The Three-Fund Portfolio
Re: The Three-Fund Portfolio
It's probably a great time for a Three-Fund portfolio because all three funds are down at the same time. This probably doesn't happen too often.
And the bond section is finally yielding a respectable return.
And the bond section is finally yielding a respectable return.
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Re: The Three-Fund Portfolio
KmuVuko:JnyVuko wrote: Taylor, do you think/know if tax-free bond funds are one of the professional bond trader's choices? I currently have a large portion of my taxable bond investments in tax-free funds. Thank you.
In my opinion, tax-free bond funds are best used by high income investors (tax-rate over 25% ) who have no room in tax-advantaged accounts (IRAs, 401ks, etc.).
I would not want all my tax-free bond funds in a single state. Mr. Bogle discusses your question in pages 394-399 in "Common Sense on Mutual Funds--Updated."
Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Only the foolish investor fails to utilize tax-deferred accounts to the maximum possible advantage; to calculate the yield at which municipal bonds break even with ther taxable counterparts; and to evaluate the advantaage of paying no state taxes on interest earned on U.S. Treasury obligations."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio
Sorry to intercept. Professional bond traders do not care; they are aiming for pricing movements.
Now, if you are talking bond investors, then the high income investors have no problem placing money into tax-free bonds. If you are in the higher tax brackets, then it can be a great replacement for corporate bonds. Treasuries, I think, are still meaningful regardless of the tax bracket because of the lack of credit risk.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: The Three-Fund Portfolio
Tune this noise out and stay the course with the Three Fund Portfolio. Many years from now you will be thankful.
Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Re: The Three-Fund Portfolio
I would be interested in thoughts here....
If I was lucky enough to have future pension income cover ALL of my retirement living costs ( and more) could I theoretically substitute my guaranteed pension income for the bond section of the 3 fund portfolio? So, in essence I would have a 2 fund US equities, and International equities utilizing all of my invest-able funds. I would see not reason for bond "income" or stability because that is what the pension would produce.
By nature I would be more able to take some risk because in a mark down turn I would just live off of pension income.
Thoughts are appreciated.
If I was lucky enough to have future pension income cover ALL of my retirement living costs ( and more) could I theoretically substitute my guaranteed pension income for the bond section of the 3 fund portfolio? So, in essence I would have a 2 fund US equities, and International equities utilizing all of my invest-able funds. I would see not reason for bond "income" or stability because that is what the pension would produce.
By nature I would be more able to take some risk because in a mark down turn I would just live off of pension income.
Thoughts are appreciated.
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Re: The Three-Fund Portfolio
Hi cyclemore -cyclemore wrote: ↑Wed May 11, 2022 6:59 pm I would be interested in thoughts here....
If I was lucky enough to have future pension income cover ALL of my retirement living costs ( and more) could I theoretically substitute my guaranteed pension income for the bond section of the 3 fund portfolio? So, in essence I would have a 2 fund US equities, and International equities utilizing all of my invest-able funds. I would see not reason for bond "income" or stability because that is what the pension would produce.
By nature I would be more able to take some risk because in a mark down turn I would just live off of pension income.
Thoughts are appreciated.
Welcome to the forum!
This thread is so geared towards the Three Fund Portfolio, that I am afraid you will not receive worthwhile responses.
I would consider starting a new thread with the question. You may receive very good feedback and strategies to consider.
Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio
cyclemore:cyclemore wrote: ↑Wed May 11, 2022 6:59 pm I would be interested in thoughts here....
If I was lucky enough to have future pension income cover ALL of my retirement living costs ( and more) could I theoretically substitute my guaranteed pension income for the bond section of the 3 fund portfolio? So, in essence I would have a 2 fund US equities, and International equities utilizing all of my invest-able funds. I would see not reason for bond "income" or stability because that is what the pension would produce.
By nature I would be more able to take some risk because in a mark down turn I would just live off of pension income.
Thoughts are appreciated.
Welcome to the Bogleheads Forum!
I am retired in the situation you describe--my income "covers ALL of my retirement living costs." Although I hold a small percentage of bonds, I think a 100% stock portfolio (plus cash for everyday expenses) is acceptable.
Best wishes
Taylor
Jack Bogle's Words of Wisdom: "Successful investing involves doing just a few things right and avoiding serious mistakes."
"Simplicity is the master key to financial success." -- Jack Bogle
Re: The Three-Fund Portfolio
Yes, it could be reasonable to invest 100% equities. The reason is not because a pension is a bond. The reason is because your need, ability, and willingness to take risk in your circumstances ends up at 100% equities. The concept is presented by Larry Swedroe in a couple of his books and is a way to think through what you should choose for your allocation between stocks and bonds.* I don't think the discussion of the 3 fund portfolio involves a coherent process to determine the asset allocation. It may sound facetious, but it is in fact absolutely logical to propose a 3 fund portfolio in which the allocation to one or two of the assets is zero. A side benefit is that you would not bother with rebalancing.cyclemore wrote: ↑Wed May 11, 2022 6:59 pm I would be interested in thoughts here....
If I was lucky enough to have future pension income cover ALL of my retirement living costs ( and more) could I theoretically substitute my guaranteed pension income for the bond section of the 3 fund portfolio? So, in essence I would have a 2 fund US equities, and International equities utilizing all of my invest-able funds. I would see not reason for bond "income" or stability because that is what the pension would produce.
By nature I would be more able to take some risk because in a mark down turn I would just live off of pension income.
Thoughts are appreciated.
*It is also possible that after doing a thoughtful analysis of what you want you would not invest 100% in equities even if you have all the income you need. The process starts with being clear about what you want to do with your money and fitting the consequences of your choice of assets to what it is you want.
Re: The Three-Fund Portfolio
Thanks for the reply and thoughts. I will definitely consider some of the points you raised. I just wanted to put it out there to make sure it was not totally neglectful. Thanks for taking the time to reply!
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Re: The Three-Fund Portfolio
If it's helpful to anyone, I made a spreadsheet with different asset allocations - several of my own, and the 5 taken directly from the AA of the Boglehead WIki page. I used all of the information directly from Taylor's "Past rate of inflation (CPU) and fund returns in The Three-Fund Portfolio" chart.
Past rate of inflation (CPU) and fund returns in The Three-Fund Portfolio:
YEAR--INFLATION--BOND INDEX--S&P 500 INDEX------MSCI EAFE INDEX
1976-------4.9%--------15.6%------------23.8%--------------------3.6%
1977-------6.7-----------3.0-------------(-7.2)-------------------17.5
1978-------9.0-----------1.4---------------6.6--------------------33.1
1979------13.3-----------1.9--------------18.4-------------------10.9 (Highest Annual Inflation Rate)
1980------12.5-----------2.7--------------32.4-------------------25.4
1981-------8.9-----------6.3-------------(-4.9)------------------(-2.5)
1982-------3.8----------32.6--------------21.6------------------(-0.3) (Highest Bond Index Return)
...
...
...
*I can post a link to the Google spreadsheet as soon as I know this information: Are the returns inflation adjusted? I used the figures present, and then adjusted those for inflation. But if the figures are already inflation adjusted, then I'll have to make a quick adjustment to the formulas.
This is my first attempt at making ANY kind of spreadsheet. I apologize, but I'm 22 years late to the 21st century.
Past rate of inflation (CPU) and fund returns in The Three-Fund Portfolio:
YEAR--INFLATION--BOND INDEX--S&P 500 INDEX------MSCI EAFE INDEX
1976-------4.9%--------15.6%------------23.8%--------------------3.6%
1977-------6.7-----------3.0-------------(-7.2)-------------------17.5
1978-------9.0-----------1.4---------------6.6--------------------33.1
1979------13.3-----------1.9--------------18.4-------------------10.9 (Highest Annual Inflation Rate)
1980------12.5-----------2.7--------------32.4-------------------25.4
1981-------8.9-----------6.3-------------(-4.9)------------------(-2.5)
1982-------3.8----------32.6--------------21.6------------------(-0.3) (Highest Bond Index Return)
...
...
...
*I can post a link to the Google spreadsheet as soon as I know this information: Are the returns inflation adjusted? I used the figures present, and then adjusted those for inflation. But if the figures are already inflation adjusted, then I'll have to make a quick adjustment to the formulas.
This is my first attempt at making ANY kind of spreadsheet. I apologize, but I'm 22 years late to the 21st century.
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Re: The Three-Fund Portfolio
Blues Baker:Blues Baker wrote: ↑Fri May 13, 2022 11:01 am If it's helpful to anyone, I made a spreadsheet with different asset allocations - several of my own, and the 5 taken directly from the AA of the Boglehead WIki page. I used all of the information directly from Taylor's "Past rate of inflation (CPU) and fund returns in The Three-Fund Portfolio" chart.
Past rate of inflation (CPU) and fund returns in The Three-Fund Portfolio:
YEAR--INFLATION--BOND INDEX--S&P 500 INDEX------MSCI EAFE INDEX
1976-------4.9%--------15.6%------------23.8%--------------------3.6%
1977-------6.7-----------3.0-------------(-7.2)-------------------17.5
1978-------9.0-----------1.4---------------6.6--------------------33.1
1979------13.3-----------1.9--------------18.4-------------------10.9 (Highest Annual Inflation Rate)
1980------12.5-----------2.7--------------32.4-------------------25.4
1981-------8.9-----------6.3-------------(-4.9)------------------(-2.5)
1982-------3.8----------32.6--------------21.6------------------(-0.3) (Highest Bond Index Return)
...
...
...
*I can post a link to the Google spreadsheet as soon as I know this information: Are the returns inflation adjusted? I used the figures present, and then adjusted those for inflation. But if the figures are already inflation adjusted, then I'll have to make a quick adjustment to the formulas.
This is my first attempt at making ANY kind of spreadsheet. I apologize, but I'm 22 years late to the 21st century.
The returns are not inflation adjusted. However, it is easy to see the inflation adjusted return by simply adding the inflation rate to the nominal rate.
I don't think you are "22 years late to the 21st century." One of the advantages of the simple Three-Fund Portfolio is that you don't need to bother with spreadsheets. I threw mine away.
Best wishes
Taylor
Jack Bogle's Words of Wisdom: "I would say, go into the casino, which is what Wall Street is today. Bet on the entire stock market and then get out of the casino and never show yourself there again.”
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio
Hi Taylor -Taylor Larimore wrote: ↑Fri May 13, 2022 2:39 pm
One of the advantages of the simple Three-Fund Portfolio is that you don't need to bother with spreadsheets. I threw mine away.
I used Quicken and spreadsheets for a decade. At that time I could not imagine not using or spending money and time on them.
Then we learned (and continue to learn) the value of simplicity. We focused on this during our journey and soon realized there was no need to waste time and money on Quicken and spreadsheets. We also learned there was no longer any value to them.
Over 15 years later and we could not be happier.
Keep investing and life simple!
Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Re: The Three-Fund Portfolio
Hi Taylor -
Please advise as to your feelings about stable value funds and TIPs
Thank you
Please advise as to your feelings about stable value funds and TIPs
Thank you
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Re: The Three-Fund Portfolio
annied12:
I feel they are unnecessary. Go back and look at The Three-Fund historical returns in my opening post.
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
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Re: The Three-Fund Portfolio Still Leads
Bogleheads:
Every once in a while I check to see how our Three-Fund Portfolio is doing compared with seven other "Lazy Portfolios" designed by professional investors. The Three-Fund Portfolio still leads the pack in long-term returns. (Allan Roth's "Second Grader Starter" is The Three-Fund Portfolio):
Total Returns for 8 Lazy Portfolios
Past performance does not guarantee future performance.
Best wishes.
Taylor
Every once in a while I check to see how our Three-Fund Portfolio is doing compared with seven other "Lazy Portfolios" designed by professional investors. The Three-Fund Portfolio still leads the pack in long-term returns. (Allan Roth's "Second Grader Starter" is The Three-Fund Portfolio):
Total Returns for 8 Lazy Portfolios
Past performance does not guarantee future performance.
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
Taylor,
I didn't see the JL Collins book."The Simple Path to Wealth" listed in your exhaustive list...but that might be because he isn't really a Three Fund Portfolio guy. He is a Vanguard purist however. Good Book, and website.
Hope to meet you in Chicago!
Kevin
I didn't see the JL Collins book."The Simple Path to Wealth" listed in your exhaustive list...but that might be because he isn't really a Three Fund Portfolio guy. He is a Vanguard purist however. Good Book, and website.
Hope to meet you in Chicago!
Kevin
Re: The Three-Fund Portfolio
Two things to be given some careful thought to with regard to your pension income. First, is your pension fixed or will it be indexed to inflation? Second, just how credit worthy is the provider of your pension?cyclemore wrote: ↑Wed May 11, 2022 6:59 pm I would be interested in thoughts here....
If I was lucky enough to have future pension income cover ALL of my retirement living costs ( and more) could I theoretically substitute my guaranteed pension income for the bond section of the 3 fund portfolio? So, in essence I would have a 2 fund US equities, and International equities utilizing all of my invest-able funds. I would see not reason for bond "income" or stability because that is what the pension would produce.
By nature I would be more able to take some risk because in a mark down turn I would just live off of pension income.
Thoughts are appreciated.
Re: The Three-Fund Portfolio
Can you please specify what TDF stands for.sycamore wrote: ↑Sun Mar 20, 2022 8:13 amYou're definitely not the only one.RetiOpening wrote: ↑Sun Mar 20, 2022 2:12 am My question is, am I really the only one with such struggles, and why isn’t a TDF the default instead of the three-fund allocation? (Taylor’s book on the three-fund was the first book of Boglehead literature I’ve ever read, BTW). It seems to be the ultimate in laziness as a virtue.
Why is the TDF not the default? I suspect it's related to the minimize taxes principle from the Bogleheads Philosophy. A TDF in a taxable account works against that. It all comes down to your personal tax circumstances. Those can change from year to year so best to choose funds that are tax-efficient for the long-term.
If your portfolio is all in tax-advantaged accounts, you don't have to worry about the tax-efficiency -- a TDF can be the perfect choice for you.
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Re: The Three-Fund Portfolio
Hi:
regards,
TDF is an acronym for Target Date Fund.Can you please specify what TDF stands for.
regards,
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Re: The Three-Fund Portfolio
With a three fund portfolio similar to the ones discussed on this site, what are the thoughts on the size of an emergency fund? If the value of the bond fund exceeds a few years of living expenses shouldn't that be taken into consideration to some degree?
thank you
thank you
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Re: The Three-Fund Portfolio
Droyal:Droyal wrote: ↑Mon May 30, 2022 5:52 pm With a three fund portfolio similar to the ones discussed on this site, what are the thoughts on the size of an emergency fund? If the value of the bond fund exceeds a few years of living expenses shouldn't that be taken into consideration to some degree?
thank you
In my opinion a separate low-yielding "emergency fund" that may never be used is seldom necessary. If needed, most of us can obtain money from our bank account, ATM, our portfolio, bank loan or family (a last resort).
Strive for simplicity.
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
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Re: The Three-Fund Portfolio
HENRY:HENRYGRUGER wrote: ↑Sun May 15, 2022 1:21 pm Taylor,
I didn't see the JL Collins book."The Simple Path to Wealth" listed in your exhaustive list...but that might be because he isn't really a Three Fund Portfolio guy. He is a Vanguard purist however. Good Book, and website.
Hope to meet you in Chicago!
Kevin
Look again. It's there.
Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “Learn from the experience of others. It’s cheaper.”
"Simplicity is the master key to financial success." -- Jack Bogle
Re: The Three-Fund Portfolio
^^^ As a side topic, JL Collins will be the guest speaker at the next Bogleheads virtual chapter Zoom meeting on June 15, 2022. See: Mid-Career Accumulators meeting with JL Collins-"The Simple Path to Wealth"- Wed 6/15/22- 8:00 pm ET
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FIRENomad has a question which I've moved into a new thread. See: Solo 401(k) plan documentation - look OK?
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FIRENomad has a question which I've moved into a new thread. See: Solo 401(k) plan documentation - look OK?
Re: The Three-Fund Portfolio
Hi Taylor
Thank you for all the investment advice you have given and the time you spent in responding to David’s many questions
Ann Marie and David
Thank you for all the investment advice you have given and the time you spent in responding to David’s many questions
Ann Marie and David
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Re: The Three-Fund Portfolio
I think it largely comes from going for maximum diversification however I want my bonds anti-correlated with the market and BND with heavy corporate exposure is heavily correlated with the market. When the market is down and you might benefit from rebalancing BND is also down.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
Personally I am with you and prefer treasuries.
Re: The Three-Fund Portfolio
I moved a discussion about bond pricing into a new thread. See: The Three-Fund Portfolio - bond pricing side discussion]
(Thanks to the member who reported the post and explained what's wrong.)
(Thanks to the member who reported the post and explained what's wrong.)
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International Stocks In The Three-Fund Portfolio
Bogleheads:
I am pleased to read the current Morningstar article giving a GOLD rating for Vanguard Total International Stock Market ETF (or mutual fund). This is the fund representing 20% of stocks in The Three-Fund Portfolio.
These are excerpts:
Best wishes.
Taylor
Taylor
I am pleased to read the current Morningstar article giving a GOLD rating for Vanguard Total International Stock Market ETF (or mutual fund). This is the fund representing 20% of stocks in The Three-Fund Portfolio.
These are excerpts:
Vanguard Total International Stock ETF Has It All"Vanguard Total International Stock ETF Has It All: Outstanding diversification + rock-bottom fees = a core international stock ETF that works for most investors."
"Vanguard Total International Stock ETF (VXUS) has few close rivals. Compared with its peers, it has one of the broadest portfolios and lowest expense ratios in the foreign large-blend Morningstar Category."
"The fund tracks the FTSE Global All Cap ex U.S. Index, which includes stocks of all sizes from foreign developed and emerging markets. It weights them by market cap, an approach that benefits investors by capturing the market’s collective opinion of each stock’s value while keeping turnover low."
"Market-cap weighting can be tough to beat because the market tends to do a good job valuing stocks over the long term."
"Its regional composition looks modestly different from a typical fund in the category because it has a larger dose of emerging-markets stocks."
Best wishes.
Taylor
Best wishes.Jack Bogle's Words of Wisdom: "Given the incremental currency risk, not to mention the addition of sovereign risk (the risk that a nation will default on its financial obligations and the risk of political instability or even war), your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio."
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: The Three-Fund Portfolio
Taylor: I am surprised by your statement. I have a stable value fund in my 401k and have moved most of my bond allocation to it over the past months (when interest rates have jumped up). I'm quite sure my returns have been superior to the situation had I left my money in bonds. I will be moving the money back into the bond funds as interest rates recover, to take advantage of the higher rates longer term. Perhaps a form of market timing, but it's known that interest rates are going up now and it's a known that stable value perserves value vs bonds. So why not? I"m not looking for the "best" return and fully expect I haven't hit the optimal overall point in time to move the funds. But if I have the opportunity to preserve some value at no cost, why not trim my portfolio in a very conservative way?Taylor Larimore wrote: ↑Sun May 15, 2022 10:06 am annied12 wrote: ↑Sun May 15, 2022 6:31 am
Hi Taylor -
Please advise as to your feelings about stable value funds and TIPs
Thank you
annied12:
I feel they are unnecessary. Go back and look at The Three-Fund historical returns in my opening post.
Thanks so much for all your advice throughout this forum.
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Re: The Three-Fund Portfolio
suewolf:suewolf wrote: ↑Thu Jun 16, 2022 7:41 amTaylor: I am surprised by your statement. I have a stable value fund in my 401k and have moved most of my bond allocation to it over the past months (when interest rates have jumped up). I'm quite sure my returns have been superior to the situation had I left my money in bonds. I will be moving the money back into the bond funds as interest rates recover, to take advantage of the higher rates longer term. Perhaps a form of market timing, but it's known that interest rates are going up now and it's a known that stable value perserves value vs bonds. So why not? I"m not looking for the "best" return and fully expect I haven't hit the optimal overall point in time to move the funds. But if I have the opportunity to preserve some value at no cost, why not trim my portfolio in a very conservative way?Taylor Larimore wrote: ↑Sun May 15, 2022 10:06 am annied12 wrote: ↑Sun May 15, 2022 6:31 am
Hi Taylor -
Please advise as to your feelings about stable value funds and TIPs
Thank you
annied12:
I feel they are unnecessary. Go back and look at The Three-Fund historical returns in my opening post.
Thanks so much for all your advice throughout this forum.
I assume you looked at the historical returns for the Total Bond Market Index linked in my earlier post. You can see why I concluded that TBM provides a balance of risk and return with its low-cost and broad diversification. It is also the largest bond fund in the world so it must have some good features.
I look at bonds, stable value funds, cash, Single Premium Immediate Annuities (SPIAs), CDs, TIPS etc. as good long-term choices for the safe part of a portfolio. There is no "free-lunch." Higher expected returns in fixed-income securities nearly always reflect higher expected risk (or less liquidity).
Market-timing fixed-income securities looks easy, but, like stocks, I doubt if it is a worthwhile strategy. Statistics show that most managed bond funds underperform index bond funds.
There is more than one road to Dublin.
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
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Re: The Three-Fund Portfolio
As Mike Piper says, correlations can fall off a cliff.Statistical wrote: ↑Sun Jun 12, 2022 1:45 pmI think it largely comes from going for maximum diversification however I want my bonds anti-correlated with the market and BND with heavy corporate exposure is heavily correlated with the market. When the market is down and you might benefit from rebalancing BND is also down.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
Personally I am with you and prefer treasuries.
In portfolio theory, BND isn't "used for diversification". BND is simply the US bonds portion of the world market bonds/stocks risk portfolio (and includes treasuries). The market portfolio is the most efficient portfolio considering risk/return.
For safety, a riskless asset, duration-matched TIPS can be used alongside the risk portfolio.
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Re: The Three-Fund Portfolio
I have a question about the three fund portfolio. Given all the different accounts we are basically compelled to have for tax reasons, the maximum amounts allowed to be contributed each year in each, and the different offerings in each 401k etc., can one build a three fund portfolio by aggregating different funds of one fund category across different accounts, like so:
1. G Fund in TSP, treasuries in TD, BND in 401k, SPAXX and a muni fund in Fido
2. C Fund in TSP, S&P 500 Index in 401k, FSKAX in Roth IRA, VOO or VTI in Fido taxable
3. ExUS in TSP and 401k
… or is a cornerstone of the approach that the funds literally be only three funds, meaning something Ike this:
1. only G Fund in TSP, or I bonds or BND
2. Only S&P Index or total market in 401k, IRA and taxable
3. Only one exUS fund in one place.
The latter sure looks cleaner and simpler but harder to achieve before retiring without a lot of rearranging. Apologies if I asked something similar in the past.
1. G Fund in TSP, treasuries in TD, BND in 401k, SPAXX and a muni fund in Fido
2. C Fund in TSP, S&P 500 Index in 401k, FSKAX in Roth IRA, VOO or VTI in Fido taxable
3. ExUS in TSP and 401k
… or is a cornerstone of the approach that the funds literally be only three funds, meaning something Ike this:
1. only G Fund in TSP, or I bonds or BND
2. Only S&P Index or total market in 401k, IRA and taxable
3. Only one exUS fund in one place.
The latter sure looks cleaner and simpler but harder to achieve before retiring without a lot of rearranging. Apologies if I asked something similar in the past.
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Re: The Three-Fund Portfolio
Your current approach is fine. I have five accounts and 18 funds at three different institutions. (My bond funds are more numerous because I do duration-matching as opposed to using a lone intermediate bond fund.)AnnetteLouisan wrote: ↑Fri Jun 24, 2022 6:34 pm I have a question about the three fund portfolio. Given all the different accounts we are basically compelled to have for tax reasons, the maximum amounts allowed to be contributed each year in each, and the different offerings in each 401k etc., can one build a three fund portfolio by aggregating different funds of one fund category across different accounts, like so:
1. G Fund in TSP, treasuries in TD, BND in 401k, SPAXX and a muni fund in Fido
2. C Fund in TSP, S&P 500 Index in 401k, FSKAX in Roth IRA, VOO or VTI in Fido taxable
3. ExUS in TSP and 401k
… or is a cornerstone of the approach that the funds literally be only three funds, meaning something Ike this:
1. only G Fund in TSP, or I bonds or BND
2. Only S&P Index or total market in 401k, IRA and taxable
3. Only one exUS fund in one place.
The latter sure looks cleaner and simpler but harder to achieve before retiring without a lot of rearranging. Apologies if I asked something similar in the past.
Re: The Three-Fund Portfolio
New to Bogleheads. Bit confused about the different ETF's mentioned for the 3 fund portfolio. I have seen both of these sets...are they the same? I'm assuming they are not...in which case what's the difference? Thanks in advance!
Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)
VTI: Vanguard Total Stock Market ETF (U.S. total stock market fund)
VEU: Vanguard FTSE All-World ex-US ETF (international stocks)
BND: Vanguard Total Bond Market ETF (bond fund)
Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)
VTI: Vanguard Total Stock Market ETF (U.S. total stock market fund)
VEU: Vanguard FTSE All-World ex-US ETF (international stocks)
BND: Vanguard Total Bond Market ETF (bond fund)
Re: The Three-Fund Portfolio
MoeUSA, Welcome!
The difference is that the first group is categorized as a Mutual fund.The second group is categorized as an Exchange-traded fund (ETF).
Each of those groups has a lot of history and complex regulations behind them, but you don't need to know any of that. The going trend is to invest using ETFs.
If you need assistance with your portfolio, 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.
The difference is that the first group is categorized as a Mutual fund.The second group is categorized as an Exchange-traded fund (ETF).
Each of those groups has a lot of history and complex regulations behind them, but you don't need to know any of that. The going trend is to invest using ETFs.
If you need assistance with your portfolio, 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.
- oldcomputerguy
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Re: The Three-Fund Portfolio
MoeUSA, in addition to the wiki articles linked to by LadyGeek, you might find the material in ETFs vs mutual funds useful; it compares some characteristics of mutual funds and ETFs side by side.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
Re: The Three-Fund Portfolio
Vxus is the equivalent rather than veuMoeUSA wrote: ↑Sat Jul 09, 2022 11:05 pm New to Bogleheads. Bit confused about the different ETF's mentioned for the 3 fund portfolio. I have seen both of these sets...are they the same? I'm assuming they are not...in which case what's the difference? Thanks in advance!
Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)
VTI: Vanguard Total Stock Market ETF (U.S. total stock market fund)
VEU: Vanguard FTSE All-World ex-US ETF (international stocks)
BND: Vanguard Total Bond Market ETF (bond fund)
Re: The Three-Fund Portfolio
Thank you for the replies! Very helpful...got my 3 fund portfolios set up (ETF's as recommended)...am I officially a Boglehead now?
Re: The Three-Fund Portfolio
[ quote fixed by admin LadyGeek]Taylor Larimore wrote: ↑Fri May 13, 2022 2:39 pm One of the advantages of the simple Three-Fund Portfolio is that you don't need to bother with spreadsheets. I threw mine away.
Best wishes
TaylorJack Bogle's Words of Wisdom: "I would say, go into the casino, which is what Wall Street is today. Bet on the entire stock market and then get out of the casino and never show yourself there again.”
This! I just retired and I have a million spreadsheets(former engineer, so maybe 2 million) and none of them satisfy me. I’m going to delete files right now.
Once again, Taylor, thank you and God Bless!
Re: The Three-Fund Portfolio
^^^ I'm a retired engineer with only one spreadsheet. Instead of delete, consolidate. One spreadsheet for your asset allocation, yearly rebalancing, net worth, tax withholding, and anything else that's not appropriate for Quicken. Update everything once a year by adding rows so you can what you've had before.
Re: The Three-Fund Portfolio
This.LadyGeek wrote: ↑Sat Jul 23, 2022 12:36 pm ^^^ I'm a retired engineer with only one spreadsheet. Instead of delete, consolidate. One spreadsheet for your asset allocation, yearly rebalancing, net worth, tax withholding, and anything else that's not appropriate for Quicken. Update everything once a year by adding rows so you can what you've had before.
- AnnetteLouisan
- Posts: 7261
- Joined: Sat Sep 18, 2021 10:16 pm
- Location: New York, NY
Re: The Three-Fund Portfolio
Bonds: G Fund in TSP, Plus treasuries in TDpascalwager wrote: ↑Fri Jun 24, 2022 8:57 pmYour current approach is fine. I have five accounts and 18 funds at three different institutions. (My bond funds are more numerous because I do duration-matching as opposed to using a lone intermediate bond fund.)AnnetteLouisan wrote: ↑Fri Jun 24, 2022 6:34 pm I have a question about the three fund portfolio. Given all the different accounts we are basically compelled to have for tax reasons, the maximum amounts allowed to be contributed each year in each, and the different offerings in each 401k etc., can one build a three fund portfolio by aggregating different funds of one fund category across different accounts, like so:
1. G Fund in TSP, treasuries in TD, BND in 401k, SPAXX and a muni fund in Fido
2. C Fund in TSP, S&P 500 Index in 401k, FSKAX in Roth IRA, VOO or VTI in Fido taxable
3. ExUS in TSP and 401k
… or is a cornerstone of the approach that the funds literally be only three funds, meaning something Ike this:
1. only G Fund in TSP, or I bonds or BND
2. Only S&P Index or total market in 401k, IRA and taxable
3. Only one exUS fund in one place.
The latter sure looks cleaner and simpler but harder to achieve before retiring without a lot of rearranging. Apologies if I asked something similar in the past.
Stocks: S&P 500 in 401k, total market in Roth IRA and taxable
Cash: HYSA and CDs
Pension
This would be nice and simple to manage. This is where I’m heading, building out my equity position from 20/80 to 35/65. I’ll keep my legacy exUS equities in case Team exUS scores a win in the future.
I’m now striving for *simplicity*, as Jack Bogle, Taylor and ABuss have advocated. Then I’m going to turn to other subjects.
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- Joined: Mon Oct 31, 2011 8:36 pm
Re: The Three-Fund Portfolio
Mine is basically similar, and I'm finally achieving some semblance of simplicity--but 60/40 right now (I don't rebalance).AnnetteLouisan wrote: ↑Sat Jul 23, 2022 12:50 pmBonds: G Fund in TSP, Plus treasuries in TDpascalwager wrote: ↑Fri Jun 24, 2022 8:57 pmYour current approach is fine. I have five accounts and 18 funds at three different institutions. (My bond funds are more numerous because I do duration-matching as opposed to using a lone intermediate bond fund.)AnnetteLouisan wrote: ↑Fri Jun 24, 2022 6:34 pm I have a question about the three fund portfolio. Given all the different accounts we are basically compelled to have for tax reasons, the maximum amounts allowed to be contributed each year in each, and the different offerings in each 401k etc., can one build a three fund portfolio by aggregating different funds of one fund category across different accounts, like so:
1. G Fund in TSP, treasuries in TD, BND in 401k, SPAXX and a muni fund in Fido
2. C Fund in TSP, S&P 500 Index in 401k, FSKAX in Roth IRA, VOO or VTI in Fido taxable
3. ExUS in TSP and 401k
… or is a cornerstone of the approach that the funds literally be only three funds, meaning something Ike this:
1. only G Fund in TSP, or I bonds or BND
2. Only S&P Index or total market in 401k, IRA and taxable
3. Only one exUS fund in one place.
The latter sure looks cleaner and simpler but harder to achieve before retiring without a lot of rearranging. Apologies if I asked something similar in the past.
Stocks: S&P 500 in 401k, total market in Roth IRA and taxable
Cash: HYSA and CDs
Pension
This would be nice and simple to manage. This is where I’m heading, building out my equity position from 20/80 to 35/65. I’ll keep my legacy exUS equities in case Team exUS scores a win in the future.
I’m now striving for *simplicity*, as Jack Bogle, Taylor and ABuss have advocated. Then I’m going to turn to other subjects.
Bonds: LT TIPS, IT TIPS, ST bond fund (best choice available)
Stocks: TSM, TISM, Large Value, Small Value
Cash: A few thousand $ in my local bank account after spending my monthly pension income.
Pension: Covers my usual living expenses.
The value stock funds (12% of overall portfolio) are very mature (1995) legacy assets which I'm spending down before the main portfolio.
ROTH IRA: total market stock funds
Variable Annuity: total market stock funds and ST bond fund
Rollover IRA: TIPS funds
Taxable: TIPS funds, total market stock funds, value stock funds
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Re: The Three-Fund Portfolio
VXUS is the ETF corresponding to VTIAX. VEU does not have exposure to small caps.MoeUSA wrote: ↑Sat Jul 09, 2022 11:05 pm New to Bogleheads. Bit confused about the different ETF's mentioned for the 3 fund portfolio. I have seen both of these sets...are they the same? I'm assuming they are not...in which case what's the difference? Thanks in advance!
Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)
VTI: Vanguard Total Stock Market ETF (U.S. total stock market fund)
VEU: Vanguard FTSE All-World ex-US ETF (international stocks)
BND: Vanguard Total Bond Market ETF (bond fund)
Re: The Three-Fund Portfolio
On a lighter note, I saw this post on a different financial forum:
"<hears knocking on door>
<opens door>
'Hello, I'm from the Boglehead Forum and I'm wondering if you'd like to discuss investing?'
'Yes, I am a moderately experienced investor. What do you want to discuss?'
'I'm wondering if you've accepted the Three Fund Simple Portfolio into your heart?
Have you asked it to save you from your investing sins?
Do you follow its precepts?'
<closes door>"
"<hears knocking on door>
<opens door>
'Hello, I'm from the Boglehead Forum and I'm wondering if you'd like to discuss investing?'
'Yes, I am a moderately experienced investor. What do you want to discuss?'
'I'm wondering if you've accepted the Three Fund Simple Portfolio into your heart?
Have you asked it to save you from your investing sins?
Do you follow its precepts?'
<closes door>"
Pros and CONS of the 3 fund portfolio
[Thread merged into here --admin LadyGeek]
Here's the article, but I disagree with the cons!
https://www.moneycrashers.com/boglehead ... portfolio/
Paul
Here's the article, but I disagree with the cons!
https://www.moneycrashers.com/boglehead ... portfolio/
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Pros and CONS of the 3 fund portfolio
While I more or less agree with you, they are not wrong in saying that some people want a more active investing approach.
One of the things that I think makes things more difficult is the reality that the "easy version" of the three fund portfolio often does not fit neatly into the accounts and funds that people already have and to which they have access. Choosing the three fund strategy is easy. Implementing it effectively is not so easy and requires some broader understanding if you need to identify fund substitutes and/or make decisions about tax efficient fund placement, future liquidity and integrate it into a broader and long-term financial plan. For example, the two of us have more than a dozen total accounts at six different providers that all have different funds available, costs, tax treatment, matching $ or not, different annual contribution limits etc. It takes some time to learn, manage and track a DIY portfolio.
The "easy" way is the all-in-one fund approach for everything but you can still hear the howls of outrage about taxes... and it may be expensive to get out of them down the road if you decide on a different approach.
One of the things that I think makes things more difficult is the reality that the "easy version" of the three fund portfolio often does not fit neatly into the accounts and funds that people already have and to which they have access. Choosing the three fund strategy is easy. Implementing it effectively is not so easy and requires some broader understanding if you need to identify fund substitutes and/or make decisions about tax efficient fund placement, future liquidity and integrate it into a broader and long-term financial plan. For example, the two of us have more than a dozen total accounts at six different providers that all have different funds available, costs, tax treatment, matching $ or not, different annual contribution limits etc. It takes some time to learn, manage and track a DIY portfolio.
The "easy" way is the all-in-one fund approach for everything but you can still hear the howls of outrage about taxes... and it may be expensive to get out of them down the road if you decide on a different approach.
Re: Pros and CONS of the 3 fund portfolio
While his cons aren't entirely wrong, they're irrelevant to most investors. Trying to beat the market is foolish. Since most active managers can't, we probably won't either.
If you want a straight market cap approach, you don't even need a 3-fund portfolio. All you need is a single auto re-balancing fund like Life Strategy or Target Date. I have a 3 fund since I want some factor slants, but if I wanted market cap weights I'd probably just go with VSMGX.
If you want a straight market cap approach, you don't even need a 3-fund portfolio. All you need is a single auto re-balancing fund like Life Strategy or Target Date. I have a 3 fund since I want some factor slants, but if I wanted market cap weights I'd probably just go with VSMGX.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
Re: Pros and CONS of the 3 fund portfolio
That's the point. They're index funds. Cap weighted. Don't try to pick a needle from the haystack, buy the haystack."Three-Fund Portfolio Cons"
1. A Lack of Control
The portfolio involves nesting your money in three index funds. This takes the control over what specific assets you hold completely out of your hands, leaving it up to the fund managers to decide what your money will be invested in and to make decisions on your behalf when shareholder votes arise.
There's also no chance you will lose to the market.2. No Chance of Beating the Market
Many investors are willing to take moderate or higher levels of risk for the potential to beat average market returns. The three-fund portfolio strategy simply won’t scratch that itch. The portfolio is designed to mirror overall market returns, meaning your chances of beating the market are slim to none.
What is this even supposed to mean? A "con" of the 3-fund is that you might want to choose more than 3 funds? Give me a break.3. One-for-the-Other Diversification
While the portfolio gives you heavy diversification, if you want to invest in all three among international stocks, small-cap stocks, and real estate, you would be straying too far away from the basics of this portfolio to call it a three-fund investment.
I think it can all be summed up in one statement: The bad thing about the 3-fund portfolio is that it's a passive indexing approach.
Sure is a lot of useless noise out there. Sometimes it's hard to tune it out.
Re: Pros and CONS of the 3 fund portfolio
I agree the cons are baloney.
I think the biggest missing piece in the 3 fund presentation is that it does not address what the asset allocation should be. The age in bonds hint just makes be cringe. (In fairness I will admit people can arrive at worse asset allocation choices than that.)
Another missing piece is that we don't get a good description of what to expect from the 3 fund portfolio, or any portfolio for that matter. For most new investors this is the biggest deficiency in understanding.
I think the biggest missing piece in the 3 fund presentation is that it does not address what the asset allocation should be. The age in bonds hint just makes be cringe. (In fairness I will admit people can arrive at worse asset allocation choices than that.)
Another missing piece is that we don't get a good description of what to expect from the 3 fund portfolio, or any portfolio for that matter. For most new investors this is the biggest deficiency in understanding.
Re: Pros and CONS of the 3 fund portfolio
dbr: I’m glad you brought up the point about the long bonds. Is there any case to be made now for long term bonds in the higher interest environment? I’ve had a 10% portion in VWESX for some time now but now wonder if I should taper it over to VBTLX