I will be forever grateful!

Best Regards,
GoneOnTilt
benstevens
Posts: 11
Joined: Mon Apr 19, 2021 10:47 am

Re: The Three-Fund Portfolio

Post by benstevens »

Taylor Larimore wrote: Sun Jan 01, 2012 5:02 pm
The Bogleheads' Guide to The Three-Fund Portfolio is now available in hardcover book, audio book and kindle. All royalties are donated directly to The John C. Bogle Center For Financial Literacy.
Bogleheads:

After a lifetime of investing since 1950 trying to "beat the market," I am convinced that a simple 3-fund (or ETF) portfolio of Total Stock Market, Total International, and Total Bond Market, properly allocated, is an ideal portfolio for most investors. The advantages are many (read blue links):

* Avoids wasted time, confusion and the possibility of mistakes trying to pick the best of thousands of mutual funds and ETFs.
* Very diversified with over 15,000 worldwide securities (lower risk).
* Very low expense ratios.
* Very low (hidden) turnover costs.
* Very tax-efficient.
* The many Advantages of Simplicity.
* Fewer but larger funds results in earlier eligibility for low-cost Admiral shares.
* No adviser risk.
* No fund manager risk.
* No style drift.
* No asset bloat.
* No tracking error to cause abandonment of the strategy.
* No fund overlap.
* No front-running that reduces sub-index returns.
* Automatic rebalancing within each fund.
* Less worry. Never under-performs the market.
* Easy to maintain for the owner, spouse, caregivers and heirs.
* More free time.
* Mathematically certain to outperform most investors. This was Morningstar's 15-Year Category performance for each stock fund (return) and bond fund (risk) updated on January 01, 2021:

TOP 12% = Vanguard Total Stock Market (VTSAX)

TOP 35% = Vanguard Total International (VGTSX)

TOP 9% = Vanguard Total Bond Market (VBTLX) in 2008 bear market (bonds are primarily for safety).

GOLD Analyst Rating: Total Stock Market and Total International
SILVER Analyst Rating: Total Bond Market

Asset Allocation: Use this Investor Questionnaire to help you decide your very important stock/bond allocation. I suggest International stocks = 20% of equity.

Fund Placement For Maximum Tax-Efficiency: Place Total Bond Market in tax-advantaged account(s). If full, use a tax-exempt bond fund in a taxable account. Place Total Stock Market and Total International Stock Market in either a tax-advantaged account (best) or a taxable account.

______________________________________________________________________________________

What Nobel Laureate's say:

Eugene Fama: "Whether you decide to tilt toward value depends on whether you are willing to bear the associated risk...The market portfolio is always efficient...For most people, the market portfolio is the most sensible decision."

Daniel Kahneman: "Investors shouldn't delude themselves about beating the market. They're just not going to do it. It's just not going to happen."

Harry Markowitz: "A foolish attempt to beat the market and get rich quickly will make one's broker rich and oneself much less so."

Merton Miller: "Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't"

Paul Samuelson: "The most efficient way to diversify a stock portfolio is with a low-fee index fund. Statistically, a broadly based stock index fund will outperform most actively managed equity portfolios."

William Sharpe: "You may think your opinion is superior, but it pays to be humble, investing in the market rather than trying to beat it."

Robert Shiller: "A portfolio approximating the market may be the most important portfolio."
----------------------------------------------------------------------------------------------------------------------

What Other Experts Say:
American Association of Individual Investors: "It should come as no surprise that behavioral finance research makes a strong case for buying and holding low-cost, broadly diversified index funds."

Mark Balasa, CPA, CFP: "That three-pronged approach is going to beat the vast majority of the individual stock and bond portfolio that most people have at brokerage firms. There is a certain elegance in the simplicity of it."

Christine Benz, Morningstar Director of Personal Finance: "By buying total-market index funds--one for U.S. stocks, one for foreign stocks, and one for bonds--investors can gain exposure to a huge swath of securities in three highly economical packages."

Bill Bernstein, author of The Four Pillars of Investing: "Does this (three fund) portfolio seem overly simplistic, even amateurish? Get over it. Over the next few decades, the overwhelming majority of all professional investors will not be able to beat it."

Jack Bogle, Vanguard founder: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk." -- "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."

Warren Buffett, famed investor: “I’d rather be certain of a good return than hopeful of a great one. -- Most investors are better off putting their money in low-cost index funds."

Scott Burns, financial columnist: "The odd are really, really poor than any of us will do better than a low-cost broad index fund."

Jonathan Burton, MarketWatch: "There are plenty of ways to complicate investing, and plenty of people who stand to make money from you as a result. So just think of a three-fund strategy as something you won't have to think about too much."

Andrew Clarke, co-author of Wealth of Experience: "If your stock portfolio looks very different from the broad stock market, you're assuming additional risk that may, or may not, pay off."

Jonathan Clements, author and Wall Street Journal columnist: "Using broad-based index funds to match the market is, I believe, brilliant in its simplicity.

John Cochrane, President American Finance Association: "The market in aggregate always gets the allocation of capital right."

Consumer Reports Money Book: "Simply buy the market as a whole."

Laura Dugu, Ambassador and co-author of The Bogleheads' Guide to Retirement Planning: "With only these three funds in your investment portfolio you can benefit from low costs and broad diversification and still have a portfolio that is easy to manage."

Charles D. Ellis, author of The Index Revolution: "'Beating the market' is much harder than it used to be, and investors who continue to approach the market with that mindset populate the rolls of market losers time and time again."

Paul Farrell, author of The Lazy Person's Guide to Investing: "Where does Fama invest his retirement money? 'In index funds. Mostly the Wilshire 5000.' "

Rick Ferri, Forbes columnist and author of six investment books: "The older I get, the more I believe the 3-fund portfolio is an excellent choice for most people. It's simple, cheap, easy to maintain, and has no tracking error that would cause emotional abandonment to the strategy."

Graham/Zweig, authors of The Intelligent Investor: "The single best choice for a lifelong holding is a total stock-market index fund."

Alan Greenspan, former Chairman of the Federal Reserve: "Prices in the marketplace are by definition the right price."

Mark Hebner, author of Index Funds: “A diversified portfolio which captures the right blend of market indexes reaps the benefit of carrying the systematic risk of the entire market while minimizing exposure to the unsystematic and concentrated risk associated with individual stocks and bonds, countries, industries, or sectors.”

Hulbert Financial Digest: "Buying and holding a broad-market index fund remains the best course of action for most investors."

Sheldon Jacobs, author of No-Load Fund Investing: "The best index fund for almost everyone is the Total Stock Market Index Fund.--The fund can only go wrong if the market goes down and never comes back again, which is not going to happen."

Kiplinger's Retirement Report: "You'll beat most investors with just three funds that cover the vast majority of global stock and bond markets: Vanguard Total Stock Market; Vanguard Total International Stock Index and Vanguard Total Bond Market Index."

Lawrence Kudlow, Director of the U.S. Economic Council: "I like the concept of the Wilshire 5000, which essentially gives you a piece of the rock of all actively traded companies."

Prof. Burton Malkiel, author of Random Walk Down Wall Street: "I recommend a total-market index fund--one that follows the entire U.S. stock market. And I recommend the same approach for the U.S. bond market and international stocks."

Bill Miller, famed fund manager: "With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me."

E.F.Moody, author of No Nonsense Finance: "I am increasingly convinced that the best investment advice for both individual and institutional equity investors is to buy a low-cost broad-based index fund that holds all the stocks comprising the market portfolio."

Motley Fools: "Invest your long-term moolah in index mutual funds that are designed to track the performance of a broad market index."

John Norstad, Northwestern College academic: "For total-market investors, the three disciplines of history, arithmetic, and reason all say that they will succeed in the end."

Anna Pryor Wall Street Journal writer: "A simple portfolio of 3 funds. It may sound counter-intuitive, but for the average individual investor, less is actually more."

Jane Bryant Quinn, syndicated columnist and author of Making the Most of Your Money: "The dependable great investment returns come from index funds which invest in the stock market as a whole."

Pat Regnier, former Morningstar analyst: "We should just forget about choosing fund managers and settle for index funds to mimic the market."

Ron Ross, author of The Unbeatable Market: "Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind."

Gus Sauter, former Vanguard chief investment officer: "I think a very good way to gain exposure to the stock market is through the Total Stock Market Portfolio on the domestic side."

Bill Schultheis, author of The Coffee House Investor: The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market."

Charles Schwab: "Only about one out of every four equity funds outperforms the stock market. That's why I'm a firm believer in the power of indexing."

Chandan Sengupta, author of The Only Proven Road to Investment Success: "Use a low-cost, broad-based index fund to passively invest in a little bit of a large number of stocks."

Prof. Jeremy Siegel, author of Stocks For The Long Run: "For most of us, trying to beat the market leads to disastrous results."

Dan Solin, author of The Smartest Portfolio You'll Ever Own: "You can get as simple or as complicated as you'd like. You can keep it very simple by owning just three mutual funds that invests in domestic stocks, foreign stocks, and bonds. That's precisely what I recommend in my model portfolios."

William Spitz, author of Get Rich Slowly: "Few are able to beat a simple strategy of buying and holding the securities that comprise the market."

Prof. Meir Statman, author of What Investors Really Want: "It makes sense to have those three funds. What makes it hard is that it seems too simple to actually be a winner."

Stein & DeMuth, authors of The Affluent Investor: "Buying and holding a few broad market index funds is perhaps the most important move ordinary investors can make to supercharge their portfolios."

"Robert Stovall, investment manager: It's just not true that you can't beat the market. Every year about one-third do it. Of course, each year it is a different group."

Peter D. Teresa, Morningstar Sr. Analyst: My recommendation: "A fund that indexes the entire market, such as Vanguard Total Stock Market Index."

Wilshire Research: "The market portfolio offers the best ratio of return to risk."

John Woerth, Vanguard director of public relations: "We would agree that this three-fund approach offers most investors a prudent, well-balanced, diversified portfolio at a low cost."

Jason Zweig, Wall Street Journal columnist and author of Your Money and Your Brain: "I think a total stock market index fund is not only the simplest, but the very best core investment for most people."

Warren Buffett, famed investor: "There seems to be some perverse human characteristic that likes to make easy things difficult."
What investment writers say:

"The Best Investment Strategy Is Simple But Hard to Do" by Allan Roth in AARP

"The BigLaw Investor Portfolio" by Joshua Hunt

"A Boglehead Explains the Simplest Way to Manage Your Money"--MarketWatch

"The Bogleheads' Guide to The Three-Fund Portfolio" by Four Pillar Freedom

"The Bogleheads' Guide to the Three-Fund Portfolio" by Rick Van Ness

"Bogleheads Three-Fund Portfolio Review" by Optimized Portfolio"

"Building a Vanguard Three-Fund Portfolio" by The Wall Street Physician

"Efficient Investing with the Three Fund Portfolio" by Mr. Crazy Kicks

"From 28 Funds to 3: Simplifying to a Three-Fund Portfolio" by Physician On Fire

"He Has Read 250 Investing Books and Recommends the Three Fund Portfolio" by Physician on Fire

"How the Bogle (3-fund) Model Beats the Yale Model" by Ben Carlson

"How To Create A Three-Fund Portfolio" by Camilo Maldonado, Forbes

"How to Build a Three-Fund Portfolio" by Estorica

"How To Diversify With Just Three Mutual Funds" by Ambassador Laura Dogu, Forbes

"How To Simplify Your Investing Using Only Three Funds" by Debt Free Doctor

"If You Can. How Millennials Can Get Rich Slowly" -- Free book by Wm. Bernstein

"Investing Should Be Simple. A Three-Fund Portfolio Is All You Need." by Allan Roth, AARP

"The Lazy Portfolio -- Why A Simple 3 Fund Portfolio Might Be Best" by WealthFam

"Most Investors Probably Won’t Outperform This Simple (three-fund) Portfolio" by Morningstar

"Next to Nothing" by Jonathan Clements

"The Only Three Vanguard Funds You Need to Build a Portfolio" by Kent Thune

"Review of Bogleheads Guide to the Three Fund Portfolio" by The White Coat Investor

"The Simple Magic of Investing In A Three-Fund Portfolio by BestWalletHacks

"Simplify Your Investments With The 3-Fund Portfolio" by Alicia Adamczyk

"Taylor Larimore: Three-Fund Portfolio" by blbarnitz Financial Page

"The Three Fund Portfolio: The Lazy Investing Strategy that Crushes the Pros" by The Money Wizard

"The Three-Fund Investment Portfolio: The Beauty of Simplicity" by Mama Fish Saves

"Three-Fund Portfolio" by Portfolio Charts

"Three Fund Portfolio: Did Awesomeness Find Trinity?" by Portfolio Einstein

"Three Fund Portfolio – Investing Made Easy" by The Finance Twins

"The Three-Fund Portfolio. Living the Simple Life" by Morningstar

"Three-Fund Portfolios Can Cut Risk, Taxes, and Costs for Investors. Here’s How to Build One" by Barron's

"3 Fund Portfolio Investment Strategy: The Only Time Lazy is Cool" by Dr Breathe Easy Investing

"Three-Fund Portfolio: The Lazy Strategy That Really Works" by Invested Wallet

"3 Fund Portfolio: The Lazy Way To Invest" by Just Start Investing

"The Three-Fund Portfolio" -- Boglehead wiki

"The Three Fund Portfolio: A Simple Diversified Investing Strategy" by Bible Matters

"The 3 Fund Portfolio: Simple Investing That Works" by Clevergirl Finance

"Why (3) Index Portfolios Win" by M.P. Dunleavey

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."


This looks super interesting I'm going to look into it immediately
Destiple
Posts: 112
Joined: Tue Aug 18, 2020 11:31 am

Re: The Three-Fund Portfolio

Post by Destiple »

given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: The Three-Fund Portfolio

Post by Da5id »

Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Sure, if 66% stock is what you want. And overweighting international a bit is what you want. No percentage mixture is inherently simpler or easier to rebalance so nothing magical about the numbers you picked.
User avatar
Topic Author
Taylor Larimore
Posts: 32842
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Re: The Three-Fund Portfolio

Post by Taylor Larimore »

Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Destiple:

I am pleased that you recognize the many advantages of simply holding the three Funds/ETFs in The Bogleheads' Three-Fund Portfolio. Nevertheless, your asset-allocation between stocks and bonds can be even more important than the funds themselves.

Use this Vanguard Investor Questionnaire to help you decide the best stock/bond allocation for you.

After deciding your stock/bond allocation, I suggest your international stock fund (VXUS) should be 20% of your stock allocation.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Asset allocation is critically important; but cost is critically important, too -- All other factors pale into insignificance."
"Simplicity is the master key to financial success." -- Jack Bogle
Triple digit golfer
Posts: 10433
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Yes, that would be well within the realm of what most would consider acceptable. William Bernstein recommended this set it and forget it portfolio here:

https://www.etf.com/docs/IfYouCan.pdf
Destiple
Posts: 112
Joined: Tue Aug 18, 2020 11:31 am

Re: The Three-Fund Portfolio

Post by Destiple »

Taylor Larimore wrote: Tue Jul 13, 2021 12:46 pm
Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Destiple:

I am pleased that you recognize the many advantages of simply holding the three Funds/ETFs in The Bogleheads' Three-Fund Portfolio. Nevertheless, your asset-allocation between stocks and bonds can be even more important than the funds themselves.

Use this Vanguard Investor Questionnaire to help you decide the best stock/bond allocation for you.

After deciding your stock/bond allocation, I suggest your international stock fund (VXUS) should be 20% of your stock allocation.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Asset allocation is critically important; but cost is critically important, too -- All other factors pale into insignificance."
I took the test and my results came back at forty bonds and sixty stocks
so i will do
40 BND
38 VTI
22 VXUS
Last edited by Destiple on Tue Jul 13, 2021 1:46 pm, edited 1 time in total.
Destiple
Posts: 112
Joined: Tue Aug 18, 2020 11:31 am

Re: The Three-Fund Portfolio

Post by Destiple »

Triple digit golfer wrote: Tue Jul 13, 2021 1:24 pm
Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Yes, that would be well within the realm of what most would consider acceptable. William Bernstein recommended this set it and forget it portfolio here:

https://www.etf.com/docs/IfYouCan.pdf
I'm in my 40s feel like im too old for this advice
Triple digit golfer
Posts: 10433
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

Destiple wrote: Tue Jul 13, 2021 1:46 pm
Triple digit golfer wrote: Tue Jul 13, 2021 1:24 pm
Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Yes, that would be well within the realm of what most would consider acceptable. William Bernstein recommended this set it and forget it portfolio here:

https://www.etf.com/docs/IfYouCan.pdf
I'm in my 40s feel like im too old for this advice
What if you'd gotten the advice 20 years prior?

The portfolio you posted above looks good too.

Essentially, you need to do 2 things:

1. Select stock/bond ratio
2. Select U.S./international stock ratio

Then your 3 fund portfolio is designed.

In order to get to 1/3 each, you'd have to select a 2/1 stock bond ratio and 1/1 U.S./international ratio. That may or may not be best for you. Sounds like you prefer a bit more in bonds and to be more U.S. heavy on the equity, which is also reasonable.
User avatar
Topic Author
Taylor Larimore
Posts: 32842
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Forbes Update on "The Three-Fund Portfolio"

Post by Taylor Larimore »

Bogleheads:

Forbes has updated their previous article featuring "The Three-Fund Portfolio":

https://www.forbes.com/advisor/retireme ... portfolio/

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
bog007
Posts: 539
Joined: Fri Feb 28, 2020 2:27 am

Re: The Three-Fund Portfolio

Post by bog007 »

thanks boss
Don’t let anyone else ruin your portfolio. It’s your portfolio. Ruin it yourself!!!
User avatar
Eagle33
Posts: 2392
Joined: Wed Aug 30, 2017 3:20 pm

Re: The Three-Fund Portfolio

Post by Eagle33 »

Destiple wrote: Tue Jul 13, 2021 1:46 pm
Triple digit golfer wrote: Tue Jul 13, 2021 1:24 pm
Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Yes, that would be well within the realm of what most would consider acceptable. William Bernstein recommended this set it and forget it portfolio here:

https://www.etf.com/docs/IfYouCan.pdf
I'm in my 40s feel like im too old for this advice
What is your remaining life expectancy? If in your 40's, then you got another 40 years - plenty of time for advice to work. You won't be spending 100% of your portfolio on day 1 of your retirement.
Destiple
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Re: The Three-Fund Portfolio

Post by Destiple »

Eagle33 wrote: Sat Jul 17, 2021 7:51 pm
Destiple wrote: Tue Jul 13, 2021 1:46 pm
Triple digit golfer wrote: Tue Jul 13, 2021 1:24 pm
Destiple wrote: Tue Jul 13, 2021 12:34 pm given there are so many variations of this
can one just do this
33.3 VTI
33.3 BND
33.3 VXUS
to keep it simple ?
Yes, that would be well within the realm of what most would consider acceptable. William Bernstein recommended this set it and forget it portfolio here:

https://www.etf.com/docs/IfYouCan.pdf
I'm in my 40s feel like im too old for this advice
What is your remaining life expectancy? If in your 40's, then you got another 40 years - plenty of time for advice to work. You won't be spending 100% of your portfolio on day 1 of your retirement.
Most family members are dead by 80 and I’m 42
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

Destiple wrote:
"I'm in my 40s feel like im too old for this advice."
Destiple:

I'm age 97 and learn something from Dr. Bernstein's great free booklet "If You Can" every time I read it.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “It is the power of words and books - explaining and dramatizing great ideas and articulating high ideals - that is the greatest weapon in the missionary's arsenal.”
"Simplicity is the master key to financial success." -- Jack Bogle
dbw
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Re: The Three-Fund Portfolio

Post by dbw »

Taylor,
Just a note to thank you & Bogleheads Forum generally for the incredible service to us investors.
Thank you
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

dbw wrote: Sun Aug 01, 2021 5:13 pm Taylor,
Just a note to thank you & Bogleheads Forum generally for the incredible service to us investors.
Thank you
dbw

Welcome to the Bogleheads Forum!

It is always nice when Bogleheads know their posts are appreciated.

Best wishes.
Taylor
Jack Bogle in his book, "John Bogle on Investing": "Dedicated to all of the human beings --especially those "Bogleheads" of the internet, that dedicated and loyal cadre of Vanguard Diehards who give me strength to carry on my mission."
"Simplicity is the master key to financial success." -- Jack Bogle
namrac
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Re: The Three-Fund Portfolio

Post by namrac »

As the mantra goes, if you keep saying this often enough, it's bound to be true some years...
Da5id
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Re: The Three-Fund Portfolio

Post by Da5id »

namrac wrote: Tue Aug 03, 2021 3:24 pm As the mantra goes, if you keep saying this often enough, it's bound to be true some years...
Unclear what your point is. Index funds do what they say they will do, which is roughly capture the return of the market. That is "good enough" for most investors, and historically has been hard to beat with active funds. See e.g. https://www.spglobal.com/spdji/en/resea ... hts/spiva/
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

Bogleheads:

Another article featuring The Bogleheads Three-Fund Portfolio. This one is by Joshua Rodriguez at MoneyCrashers:

https://www.moneycrashers.com/boglehead ... portfolio/

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An investment in knowledge always pays the best interest."
"Simplicity is the master key to financial success." -- Jack Bogle
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International Bonds?

Post by Taylor Larimore »

Bogleheads:

I am often asked why I did not include "International Bonds" in my Three-Fund Portfolio. I recently came across this interview with Dr. Bill Bernstein who answers the question better than I can:

Don't Bother With International Bonds

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “(How much) are people saying you should put in these exotic, if you will, (international) bond funds. And they say, well, maybe 5% of your bond position or 10% of your bond position. Well, that's not going to change your returns. They're expensive. They have hedging costs--I guess about half are hedged and half are not. I don't even an opinion about which is which because I wouldn't buy either one."
"Simplicity is the master key to financial success." -- Jack Bogle
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HuckFinn
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Re: The Three-Fund Portfolio

Post by HuckFinn »

Thanks Taylor.

It's been almost one year since my wife and I committed to the pure Three-Fund portfolio. Couldn't be happier. So much less stress about sector bets, individual stocks etc. Our portfolio is beautifully tax efficient and we have an asset allocation we are comfortable with and a Investment Policy Statement that keeps us honest. We could not have gotten here without your help and the Bogleheads. Thank you immeasurably!
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

HuckFinn wrote: Thu Aug 19, 2021 7:26 pm Thanks Taylor.

It's been almost one year since my wife and I committed to the pure Three-Fund portfolio. Couldn't be happier. So much less stress about sector bets, individual stocks etc. Our portfolio is beautifully tax efficient and we have an asset allocation we are comfortable with and a Investment Policy Statement that keeps us honest. We could not have gotten here without your help and the Bogleheads. Thank you immeasurably!
HuckFinn:

We appreciate your post.

Taylor
Jack Bogle's Words of Wisdom: I do not believe it is hyperbole to say that success in the competitive arena depends, in the final analysis, on character. Our character will shape our future."
"Simplicity is the master key to financial success." -- Jack Bogle
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ruralavalon
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Re: The Three-Fund Portfolio

Post by ruralavalon »

Morningstar (8/19/2021) "Vanguard Total Bond Market: A Success Story", link.
The fund has topped the expectations of even its most fervent advocates. During the past three decades, its total returns, volatility, and risk-adjusted performance have almost exactly matched that of its benchmark (now dubbed Bloomberg Barclays U.S. Bond Aggregate). Total Bond Market has behaved as promised.
Thirty years ago, there were 92 intermediate core-bond mutual funds. Since then, 72 have disappeared, through liquidations or mergers. Thus, Total Bond Market has bested those 72 funds. Among the 20 remaining funds, Total Bond Market has posted the tenth-highest return, the fifth-lowest standard deviation, and the fourth-best risk-adjusted performance
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

I don't understand the fascination with the Vanguard Total Bond fund. Over the last 34 years, a 3-fund portfolio using an intermediate-term treasury fund would have edged out a 3-fund portfolio using Vanguard Total Bond (with slightly lower STDEV and drawdowns to boot). Is the attraction due to the fact that it has "Total" in the name?

https://www.portfoliovisualizer.com/bac ... n4_2=33.33
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Da5id
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Re: The Three-Fund Portfolio

Post by Da5id »

GaryA505 wrote: Fri Aug 20, 2021 11:21 am I don't understand the fascination with the Vanguard Total Bond fund. Over the last 34 years, a 3-fund portfolio using an intermediate-term treasury fund would have edged out a 3-fund portfolio using Vanguard Total Bond (with slightly lower STDEV and drawdowns to boot). Is the attraction due to the fact that it has "Total" in the name?

https://www.portfoliovisualizer.com/bac ... n4_2=33.33
Some like Total Bond. Some like intermediate treasuries. Some like more corporates (without the MBS) like VBILX. Some like long term treasuries. Some like to mix in some amount TIPS or I-bonds. But really they all serve a similar role in your portfolio.

Your comparison has a specific start and end point, which may well not be the most meaningful comparison. With longer duration and more risk, total bond will probably outperform intermediate term treasuries going forward.
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

GaryA505 wrote: Fri Aug 20, 2021 11:21 am I don't understand the fascination with the Vanguard Total Bond fund. Over the last 34 years, a 3-fund portfolio using an intermediate-term treasury fund would have edged out a 3-fund portfolio using Vanguard Total Bond (with slightly lower STDEV and drawdowns to boot). Is the attraction due to the fact that it has "Total" in the name?
Gary:

Morningstar is currently featuring an article about Vanguard Total Bond Fund. It should answer your question:

https://www.morningstar.com/articles/10 ... cess-story

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Lehman Bond Index (total bond market), in substance, is an appropriate choice for investors with an intermediate-term time horizon and seeking top quality."
"Simplicity is the master key to financial success." -- Jack Bogle
GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

I read the Morningstar piece. I detect any secret sauce.

I don't get their comparison with 5-year and 10-year treasuries. What investor who is considering Total Bond would buy actual treasury bonds? Not me. And, they're ignoring duration, which for Total Bond is neither 5 or 10 years. A comparison with an intermediate-term treasury fund like VFITX would be more useful, but not very valuable in the Morningstar writer's fluff piece.

Not saying I wouldn't hold Total Bond, just that there is no real advantage over intermediate treasury funds like VFITX/VFIUX/VSIGX or intermediate treasury+corporate funds like VBIIX/VBILX. It just doesn't matter much (but the "Total" in the name does sound cool).
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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