The Three-Fund Portfolio

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: The Three-Fund Portfolio and Inflation

Post by 000 »

Taylor Larimore wrote: Sat Feb 13, 2021 11:23 am Bogleheads:

Investors in The Three-Fund Portfolio are encouraged by the investment industry to add their additional funds. One such fund is a TIPS fund. This a copy of my recent post showing historical returns for each of the funds in The Three-Fund Portfolio going back to 1975. Adding a TIPS fund was unnecessary even during the -13.3% inflation in 1979.
Re: Good idea to hold TIPS now?
Post by Taylor Larimore » Sat Feb 13, 2021 12:02 pm

FIREchief:

I recently posted U.S. inflation rates and historical returns since 1975 for each of the funds in The Three-Fund Portfolio. The worst annual inflation rate during that period was -13.3% in 1979. Despite that inflation, the three-funds enjoyed a positive return.

viewtopic.php?t=315786

More money has been lost preparing for inflation than from inflation itself. Strive for simplicity--not complexity.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "On occasion, rapid growth in the money supply has unleashed bouts of rapid price inflation. The effect on real long-term stock returns has nonetheless proved neutral."
I'll just repeat what I said in the first thread where you posted that:
000 wrote: Sat Feb 13, 2021 9:44 pm I believe this analysis is not correct.

Losing 11% of the purchasing power of my "safe" assets in a single year (1979) seems pretty bad to me.

Anyway, to answer the question about how the three funds portfolio did during the last high US inflationary time period, we need to go back to the Nixon shock (end of 1971) AND we need to look at the cumulative performance of the whole portfolio. The data in your linked thread only goes back to 1976 and does not show whole cumulative performance.

Using portfolio visualizer with the inflation adjusted option shows a negative real return for a 60/40 all US portfolio from Jan 1972 - Dec 1981. Portfolio visualizer doesn't have international stock data that far back, but how much could a 12% allocation to international stocks really have moved the needle?

Finally, past performance is not indicative of future performance. After abandoning Bretton Woods, the US was able to pivot to a petrodollar system where the US dollar remained the global reserve but was implicitly backed by oil and US military might which eventually tamed inflation. We don't know how long the current monetary system will last or if another successful pivot will occur.
Why are you encouraging investors to avoid (or abandon) TIPS?
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

Anyway, to answer the question about how the three funds portfolio did during the last high US inflationary time period, we need to go back to the Nixon shock (end of 1971) AND we need to look at the cumulative performance of the whole portfolio. The data in your linked thread only goes back to 1976 and does not show whole cumulative performance.
However the three funds that make up the three-fund portfolio did not exist at that time, nor did similar index funds exist then.

The first S&P 500 index fund was created in 1976. The first bond index fund was created in 1986, I don't remember when the first international stock index fund was created.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: The Three-Fund Portfolio

Post by 000 »

ruralavalon wrote: Sun Feb 14, 2021 9:27 am
Anyway, to answer the question about how the three funds portfolio did during the last high US inflationary time period, we need to go back to the Nixon shock (end of 1971) AND we need to look at the cumulative performance of the whole portfolio. The data in your linked thread only goes back to 1976 and does not show whole cumulative performance.
However the three funds that make up the three-fund portfolio did not exist at that time, nor did similar index funds exist then.

The first S&P 500 index fund was created in 1976. The first bond index fund was created in 1986, I don't remember when the first international stock index fund was created.
I'm not sure I see your point. Is it that we can't draw any conclusions about asset class performance during that time because index funds didn't exist?
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

The Three-Fund Portfolio in Retirement?

Post by Taylor Larimore »

Bogleheads:

On another forum someone asked: "More than 3 fund portfolio needed in retirement?" This was my reply:
I was a government employee who retired at the age of 57 (I'm now 97). After fooling around with dozens of mutual funds, we finally settled on The Three-Fund Portfolio about 20 years ago. We later sold the 20% International Fund for tax reasons so it has been a 2-fund ever since. We have traveled the world, live in the home that Jack Built, and have money left over to give to charity.

The simple Three-Fund Portfolio has been ideal for our retirement!
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
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

3 fund equivalent here.

I hold a mix of Total Stock, Total International, Total Bond, Intermediate Term Bond Index, and S&P500/Small Cap Index in an 85/15 ratio to replicate Total Stock.

I actually just added the small cap slice because most of my contributions are going into an account that doesn't hold Total Stock, only S&P 500 and a few other funds. I was about 98% of the way to a pure 3-fund portfolio, but now I'm 99% :happy
Alphaone75
Posts: 7
Joined: Sat Feb 20, 2021 11:55 am

Re: The 2020 Periodic Table of Investment Returns

Post by Alphaone75 »

Taylor Larimore wrote: Thu Jan 28, 2021 2:10 pm Bogleheads:

The Callan Company has posted their annual Periodic Table of Investment Returns for 2020. In my opinion it is the best visual information showing the importance of asset class diversification and the futility of market timing. It is also a primary reason for which many Bogleheads favor the total market index funds in The Three-Fund Portfolio. This is the Link:

https://www.bogleheads.org/w/images/d/d ... eturns.png

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."
If I can find the data of correlation by year I would like to run a simple genetic algorithm I have been playing with on it to see what allocation it brings. Just out of fairness I am not the developer, I just know how to use it and have used it for other areas than investing.
Not sure if it makes sense but just for the fun. I’ll try to put it in place. If I do so I’ll post the results here. The question will be weighting return vs correlation.
Thanks for the chart reference .
bikechuck
Posts: 1466
Joined: Sun Aug 16, 2015 9:22 pm

Re: Latest article featuring "The Three-Fund Portfolio"

Post by bikechuck »

Taylor Larimore wrote: Sat Oct 10, 2020 11:20 am Bogleheads:

The Personal Finance Club has written this nice article featuring the Three-Fund Portfolio:

The Three-Fund Portfolio

Best wishes
Taylor
Jack Bogle's Words of Wisdom:"The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
Taylor, thank you for posting this.

It is well written and although the concepts are not new to me it is useful to periodically revisit the wisdom inherent in the three fund approach. It helps me commit to staying the course.
love0050
Posts: 24
Joined: Fri Jan 29, 2021 6:13 pm

Re: The Three-Fund Portfolio

Post by love0050 »

I’ve read the Wiki and read through some of these posts, but can someone please explain how bonds work, and where the best place is to buy them? I contemplated purchasing BNDX and LQD, but these are just ETFs, and not the actual note. When it comes to creating the three-investment portfolio, did you ever contemplate buying VB and VO (small and mid cap ETFs) as a way of getting more risk/reward, or was VTI/VTSAX exposure to the 3K companies (albeit not as weighted as the individual small and mid cap ETFs), sufficient enough for your risk tolerance?
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: The Three-Fund Portfolio

Post by abuss368 »

Triple digit golfer wrote: Thu Feb 18, 2021 11:27 am 3 fund equivalent here.

I hold a mix of Total Stock, Total International, Total Bond, Intermediate Term Bond Index, and S&P500/Small Cap Index in an 85/15 ratio to replicate Total Stock.

I actually just added the small cap slice because most of my contributions are going into an account that doesn't hold Total Stock, only S&P 500 and a few other funds. I was about 98% of the way to a pure 3-fund portfolio, but now I'm 99% :happy
In a prior employer retirement plan, the only low cost offering was an S&P 500 fund. I simply went with that one fund at it worked out well. It is “close enough” to the Total Market in terms of performance over the years.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: The Three-Fund Portfolio

Post by abuss368 »

love0050 wrote: Sat Feb 27, 2021 12:32 am I’ve read the Wiki and read through some of these posts, but can someone please explain how bonds work, and where the best place is to buy them? I contemplated purchasing BNDX and LQD, but these are just ETFs, and not the actual note. When it comes to creating the three-investment portfolio, did you ever contemplate buying VB and VO (small and mid cap ETFs) as a way of getting more risk/reward, or was VTI/VTSAX exposure to the 3K companies (albeit not as weighted as the individual small and mid cap ETFs), sufficient enough for your risk tolerance?
I don’t know many ticker symbols but I believe BNDX is Vanguard Total International Bond Index, which is recommended by Vanguard investment experts with Total Bond Market.

However, this thread is a about an excellent portfolio strategy for all investors: The Three Fund Portfolio. This portfolio includes Total Bond Market. For good reason this is the largest bond fund on the planet. It simply does the job in all markets and works.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

Triple digit golfer wrote: Thu Feb 18, 2021 11:27 am 3 fund equivalent here.

I hold a mix of Total Stock, Total International, Total Bond, Intermediate Term Bond Index, and S&P500/Small Cap Index in an 85/15 ratio to replicate Total Stock.

I actually just added the small cap slice because most of my contributions are going into an account that doesn't hold Total Stock, only S&P 500 and a few other funds. I was about 98% of the way to a pure 3-fund portfolio, but now I'm 99% :happy
The only decent fund offered in my 401k was a S&P 500 index fund. It worked out fine by itself.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Factor Investors

Post by Taylor Larimore »

Triple digit golfer wrote: The only decent fund offered in my 401k was a S&P 500 index fund. It worked out fine by itself.
Triple digit golfer:

Many factor investors wish they had done the same.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom “I don’t believe in Factor funds”
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Factor Investors

Post by abuss368 »

Taylor Larimore wrote: Sat Feb 27, 2021 9:38 am
Triple digit golfer wrote: The only decent fund offered in my 401k was a S&P 500 index fund. It worked out fine by itself.
Triple digit golfer:

Many factor investors wish they had done the same.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom “I don’t believe in Factor funds”
Indeed. A prior employer plan was with very high priced John Hancock. The funds had an insurance wrapper. The only low cost fund was a simple S&P 500 for 0.04%. Everything else was much much higher.

I simply had 100% of the 401k contribution invested in this one fund. Over time is built up and worked very well.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

ruralavalon wrote: Sat Feb 27, 2021 9:00 am
Triple digit golfer wrote: Thu Feb 18, 2021 11:27 am 3 fund equivalent here.

I hold a mix of Total Stock, Total International, Total Bond, Intermediate Term Bond Index, and S&P500/Small Cap Index in an 85/15 ratio to replicate Total Stock.

I actually just added the small cap slice because most of my contributions are going into an account that doesn't hold Total Stock, only S&P 500 and a few other funds. I was about 98% of the way to a pure 3-fund portfolio, but now I'm 99% :happy
The only decent fund offered in my 401k was a S&P 500 index fund. It worked out fine by itself.
Yes, but using two funds isn't any more difficult other than about 10 seconds of initial set-up, and I'm getting slightly more diversification by doing so. I think it's worth it for 10 seconds of work.
pnw_guy
Posts: 164
Joined: Sun Feb 28, 2021 12:11 pm

Re: The Three-Fund Portfolio

Post by pnw_guy »

Hi, this is my first post in the Bogleheads forums.

I'd like to implement the 3 fund portfolio in my work 401K. However, my employer only offers two of the three funds. They offer:
- Total US Stock Market Index
- Total US Bond Market Index

So what's missing is the Total International Stock Market Index. So while I can't do the 3 fund portfolio, I'd like to get advice on which of these three options I should pursue:
1. Should I just invest in one of the Vanguard Target Retirement Funds that my company offers?
2. I do have access to two funds that could approximate the total international stock fund: A developed nations index (VTMGX) and an emerging nations index (VEMAX). Should I just invest some in both of these funds and treat this as my equivalent of the total international stock index?
3. Although I haven't looked through all of the paperwork, it does seem like I can signup for a special program (that may have additional fee's) where I get the right to invest in funds not offered by my employer. I could sign up for this special program and try to get access to a total international stock fund from Vanguard.

Any thoughts on what I should do? I'm not quite sure which option to pursue or if it really even matters.

Thanks in advance.
Last edited by pnw_guy on Sun Feb 28, 2021 1:10 pm, edited 1 time in total.
User avatar
bertilak
Posts: 10711
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: The Three-Fund Portfolio

Post by bertilak »

I assume your employers plan is a 401(k) or some other variation of a tax deferred plan.

If so and if you want to implement the three-fund portfolio including international stock market I think your developed markets option (VTMGX) is appropriate. Many people would actually prefer this over the more common alternative of VTIAX. It even has a lower ER.

I see no need to add in VEMAX although it would not hurt other than: slightly higher ER than VTMGX and the added complexity of an additional fund.

For Tax Loss Harvesting purposes I consider VTMGX and VTIAX to be swappable partners. The point being, I personally would not care which of the two I held.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

International funds?

Post by Taylor Larimore »

pnw_guy

Welcome to the Bogleheads Forum!

I agree with bertilak that the Vanguard developed markets fund is a good option. Perhaps 20% of your equity. You can read more here:

viewtopic.php?t=196956

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success. -- We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity."
"Simplicity is the master key to financial success." -- Jack Bogle
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

pnw_guy wrote: Sun Feb 28, 2021 12:25 pm Hi, this is my first post in the Bogleheads forums.

I'd like to implement the 3 fund portfolio in my work 401K. However, my employer only offers two of the three funds. They offer:
- Total US Stock Market Index
- Total US Bond Market Index

So what's missing is the Total International Stock Market Index. So while I can't do the 3 fund portfolio, I'd like to get advice on which of these three options I should pursue:
1. Should I just invest in one of the Vanguard Target Retirement Funds that my company offers?
2. I do have access to two funds that could approximate the total international stock fund: A developed nations index (VTMGX) and an emerging nations index (VEMAX). Should I just invest some in both of these funds and treat this as my equivalent of the total international stock index?
3. Although I haven't looked through all of the paperwork, it does seem like I can signup for a special program (that may have additional fee's) where I get the right to invest in funds not offered by my employer. I could sign up for this special program and try to get access to a total international stock fund from Vanguard.

Any thoughts on what I should do? I'm not quite sure which option to pursue or if it really even matters.

Thanks in advance.
1. Are you investing anywhere else besides your work 401k?
2. What are the expense ratios of VTMGX and VEMAX in your 401k?
3. What percentage of your portfolio are you going to be placing in international equities?

Emerging markets is about 25%, give or take, of international equity. I abide by the guideline that any individual asset that is less than 5% of the portfolio isn't worth it. Therefore, if you are investing less than 20% of your portfolio in international equities, I'd probably just go with VTMGX. Any more than that, and I'd split it out the internatinal portion 75/25 between VTMGX and VEMAX. Sometimes emerging markets have performed significantly differently than developed markets, and have been less correlated with U.S. equities than developed markets. That said, it's not a make or break decision whether to include them or not. At 5% or even 10% it won't move the needle very much. But how much trouble is it to include them?
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

Welcome to the forum :) .

pnw_guy wrote: Sun Feb 28, 2021 12:25 pm Hi, this is my first post in the Bogleheads forums.

I'd like to implement the 3 fund portfolio in my work 401K. However, my employer only offers two of the three funds. They offer:
- Total US Stock Market Index
- Total US Bond Market Index

So what's missing is the Total International Stock Market Index. So while I can't do the 3 fund portfolio, I'd like to get advice on which of these three options I should pursue:
1. Should I just invest in one of the Vanguard Target Retirement Funds that my company offers?
2. I do have access to two funds that could approximate the total international stock fund: A developed nations index (VTMGX) and an emerging nations index (VEMAX). Should I just invest some in both of these funds and treat this as my equivalent of the total international stock index?
3. Although I haven't looked through all of the paperwork, it does seem like I can signup for a special program (that may have additional fee's) where I get the right to invest in funds not offered by my employer. I could sign up for this special program and try to get access to a total international stock fund from Vanguard.

Any thoughts on what I should do? I'm not quite sure which option to pursue or if it really even matters.

Thanks in advance.
In your 401k you could just add Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) to the total U.S. stock market and total bond market index funds.

If you have other accounts (taxable brokerage account or an IRA) where a total international stock index fund is offered, then you could use a total international stock index fund in that account. It's often best to coordinate investments among all accounts treating all accounts together as a single unified portfolio.

You have excellent funds available in your employer's 401k plan. You are fortunate. I would not bother with the Self Directed Brokerage Account feature of the 401k plan.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
huskerfan1414
Posts: 197
Joined: Wed Mar 11, 2020 7:51 pm

Re: The Three-Fund Portfolio

Post by huskerfan1414 »

Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
“I’m confident, but not really sure.” -Tom Petty
User avatar
jason2459
Posts: 1208
Joined: Wed May 06, 2020 7:59 pm

Re: The Three-Fund Portfolio

Post by jason2459 »

Is your holding timeline for the bonds as long or longer then the bond duration? If so then I wouldn't stress about it. The yields may go up and the nav price of your fund may go down but in the end will be compensated over the full duration. Stay the course.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

huskerfan1414 wrote: Mon Mar 01, 2021 8:39 am Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
I'm similar to you. I'm 36 and 80/20. I've been 80/20 forever. I am also having some anxiety about bonds. In prior years, I didn't care because 1. Yields were higher and 2. I did not have enough in bonds to feel "safe" yet. Now, with yields in the toilet and my total portfolio growing and bond holdings now at 3 years of expenses, I feel like I really don't need any more, and I'm buying them just to maintain some arbitrary 80/20 AA that really doesn't mean anything.

So - sorry I don't have an answer, but you have company, if it makes you feel any better!

Rather than think about maximizing returns, I'm thinking about regret. I'm asking myself how I'd feel if I moved half (or more) of my bond holdings to stocks and then stocks immediately fell 40%. Probably pretty rotten because I would have had all that bond money to use to rebalance into cheap stocks. I'd be able to rebalance back to say, 90/10, but that wouldn't be much consolation.

On the other hand, with a 40% stock market increase, I doubt I'd feel too badly about holding 20% in bonds because I'd still have huge gains on the stock side.

Finally, see here: https://www.portfoliovisualizer.com/bac ... tion3_2=10

Yes, that's a period of a bond bull market and one may argue that the gap will grow in the future, but remember that most "experts," for what it's worth, are anticipating lower equity returns moving forward, too.
huskerfan1414
Posts: 197
Joined: Wed Mar 11, 2020 7:51 pm

Re: The Three-Fund Portfolio

Post by huskerfan1414 »

Triple digit golfer wrote: Mon Mar 01, 2021 8:53 am
huskerfan1414 wrote: Mon Mar 01, 2021 8:39 am Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
I'm similar to you. I'm 36 and 80/20. I've been 80/20 forever. I am also having some anxiety about bonds. In prior years, I didn't care because 1. Yields were higher and 2. I did not have enough in bonds to feel "safe" yet. Now, with yields in the toilet and my total portfolio growing and bond holdings now at 3 years of expenses, I feel like I really don't need any more, and I'm buying them just to maintain some arbitrary 80/20 AA that really doesn't mean anything.

So - sorry I don't have an answer, but you have company, if it makes you feel any better!

Rather than think about maximizing returns, I'm thinking about regret. I'm asking myself how I'd feel if I moved half (or more) of my bond holdings to stocks and then stocks immediately fell 40%. Probably pretty rotten because I would have had all that bond money to use to rebalance into cheap stocks. I'd be able to rebalance back to say, 90/10, but that wouldn't be much consolation.

On the other hand, with a 40% stock market increase, I doubt I'd feel too badly about holding 20% in bonds because I'd still have huge gains on the stock side.

Finally, see here: https://www.portfoliovisualizer.com/bac ... tion3_2=10

Yes, that's a period of a bond bull market and one may argue that the gap will grow in the future, but remember that most "experts," for what it's worth, are anticipating lower equity returns moving forward, too.
:sharebeer :sharebeer thanks for helping me feel as though I'm not alone.

Good thoughts.

Stuck between a rock and a hard place? Maybe not? Just a strange time.
“I’m confident, but not really sure.” -Tom Petty
huskerfan1414
Posts: 197
Joined: Wed Mar 11, 2020 7:51 pm

Re: The Three-Fund Portfolio

Post by huskerfan1414 »

jason2459 wrote: Mon Mar 01, 2021 8:41 am Is your holding timeline for the bonds as long or longer then the bond duration? If so then I wouldn't stress about it. The yields may go up and the nav price of your fund may go down but in the end will be compensated over the full duration. Stay the course.
Just need to hear it sometimes. thanks
“I’m confident, but not really sure.” -Tom Petty
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

huskerfan1414 wrote: Mon Mar 01, 2021 8:55 am
Triple digit golfer wrote: Mon Mar 01, 2021 8:53 am
huskerfan1414 wrote: Mon Mar 01, 2021 8:39 am Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
I'm similar to you. I'm 36 and 80/20. I've been 80/20 forever. I am also having some anxiety about bonds. In prior years, I didn't care because 1. Yields were higher and 2. I did not have enough in bonds to feel "safe" yet. Now, with yields in the toilet and my total portfolio growing and bond holdings now at 3 years of expenses, I feel like I really don't need any more, and I'm buying them just to maintain some arbitrary 80/20 AA that really doesn't mean anything.

So - sorry I don't have an answer, but you have company, if it makes you feel any better!

Rather than think about maximizing returns, I'm thinking about regret. I'm asking myself how I'd feel if I moved half (or more) of my bond holdings to stocks and then stocks immediately fell 40%. Probably pretty rotten because I would have had all that bond money to use to rebalance into cheap stocks. I'd be able to rebalance back to say, 90/10, but that wouldn't be much consolation.

On the other hand, with a 40% stock market increase, I doubt I'd feel too badly about holding 20% in bonds because I'd still have huge gains on the stock side.

Finally, see here: https://www.portfoliovisualizer.com/bac ... tion3_2=10

Yes, that's a period of a bond bull market and one may argue that the gap will grow in the future, but remember that most "experts," for what it's worth, are anticipating lower equity returns moving forward, too.
:sharebeer :sharebeer thanks for helping me feel as though I'm not alone.

Good thoughts.

Stuck between a rock and a hard place? Maybe not? Just a strange time.
Another thing to consider is that being unhappy with part of your portfolio probably means you're diversified. Or, maybe put better, if you're not disappointed in something you own, you're probably not diversified.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

huskerfan1414 wrote: Mon Mar 01, 2021 8:39 am Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
Higher interest rates are good for the long-term bond investor.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
pnw_guy
Posts: 164
Joined: Sun Feb 28, 2021 12:11 pm

Re: The Three-Fund Portfolio

Post by pnw_guy »

Triple digit golfer wrote: Sun Feb 28, 2021 1:57 pm
pnw_guy wrote: Sun Feb 28, 2021 12:25 pm Hi, this is my first post in the Bogleheads forums.

I'd like to implement the 3 fund portfolio in my work 401K. However, my employer only offers two of the three funds. They offer:
- Total US Stock Market Index
- Total US Bond Market Index

So what's missing is the Total International Stock Market Index. So while I can't do the 3 fund portfolio, I'd like to get advice on which of these three options I should pursue:
1. Should I just invest in one of the Vanguard Target Retirement Funds that my company offers?
2. I do have access to two funds that could approximate the total international stock fund: A developed nations index (VTMGX) and an emerging nations index (VEMAX). Should I just invest some in both of these funds and treat this as my equivalent of the total international stock index?
3. Although I haven't looked through all of the paperwork, it does seem like I can signup for a special program (that may have additional fee's) where I get the right to invest in funds not offered by my employer. I could sign up for this special program and try to get access to a total international stock fund from Vanguard.

Any thoughts on what I should do? I'm not quite sure which option to pursue or if it really even matters.

Thanks in advance.
1. Are you investing anywhere else besides your work 401k?
2. What are the expense ratios of VTMGX and VEMAX in your 401k?
3. What percentage of your portfolio are you going to be placing in international equities?

Emerging markets is about 25%, give or take, of international equity. I abide by the guideline that any individual asset that is less than 5% of the portfolio isn't worth it. Therefore, if you are investing less than 20% of your portfolio in international equities, I'd probably just go with VTMGX. Any more than that, and I'd split it out the internatinal portion 75/25 between VTMGX and VEMAX. Sometimes emerging markets have performed significantly differently than developed markets, and have been less correlated with U.S. equities than developed markets. That said, it's not a make or break decision whether to include them or not. At 5% or even 10% it won't move the needle very much. But how much trouble is it to include them?
Here are the answers to your follow up questions:

1. My wife and I are investing in her 403b (a pretty good one that has access to a low-cost SP500 fund), my 401k (contributing the full amount to a traditional account and also doing a mega backdoor Roth), our HSAs, and a taxable account. Truthfully, all of our investments are either in the U.S. Total Stock Market index or the Total International Stock Market index. I just don't have access to a Total International Stock Market index via my work 401K and neither does my wife, hence why I started this thread.

As an aside, I know I'll be scolded for not having any bonds in our portfolio. We're young and have invested all of our lives - including all through 2008 and through the 2020 dip. Thus, I think we have enough behavioral evidence that we can stay the course with a 100% stock portfolio when times are rough. Nonetheless, I'd like to take some risk off the table and transition to a 3 fund portfolio.

2. Costs for VTMGX is .05% and the costs for VEMAX is .14%.

3. I'm thinking of trying to get our international allocation to represent 15% of the equity in our portfolio. Since we're currently at a 100% stock allocation, that 15% would also be 15% of the entire portfolio as it stands.
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

"The Best Investment Strategy is Simple But Hard to Do"

Post by Taylor Larimore »

Bogleheads:

Allan Roth, CPA, CFP, is an advisor, and director of The John C. Bogle Center for Investment Literacy." Allan has written an important article for AARP magazine praising The Three Fund Portfolio.

The Best Investment Strategy is Simple But Hard to Do

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
Allan Roth
Posts: 466
Joined: Thu Sep 11, 2008 12:47 pm

Re: The Three-Fund Portfolio

Post by Allan Roth »

Thanks Taylor. Our three fund portfolio has done pretty well:

https://www.marketwatch.com/lazyportfolio

BTW, since 12/31/1999, it really wasn't the aggressiveness of the second grader portfolio that drove returns. The conservative (30% stocks), moderate (60% stocks), and aggressive (90% stocks) all performed about the same.
huskerfan1414
Posts: 197
Joined: Wed Mar 11, 2020 7:51 pm

Re: The Three-Fund Portfolio

Post by huskerfan1414 »

Allan Roth wrote: Tue Mar 02, 2021 11:37 am Thanks Taylor. Our three fund portfolio has done pretty well:

https://www.marketwatch.com/lazyportfolio

BTW, since 12/31/1999, it really wasn't the aggressiveness of the second grader portfolio that drove returns. The conservative (30% stocks), moderate (60% stocks), and aggressive (90% stocks) all performed about the same.
Allan, great article and I enjoyed looking at the different portfolios in comparison.


I have a question: assuming you actually did start your 2nd grade son on that portfolio, how did you do it? What I mean is, taxable account? Or did you give him a "job" and set him up in a roth?

I have young kids and would like to get them started, and while I know I want them in the three fund portfolio, I don't know how or where to open it.

Thanks for any suggestions you or anyone else can give.
“I’m confident, but not really sure.” -Tom Petty
huskerfan1414
Posts: 197
Joined: Wed Mar 11, 2020 7:51 pm

Re: The Three-Fund Portfolio

Post by huskerfan1414 »

huskerfan1414 wrote: Tue Mar 02, 2021 12:14 pm
Allan Roth wrote: Tue Mar 02, 2021 11:37 am Thanks Taylor. Our three fund portfolio has done pretty well:

https://www.marketwatch.com/lazyportfolio

BTW, since 12/31/1999, it really wasn't the aggressiveness of the second grader portfolio that drove returns. The conservative (30% stocks), moderate (60% stocks), and aggressive (90% stocks) all performed about the same.
Allan, great article and I enjoyed looking at the different portfolios in comparison.


I have a question: assuming you actually did start your 2nd grade son on that portfolio, how did you do it? What I mean is, taxable account? Or did you give him a "job" and set him up in a roth?

I have young kids and would like to get them started, and while I know I want them in the three fund portfolio, I don't know how or where to open it.

Thanks for any suggestions you or anyone else can give.
“I’m confident, but not really sure.” -Tom Petty
huskerfan1414
Posts: 197
Joined: Wed Mar 11, 2020 7:51 pm

Re: The Three-Fund Portfolio

Post by huskerfan1414 »

delete
“I’m confident, but not really sure.” -Tom Petty
bizkitgto
Posts: 68
Joined: Tue Mar 14, 2017 11:54 am

Re: The Three-Fund Portfolio

Post by bizkitgto »

Triple digit golfer wrote: Mon Mar 01, 2021 8:53 am
huskerfan1414 wrote: Mon Mar 01, 2021 8:39 am Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
I'm similar to you. I'm 36 and 80/20. I've been 80/20 forever. I am also having some anxiety about bonds. In prior years, I didn't care because 1. Yields were higher and 2. I did not have enough in bonds to feel "safe" yet. Now, with yields in the toilet and my total portfolio growing and bond holdings now at 3 years of expenses, I feel like I really don't need any more, and I'm buying them just to maintain some arbitrary 80/20 AA that really doesn't mean anything.

So - sorry I don't have an answer, but you have company, if it makes you feel any better!

Rather than think about maximizing returns, I'm thinking about regret. I'm asking myself how I'd feel if I moved half (or more) of my bond holdings to stocks and then stocks immediately fell 40%. Probably pretty rotten because I would have had all that bond money to use to rebalance into cheap stocks. I'd be able to rebalance back to say, 90/10, but that wouldn't be much consolation.

On the other hand, with a 40% stock market increase, I doubt I'd feel too badly about holding 20% in bonds because I'd still have huge gains on the stock side.

Finally, see here: https://www.portfoliovisualizer.com/bac ... tion3_2=10

Yes, that's a period of a bond bull market and one may argue that the gap will grow in the future, but remember that most "experts," for what it's worth, are anticipating lower equity returns moving forward, too.
I'm in the same boat as you, 80/20 and worried about bonds. Have you looked at preferred shares? I am thinking about maybe doing something like: 15% Bonds, 75% Stocks, 10% Preferred's. At least this way you can capture some upside from rising rates. Does anyone incorporate preferred shares into their portfolio? Thoughts?
Keep it simple: 20% BND, 50% VTI and 30% VXUS
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

bizkitgto wrote: Wed Mar 03, 2021 6:34 pm
Triple digit golfer wrote: Mon Mar 01, 2021 8:53 am
huskerfan1414 wrote: Mon Mar 01, 2021 8:39 am Is anyone else worried about bonds right now? I'm 33 and 90/10. I realize the stocks can drop 50% and this doesn't worry me at all. It's strange but the bonds worry me more. However, I want some dry powder in case of a correction so I don't want to go 100/0.

Should I move the 10% to cash? I'd love to buy I bonds with my 403b but alas not possible.

Am I crazy?
I'm similar to you. I'm 36 and 80/20. I've been 80/20 forever. I am also having some anxiety about bonds. In prior years, I didn't care because 1. Yields were higher and 2. I did not have enough in bonds to feel "safe" yet. Now, with yields in the toilet and my total portfolio growing and bond holdings now at 3 years of expenses, I feel like I really don't need any more, and I'm buying them just to maintain some arbitrary 80/20 AA that really doesn't mean anything.

So - sorry I don't have an answer, but you have company, if it makes you feel any better!

Rather than think about maximizing returns, I'm thinking about regret. I'm asking myself how I'd feel if I moved half (or more) of my bond holdings to stocks and then stocks immediately fell 40%. Probably pretty rotten because I would have had all that bond money to use to rebalance into cheap stocks. I'd be able to rebalance back to say, 90/10, but that wouldn't be much consolation.

On the other hand, with a 40% stock market increase, I doubt I'd feel too badly about holding 20% in bonds because I'd still have huge gains on the stock side.

Finally, see here: https://www.portfoliovisualizer.com/bac ... tion3_2=10

Yes, that's a period of a bond bull market and one may argue that the gap will grow in the future, but remember that most "experts," for what it's worth, are anticipating lower equity returns moving forward, too.
I'm in the same boat as you, 80/20 and worried about bonds. Have you looked at preferred shares? I am thinking about maybe doing something like: 15% Bonds, 75% Stocks, 10% Preferred's. At least this way you can capture some upside from rising rates. Does anyone incorporate preferred shares into their portfolio? Thoughts?
I haven't thought about it. They're still stocks, though. Are there preferred stock mutual funds or ETFs?

I'd probably just rather follow your signature.
pascalwager
Posts: 2312
Joined: Mon Oct 31, 2011 8:36 pm

Re: The Three-Fund Portfolio

Post by pascalwager »

Some investors might want to modify the 3-fund portfolio to reduce the high China allocation. The principal is reducing single-country risk.

Maybe VTI/VEA/VWO/XCEM for stocks portion.

VEA may include a little China (3%) by way of Hong Kong, but VWO includes 44% China and XCEM is China-free.
User avatar
TheBoringInvestor
Posts: 13
Joined: Tue Sep 01, 2020 3:10 pm

Re: The Three-Fund Portfolio

Post by TheBoringInvestor »

pnw_guy wrote: Sun Feb 28, 2021 12:25 pm Hi, this is my first post in the Bogleheads forums.

I'd like to implement the 3 fund portfolio in my work 401K. However, my employer only offers two of the three funds. They offer:
- Total US Stock Market Index
- Total US Bond Market Index

So what's missing is the Total International Stock Market Index. So while I can't do the 3 fund portfolio, I'd like to get advice on which of these three options I should pursue:
1. Should I just invest in one of the Vanguard Target Retirement Funds that my company offers?

Any thoughts on what I should do? I'm not quite sure which option to pursue or if it really even matters.

Thanks in advance.
I would (and actually do) just take option 1 and invest entirely in a Vanguard Target Retirement Fund based on age.
In my Roth IRA and my taxable brokerage account (both at Vanguard), I hold a Vanguard TDF.
My wife's Roth IRA and 403b are also in Vanguard TDFs.

My 401k doesn't have access to the Vanguard TDF, but it added cheap index funds a few years back, so I approximate the TDF using blackrock institutional index funds for:

Wilshire 1000
Wilshire 2000
International Stock
US Bond.

My IPS has me quarterly rebalancing to match the Vanguard TDF.

The only deviation we have is my wife is 100% VTWAX in her taxable account (we're relatively young, and she's not a big fan of bonds).

Whether you want to just use the TDF or roll your own target date portfolio has more to do with personal preference than with an end result in risk adjusted returns. You can do much worse than a TDF, and it's hard to do much better in the long run. For me, the simplicity and inability to fiddle is worth its weight in gold.

Pick a plan that makes sense and works for you and write it down. Then stick with it through thick and thin.

The most important thing in your control is your savings rate. After that, you can control for costs. Asset allocation, asset location, tax efficiency, and fund selection becomes much more of an arcane art than a science. I'm satisfied with the TDF's allocations and logic, and the rest is probably a wash in the end.

Good luck and stay the course!

TBI
Boring is Best
User avatar
Raspberry-503
Posts: 949
Joined: Sat Oct 03, 2020 6:42 am

Re: The Three-Fund Portfolio

Post by Raspberry-503 »

As you get closer to retirement, look at the glide path for your TDF. Many go too far into bonds too quickly for some people's liking.
So understand your TDF
User avatar
CABob
Posts: 5091
Joined: Sun Feb 25, 2007 7:55 pm
Location: Southern California

Re: The Three-Fund Portfolio

Post by CABob »

Raspberry-503 wrote: Fri Mar 12, 2021 9:39 pm As you get closer to retirement, look at the glide path for your TDF. Many go too far into bonds too quickly for some people's liking.
So understand your TDF
More to the point, select target date fund on the basis of its asset allocation rather than a year to be sure it is what you want currently and in the future.
Bob
manlymatt83
Posts: 1286
Joined: Tue Jan 30, 2018 7:23 am

Re: The Three-Fund Portfolio

Post by manlymatt83 »

Suppose most of your core holdings are VT, but in a taxable account you have VTI and VXUS. How to best calculate when you're out of band? Is it OK to guesstimate within a few % points, or do you need to maintain a spreadsheet? Or should I just pull out a calculator every 3 months?
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

manlymatt83 wrote: Fri Mar 12, 2021 9:58 pm Suppose most of your core holdings are VT, but in a taxable account you have VTI and VXUS. How to best calculate when you're out of band? Is it OK to guesstimate within a few % points, or do you need to maintain a spreadsheet? Or should I just pull out a calculator every 3 months?
If anything in investing doesn't require precision, it's this. Guesstimate is fine.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

manlymatt83 wrote: Fri Mar 12, 2021 9:58 pm Suppose most of your core holdings are VT, but in a taxable account you have VTI and VXUS. How to best calculate when you're out of band? Is it OK to guesstimate within a few % points, or do you need to maintain a spreadsheet? Or should I just pull out a calculator every 3 months?
A calculator, or pen and paper, every few months is fine.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Ebenezer
Posts: 14
Joined: Mon Dec 31, 2018 12:51 pm

Re: The Three-Fund Portfolio

Post by Ebenezer »

Working on a strategy to get to a three-fund portfolio with existing 401k, mix of mutual funds/ETFs, and some company stock. Can I present my questions here or do they belong in the Personal Investing forum?

Thanks
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: The Three-Fund Portfolio

Post by Triple digit golfer »

Ebenezer wrote: Mon Mar 15, 2021 6:03 pm Working on a strategy to get to a three-fund portfolio with existing 401k, mix of mutual funds/ETFs, and some company stock. Can I present my questions here or do they belong in the Personal Investing forum?

Thanks
You will get much more visibility in the Personal Investing forum.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

Ebenezer wrote: Mon Mar 15, 2021 6:03 pm Working on a strategy to get to a three-fund portfolio with existing 401k, mix of mutual funds/ETFs, and some company stock. Can I present my questions here or do they belong in the Personal Investing forum?

Thanks
Post in the personal investing form, give full details and use this format: Asking Portfolio Questions
.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: The Three-Fund Portfolio

Post by LadyGeek »

Orange_Philosophy has a question which I've moved into a new thread. See: [What is the best allocation for my three-fund portfolio?]
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
KeepingEyesOpen
Posts: 81
Joined: Sat Dec 12, 2015 9:49 pm

Re: The Three-Fund Portfolio

Post by KeepingEyesOpen »

manlymatt83 wrote: Fri Mar 12, 2021 9:58 pm Suppose most of your core holdings are VT, but in a taxable account you have VTI and VXUS. How to best calculate when you're out of band? Is it OK to guesstimate within a few % points, or do you need to maintain a spreadsheet? Or should I just pull out a calculator every 3 months?
You don't need to calculate it yourself. Your asset allocation and other portfolio metrics can be automatically calculated for you in Vanguard's website.

This is easy to set up, assuming at least some of your holdings are in a Vanguard account. The "Balances and Holdings Summary" automatically includes a snapshot of the overall asset allocation (% stocks, bonds, cash and other). A more detailed and granular report is provided on demand in the "Portfolio Watch" feature. This includes sub-categories such as large-cap, mid-cap and small-cap for stocks, bond types and risk metrics (credit quality, interest rate risk), tax efficiency and cost metrics. This is more than enough information needed for an individual's portfolio.

If I were younger and starting to invest today, I would start with a simple three-fund portfolio, perhaps modified to optimize tax efficiency between taxable and tax-deferred accounts. Due to historical factors and constraints my portfolio is more complex than necessary. Even so, Vanguard's website features provide all information needed on an ongoing basis.

I'm much too lazy to maintain a spreadsheet to periodically calculate asset allocation and other portfolio metrics. Holdings include Vanguard and non-Vanguard funds and ETFs, individual stocks, bank CDs, Treasury Direct holdings, US Savings Bonds and intra-family loans. Many of those holdings had to be manually entered once, but these are mostly automatically updated in the Vanguard system.

This was described in a bit more detail my my previous BH forum post here:
viewtopic.php?p=5902291#p5902291
CIPHERSTONE
Posts: 36
Joined: Thu Mar 25, 2021 9:07 am

Re: The Three-Fund Portfolio

Post by CIPHERSTONE »

First time poster, rather a financial noob to be honest, outside of 401k (in high growth funds) and company granted stock I have not been very active in investing. Now however I find myself in a situation after my father passed of inheriting a decent amount of money that I want to invest. He was always at Edward Jones, but I have read in multiple areas/places that paying a percentage based firm to manage money is generally frowned upon.

So it was with great interest that I ran across this thread. For the recommended three funds, what is the general advised percentage split to use for money going into them? This is a huge thread and I imagine thinking has evolved. For example, when I look at schwab's VBTLX performance today, it doesn't look to hot. It is still recommended to invest here?

But let's say for a minute that the 3 listed funds (VTSAX, VGTSX, VBTLX) are still recommended, what is the percentages that are recommended? For example US 70% , Foreign 20%, Bond 10%?

I want to note that I am talking to different financial people, but I'll be honest I also do take regular peoples opinions based on what they have done to heart to at a minimum question the so called professionals.

I really appreciate any replies to this question.
---------------------------------------------- | 55% SWTSX / 15% SWISX / 30% VBILX
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: The Three-Fund Portfolio

Post by ruralavalon »

Welcome to the forum :)

CIPHERSTONE wrote: Fri Mar 26, 2021 2:21 pm First time poster, rather a financial noob to be honest, outside of 401k (in high growth funds) and company granted stock I have not been very active in investing. Now however I find myself in a situation after my father passed of inheriting a decent amount of money that I want to invest. He was always at Edward Jones, but I have read in multiple areas/places that paying a percentage based firm to manage money is generally frowned upon.

So it was with great interest that I ran across this thread. For the recommended three funds, what is the general advised percentage split to use for money going into them? This is a huge thread and I imagine thinking has evolved. For example, when I look at schwab's VBTLX performance today, it doesn't look to hot. It is still recommended to invest here?

But let's say for a minute that the 3 listed funds (VTSAX, VGTSX, VBTLX) are still recommended, what is the percentages that are recommended? For example US 70% , Foreign 20%, Bond 10%?

I want to note that I am talking to different financial people, but I'll be honest I also do take regular peoples opinions based on what they have done to heart to at a minimum question the so called professionals.

I really appreciate any replies to this question.
Stay out of the clutches of Edward Jones, they charge very high fees, often hidden. You can use the Bogleheads Google search box (upper right) to locate many discussions about the reasons to avoid Edward Jones.

The asset allocation among U.S. stocks, international stocks, and bonds is an entire topic to itself.

The stock/bond allocation depends on your age, experience and personal risk tolerance. For the basics see the wiki articles "Asset allocation", link, and "Bogleheads® investment philosophy", third section "Never bear too much or too little risk", link.

Asset allocation is a very personal decision, and must be based on your own individual ability, willingness and need to take risk.

You might better start a separate thread stating your financial details in order to discuss asset allocation. Please see this for information needed and format: Asking Portfolio Questions.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
CIPHERSTONE
Posts: 36
Joined: Thu Mar 25, 2021 9:07 am

Re: The Three-Fund Portfolio

Post by CIPHERSTONE »

Thanks! I’ll do some reading and do as you suggest.
---------------------------------------------- | 55% SWTSX / 15% SWISX / 30% VBILX
tres arcenes
Posts: 4
Joined: Mon Mar 01, 2021 6:38 pm

Re: The Three-Fund Portfolio

Post by tres arcenes »

I've decided to simplify things using the three-fund portfolio. I'll use I-shares ETF's. ITOT for Total U.S. Market and IXUS for Total International Stock.
I'm struggling on the Bond fund. My thinking and research leads me to believe that the Bond fund should be oriented to short term bonds in nature with high credit quality bonds. IGSB is "1 to 5 year Investment Grade Corp" with an average bond duration of 2.77 years. IEI is "3-7 year Treasury Bond Fund" with obviously the best credit ratings (AAA) with an average bond duration of 4.60 years. I am avoiding a typical "Total Bond Fund" to eliminate exposure to long-term bonds since (in theory) the risk of owning long-term bonds outweighs the minimal benefits of better returns. Any thoughts on my funds/logic would be greatly appreciated.
Post Reply