Bogleheads Three-fund Portfolio (2024)

FAQs

Is the 3 fund portfolio good enough? ›

While the three-fund portfolio is great because it's simple to learn and easy to manage, it isn't without its disadvantages, as we discuss on our personal finance for physicians primer.

Stripped to its simplest form, here's the premise of the Bucket Strategy™: You organize your investments into three main groupings, or "buckets" and take the majority of the risk in Bucket No. 3, largely with stocks and real estate.

As of Jun 19, 2024, the Bogleheads Three-fund Portfolio returned 8.13% Year-To-Date and 7.88% of annualized return in the last 10 years.

Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.

Building a Solid Foundation: The Boring Money Account

The core of Bogles recommended portfolio is having a boring money account invested primarily in index funds. Bogle suggested putting at least 95% of investable assets into low-cost, diversified index funds.

A three-fund portfolio is an approach to portfolio management that focuses on using three funds to invest in three asset types, typically U.S. stocks, international stocks, and bonds. This strategy is popular among the “Boglehead” community, who follow investing principles championed by Vanguard founder John Bogle.

Bogleheads invest and keep it simple by buying mutual funds or ETFs that try to mimic the entire market. Or, to build a proper asset allocation for their own individual needs, they may buy a stock mutual fund and bond mutual fund to be diversified in both asset classes.

Key Takeaways. Bucket 1 consists of cash, Bucket 2 is your high-quality, short- and intermediate-term bond portfolio, and Bucket 3 is the growth engine that will hold the remainder of the assets.

The fund is allotted to these three asset classes in a certain ratio. For instance, it can be 50% in domestic stocks, 30% in domestic bonds, and 20% in international stocks. Moreover, such an investment plan provides freedom of asset allocation to match the investors' long-term financial goals.

When or how often should you rebalance your portfolio? Our research (PDF) shows that optimal rebalancing methods are neither too frequent, such as monthly or quarterly calendar-based methods, nor too infrequent, such as rebalancing only every 2 years. For many investors, implementing an annual rebalance is optimal.

What is the 50 30 20 rule for Bogleheads? ›

First, Warren's original rule was 30 to wants and 20 to savings, but if you can flip that, great! Apply the numbers to your after tax income. Then figure out how much you need for housing, utilities, transportation, food, insurance and clothing. If that is 50% or less, everything else is wants.

The task, then, is to take these three basic non-cash assets — domestic stocks, international stocks, and bonds — decide how much of each to hold (your asset allocation). Choose where to hold each of these asset classes, and finally choose a mutual fund to use for each asset class.

This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, fixed income asset classes with a target allocation of 70% equities and 30% fixed income.

His approach to investing, as described in his book Common Sense on Mutual Funds, champions low-risk, long-term, low-cost funds. To achieve an acceptable level of risk in retirement portfolios, Bogle recommended that investors add bonds to their portfolios alongside stocks.

Financial planners say it is difficult to put a cap on the number of schemes in an investor's portfolio, as investors increasingly use mutual funds to meet both long-term and short-term goals. However, they feel investors should restrict themselves to 10 schemes, as a higher number is difficult to monitor and manage.

3 Fund Portfolio vs S&P 500

A 3 fund portfolio is an asset allocation mix comprising three asset classes, domestic stocks, international stocks, and domestic bonds. Standard & Poor's 500 is a market index that tracks the market value and performance of the top 500 US large-cap stocks.