The Three Fund Portfolio

[vset]

Dear colleagues,

I don't understand why this type of portfolio cannot (should not) be used by a european citizen.

Please explain me.

Thanks!

[pingo]

I really struggle to believe it is just luck. I would not look for picking managers either. I would either dedicate myself 100% if I were picking stocks or I would simple invest in an index fund.

Respectfully, I think the latter move is the wiser move.

Have you ever read the Intelligent Investor? I think that book is outstanding.

Warren Buffet is on record as saying that Benjamin Graham saw the opportunity to invest like him had seriously diminished, and that a strategy comparable to indexing was essentially what BG ended up recommending for investors when all was said and done (I believe BG died before index funds were available). Warren Buffet has said numerous times that most investors (including the big guys, like pensions) would best be served using low cost index funds.

I have been investing myself for the past couple of years and my roi is roughly 55% over this period.

From March 2009 to March 2012 the entire U.S. stock market returned well over 100%. The past couple of years coincides with that dramatic ascent. Being stock heavy, myself, I probably saw a similar total rate of return with far less risk.

Rather than getting into a debate as to whether you can make above average returns over a long period, I am just trying to grasp the Boglehead mentality and know what your views are.

I recommend John Bogle's The Little Book of Common Sense Investing for a compelling quick read, or Common Sense on Mutual Funds if you want some serious number crunching? I expect any of Rick Ferri, or Larry Swedroes's books would do.

Do you believe Warren Buffett was simply lucky? Also, do you place emphasis on emotional stability and buying more of a stock as its price falls (provided the fundamentals of the business has not changed)?

Undecided as to Warren Buffet. However, he acknowledges what any successsful manager eventually concedes: that the more successful the manager, the greater the asset bloat, and the less likely one may expect better-than average returns. At this point, he hopes he can outdo the S&P 500 by 1-3 percentage points per year on average.

[Gemini]

In the initial post by Taylor, three Vanguard funds are stated that essentially cover the 3F portfolio.

What is the equivalent of the 3F portfolio if one only has Fidelity w/o access to VG funds?

[Gauntlet]

Gemini, check out Fidelity's Spartan funds: Total Market Index Fund, International Index Fund, US Bond Index Fund. I believe these are about the same.

[LadyGeek]

The wiki has a comprehensive list of Fidelity funds which are similar to Vanguard: Fidelity

[ruralavalon]

In the initial post by Taylor, three Vanguard funds are stated that essentially cover the 3F portfolio.

What is the equivalent of the 3F portfolio if one only has Fidelity w/o access to VG funds?

Best fit:
1. Fidelity Spartan Total Market Index Fund (FSTVX)
2. Fidelity Spartan Global ex U.S. Index Fund (FSGUX)
3.Fidelity Spartan U.S. Bond Index Fund (FBIDX)

Please see -- Wiki article link: Fidelity .

[Gemini]

Thanks. Fido 401K will be implemented soon and I want to make sure I have an idea as to what to look for and avoid.

Edit - Two questions that I wanted to squeeze in. Are the expense ratios more or less universal for index funds in general? I would be hesitant to choose the aforementioned Fido funds if the expense ratios seemed unreasonable or were inflated because my employer is providing them. I also see the min $10K for each one of these funds - what is the boglehead course of action if one is just starting out with Fido and doesn't have the minimum to qualify for any of them?

[CABob]

Thanks. Fido 401K will be implemented soon and I want to make sure I have an idea as to what to look for and avoid.

Edit - Two questions that I wanted to squeeze in. Are the expense ratios more or less universal for index funds in general? No not universal. Some fund families are even "high" for their ERs. Vanguard is known for their low expenses, but, Fido also has low expenses and in a couple of cases might be lower than VG.
I would be hesitant to choose the aforementioned Fido funds if the expense ratios seemed unreasonable or were inflated because my employer is providing them. I'm reasonably sure that Fido will be reasonable for the index funds being considered. You can check fund ERs at Morningstar or the fund family's web site. I wouldn't think your employer could raise the ER, but, there might be some administrative costs that you will be charged which in most cases will be the same regardless of the funds selected.[/color]
I also see the min $10K for each one of these funds - what is the boglehead course of action if one is just starting out with Fido and doesn't have the minimum to qualify for any of them?

You should check with your employer or plan administer. Typically fund minimums do not apply within 401k plans. If by chance they do apply the usual suggestion is to use a fund of funds such as a target retirement fund with suitable asset allocation until the fund minimums is accomplished.

[Taylor Larimore]

Bogleheads:

Mr. Bogle sent me galley proofs of his latest book, The Clash of the Cultures. Investment vs. Speculation. As always, Jack speaks with great credibility and deep experience. We should not be surprised to see him endorse The Three Fund Portfolio with statements like these:

"Too many of us spend countless time and effort poring over fund records, getting information from news articles and television interviews and friends, and from hyperbolic fund advertisements and well-intentioned fund rating services.. In substance, all of these statistics describe the past returns of mutual funds with decimal-point precision, yet have no predictive power to forecast the future returns that a fund may earn."

"Investing in equities entails four risks: stock risk, style risk, manager risk, and market risk. You can easily eliminate the first three of these risks simply by owning the entire stock market."

"When you own the entire stock market through a broad stock index fund, all the while balancing your portfolio with an appropriate allocation to an all-bond-market index fund, you create the optimal investment strategy."

Best wishes.
Taylor

[abuss368]

Bogleheads:

Mr. Bogle sent me galley proofs of his latest book, The Clash of the Cultures. Investment vs. Speculation. As always, Jack speaks with great credibility and deep experience. We should not be surprised to see him endorse The Three Fund Portfolio with statements like these:

"Too many of us spend countless time and effort poring over fund records, getting information from news articles and television interviews and friends, and from hyperbolic fund advertisements and well-intentioned fund rating services.. In substance, all of these statistics describe the past returns of mutual funds with decimal-point precision, yet have no predictive power to forecast the future returns that a fund may earn."

"Investing in equities entails four risks: stock risk, style risk, manager risk, and market risk. You can easily eliminate the first three of these risks simply by owning the entire stock market."

"When you own the entire stock market through a broad stock index fund, all the while balancing your portfolio with an appropriate allocation to an all-bond-market index fund, you create the optimal investment strategy."

Best wishes.
Taylor

Hi Taylor,

Thank you for the quote. I am a bit confused however. In many of Mr. Bogle's books, it appears that he recommends a single balanced fund or a two-fund portfolio consisting of the Total Stock and Bond funds.

I am in agreement however and include the Total International fund for the low costs, simplicity, and diversification benefits it offers.

[Taylor Larimore]

Abuss:

Mr. Bogle has never ruled out international stocks (he has said they are not necessary). In his forthcoming book he writes:

"Owning an index fund is simply a decision to buy and hold a diversified portfolo of stocks representing the entire stock market, both U.S. and possibly non-U.S. companies. Such an index fund is the paradigm of long-term investing, and the antithesis of short-term speculation."

Best wishes.
Taylor

[1210sda]

Taylor,

Do you know when the new book is coming out ??

1210

[abuss368]

Abuss:

Mr. Bogle has never ruled out international stocks (he has said they are not necessary). In his forthcoming book he writes:

"Owning an index fund is simply a decision to buy and hold a diversified portfolo of stocks representing the entire stock market, both U.S. and possibly non-U.S. companies. Such an index fund is the paradigm of long-term investing, and the antithesis of short-term speculation."

Best wishes.
Taylor

Hi Taylor,

Agreed. Thank you for that insight.

I noticed amazon (buy the book via the link here at Bogleheads) has the book release date as of early August.

Does anyone know if Mr. Bogle is going to continue to write additional books?

[LadyGeek]

At the Bogleheads 10 Convention last October, Mr. Bogle mentioned that he thought this would be his last book. However, that was last year...

[FrugalInvestor]

Abuss:

Mr. Bogle has never ruled out international stocks (he has said they are not necessary). In his forthcoming book he writes:

"Owning an index fund is simply a decision to buy and hold a diversified portfolo of stocks representing the entire stock market, both U.S. and possibly non-U.S. companies. Such an index fund is the paradigm of long-term investing, and the antithesis of short-term speculation."

Best wishes.
Taylor

Hi Taylor,

Agreed. Thank you for that insight.

I noticed amazon (buy the book via the link here at Bogleheads) has the book release date as of early August.

Does anyone know if Mr. Bogle is going to continue to write additional books?

That would be perfect timing for purchasing one and bringing it to BH11 for Jack's signature. I think I'll just go ahead and pre-order now.

[Dino1]

Do you think this would be a good portfolio for someone who is retired as well? I know that Ben Stein recommends a two fund portfolio for retirees.

[Johm221122]

Do you think this would be a good portfolio for someone who is retired as well? I know that Ben Stein recommends a two fund portfolio for retirees.

Checkout vanguard retirement income
https://personal.vanguard.com/us/funds/ ... IntExt=INT
Just adds a little tips and cash

[umfundi]

Do you think this would be a good portfolio for someone who is retired as well? I know that Ben Stein recommends a two fund portfolio for retirees.

Well, I am retired and think these funds and this strategy are an excellent choice. The difference (I believe) in being retired is not the choice of funds: It is how you determine your Asset Allocation.

Keith

[Johm221122]

Do you think this would be a good portfolio for someone who is retired as well? I know that Ben Stein recommends a two fund portfolio for retirees.

You have a few posts,nobody can really help you, you need to use this link so we have more info
viewtopic.php?t=6212

[abuss368]

Do you think this would be a good portfolio for someone who is retired as well? I know that Ben Stein recommends a two fund portfolio for retirees.

Hi Dino1,

What two funds does Ben Stein recommend for retires? Total Stock & Total Bond?

[Dino1]

Ben Stein recommends 50% total stock market and 50% total bond market funds

OR: Total US bond market index, total US stock market, inflation indexed bonds, EAFE international stock.
This is the gist of his book YES, YOU CAN STILL RETIRE COMFORTABLY

[abuss368]

I think the three fund portfolio is nearly ideal for all of us in all accounts. The advantages are incredible.

If you want, REITs and TIPS may improve performance, but it can also reduce performance.

Besides, Vanguard experts include these three funds in most of their target retirement funds (with the addition of TIPS in the later funds).

[Gemini]

What is the equivalent of the three fund portfolio offered by VG if one has a TIAA-CREF 401a?

[Dave76]

I think the three fund portfolio is nearly ideal for all of us in all accounts. The advantages are incredible.

If you want, REITs and TIPS may improve performance, but it can also reduce performance.

Besides, Vanguard experts include these three funds in most of their target retirement funds (with the addition of TIPS in the later funds).

If you hold a balanced fund -- Wellington, for instance -- how do you integrate that into the 3-fund portfolio?

[555]

"What is the equivalent of the three fund portfolio offered by VG if one has a TIAA-CREF 401a?"

CREF Stock is equivalent to 70% TSM, 30% TISM.
http://www.tiaa-cref.org/public/perform ... /1001.html
Bond Market is equivalent to TBM
http://www.tiaa-cref.org/public/perform ... /1006.html
So you can do it with a mixture of these two funds.
TIAA-CREF expenses are higher than Vanguard, but lower than most other providers.

[Taylor Larimore]

I think the three fund portfolio is nearly ideal for all of us in all accounts. The advantages are incredible.

If you want, REITs and TIPS may improve performance, but it can also reduce performance.

Besides, Vanguard experts include these three funds in most of their target retirement funds (with the addition of TIPS in the later funds).

If you hold a balanced fund -- Wellington, for instance -- how do you integrate that into the 3-fund portfolio?

Hi Dave:

Wellington is a managed balanced fund holding a more or less a fixed ratio of 60% domestic stocks and 40% domestic bonds. It is 100% overlap with two of the total market index funds in the Three-Fund Portfolio. Accordingly, Wellington will not integrate well with the Three Fund Portfolio. I would select Wellington OR the Three-Fund Portfolio--not both. You could add Total International Stock Market Index Fund to Wellington as a substitute Three-Fund Portfolio.

Best wishes.
Taylor

[Gemini]

"What is the equivalent of the three fund portfolio offered by VG if one has a TIAA-CREF 401a?"

CREF Stock is equivalent to 70% TSM, 30% TISM.
http://www.tiaa-cref.org/public/perform ... /1001.html
Bond Market is equivalent to TBM
http://www.tiaa-cref.org/public/perform ... /1006.html
So you can do it with a mixture of these two funds.
TIAA-CREF expenses are higher than Vanguard, but lower than most other providers.

Thanks. I just checked and I do have the above available.

CREF Stock: Expense charge 1 : 0.49%
Bond market: Expense charge 1 : 0.45%

So if I wanted to do 85/15 stocks/bonds, I would just put 85% of the funds into CREF stock and 15% into Bond Market or would the ratios be different since the tickers don't cover all the same markets as the VG funds?

[LadyGeek]

The wiki has a TIAA-CREF article, but I don't see any Vanguard equivalent fund comparisons (under "Mutual funds"). If anyone thinks this would be useful info, I can enter the information (but will need help with the wording). If this takes the thread off-topic, please post in Suggestions for the Wiki.

[umfundi]

The wiki has a TIAA-CREF article, but I don't see any Vanguard equivalent fund comparisons (under "Mutual funds"). If anyone thinks this would be useful info, I can enter the information (but will need help with the wording). If this takes the thread off-topic, please post in Suggestions for the Wiki.

I think a general comparison would be useful.

"How to simulate the Three-Fund Portfolio at:
Vanguard ETF
T. Rowe Price
TIAA-CREF
Fidelity
Black Rock (?)
..."

Of course, expenses should be noted. This might answer in advance what seems to be a regular question.

Keith

[555]

Thanks. I just checked and I do have the above available.

CREF Stock: Expense charge 1 : 0.49%
Bond market: Expense charge 1 : 0.45%

So if I wanted to do 85/15 stocks/bonds, I would just put 85% of the funds into CREF stock and 15% into Bond Market...?

Yes. Also see the link below.

The wiki has a TIAA-CREF article, but I don't see any Vanguard equivalent fund comparisons (under "Mutual funds"). If anyone thinks this would be useful info, I can enter the information (but will need help with the wording). If this takes the thread off-topic, please post in Suggestions for the Wiki.

CREF Stock is equivalent to 70% TSM, 30% TISM.

Also any Vanguard LifeStrategy Fund, and most Vanguard Target Retirement Funds, can be emulated by an appropriate mixture of CREF Stock and Bond market (just use the appropriate Stock:Bond split).

[LadyGeek]

I updated the wiki article to include 3-fund combinations for T. Rowe Price and the Thrift Savings Plan: Three-fund portfolio (Under "Choosing three funds")

T. Rowe Price already had the information in its own page, I just included it here. (Fidelity was already in the article.)

Taylor suggested the Thrift Savings Plan, so I took an initial cut. Can someone please verify the content is correct? There are a number of ways to go here.

TIAA-CREF needs more work. To get a "Bogleheads-style" portfolio, there are offerings for both the annuity and individual retail markets. In both cases, international funds are actively managed. I'm getting assistance from other wiki editors for TIAA-CREF. This may be a case of doing what you can with the funds available.

555 - how did you arrive at "CREF Stock is equivalent to 70% TSM, 30% TISM"? I'm double-checking the numbers.

[Barry Barnitz]

Hi Sue:

Here is the fact sheet for the CREF Stock Fund variable annuity subaccount : link

Benchmark:

The CREF Composite Benchmark is a weighted average of two indexes: the Russell 3000® Index, which measures the performance of the broad U.S. stock market
(70.0%); and the MSCI All Country World ex USA Investable Market Index, which measures the performance of large-, mid- and small-cap stocks in 44 developed
and emerging market nations throughout the world, excluding the United States (30.0%). You cannot invest directly in any index. Index returns do not include a
deduction for fees or expenses.

The subaccount, like most CREF annuity offerings (outside of the Equity Index subaccount) are a mixture of active and passive management (from wiki):

TIAA-CREF retirement annuities make up a large part of the university and research institution employer provided retirement plan market. TIAA-CREF annuity accounts are managed with much lower costs than most variable annuity offerings. [2] Most of the equity based subaccounts (Global Equity, Stock, Growth, and the equity investments in Social Choice) are actively managed using the following three-part strategy:

Active management: one part of the portfolio is devoted to active individual stock selection;
Enhanced indexing: one part of the portfolio employs a quantitative modeled stock selection strategy designed to match the risk characteristics of benchmark market sectors;
Pure Index: one part of the portfolio is managed to match the performance of the benchmark index.

The fund is expected to have allocations that :

Typically, the account seeks to maintain the weightings of its holdings as approximately 70-75% domestic equity and 25-30% foreign equities.

regards,



regards,

[LadyGeek]

Thanks, Barry. 555's website link gave a convoluted footnote, then I wasn't sure about the prospectus wording. The fact sheet sets it straight.

Using Morningstar's Instant X-Ray, VTSMX (Vanguard Total Stock Market Index 70%) and VGTSX (Vanguard Total International Index 30%):

US Stocks: 69% (approximately 70%, Total US Stock Market)
Foreign Stocks: 29% (approximately 30%, Total International - excluding the US)
Other: 1% (ignore)

That does it. To the new investors: Asset allocations to the nearest 5% are fine.

[555]

555 - how did you arrive at "CREF Stock is equivalent to 70% TSM, 30% TISM"? I'm double-checking the numbers.

Barry Barnitz beat me to it. The info was not in my original link, you had to click on "Fund Facts" to get to that fact sheet with the info.

[LadyGeek]

OK, one piece of the puzzle is in place. I updated the wiki article to show the Vanguard equivalents to the Stock fund: TIAA-CREF

Next, to see about a "Bogleheads-style" section.

To be sure this isn't missed - Can someone confirm (or provide an alternative suggestion) to the Thrift Savings Plan recommendations here?

[LadyGeek]

With additional collaboration, there are now 6 ways to do this without Vanguard mutual funds: Three-fund portfolio

• Dreyfus
• Fidelity
• Northern Funds
• T. Rowe Price
• Thrift Savings Plan
• TIAA-CREF

Please review the table in Other than Vanguard, Boglehead-style as well as the linked articles.

Blackrock Ishares and Charles Schwab are in a new table under "Three-fund Portfolios using ETFs."

555- your post is referenced in TIAA-CREF, thanks.

[umfundi]

With additional collaboration, there are now 6 ways ...

LadyGeek, Thank you so much!

The power of collaboration.

Keith

[LadyGeek]

Thanks. For this effort, Barry Barnitz did most of the work (in addition to providing guidance) - I'm just reporting back to the forum. Click on View history to see who edited the actual articles (and what was changed).

[Sunny Sarkar]

Here is a link to Taylor's original post from 1999 on this topic in the old M* forum...

Which is better--15 funds or 4?

All the best,
Sunny

[pingo]

Here is a link to Taylor's original post from 1999 on this topic in the old M* forum...

Which is better--15 funds or 4?

All the best,
Sunny

That reminds of something I noticed the other day:

Fidelity Freedom Index 2030 Fund (FXIFX) ER 0.19 <-------5 index fund portfolio.
Fidelity Advisor Freedom 2030 A LW FAFEX.lw ER 0.98 <----20 fund portfolio!
Fidelity Freedom 2030 (FFFEX) ER 0.71 <----------------21 fund portfolio!




Can anyone tell if the underlying complexity, higher costs, and active management really mattered?

The good news is that those whose 401k offers the actively-managed versions don't have to feel bad. I prefer simplicity and low cost index funds, but the above chart suggests what Bogleheads always say: one's asset allocation is the major determinant of portfolio returns.

Whether we're looking at a Fidelity 5-fund index portfolio or a 21-fund active portfolio, if the overall asset allocation is the same, it doesn't make much difference, so we might as well focus on simplicity, asset allocation and costs.

[Taylor Larimore]

Here is a link to Taylor's original post from 1999 on this topic in the old M* forum...

Which is better--15 funds or 4?

All the best,
Sunny

Hi Sunny:

Thank you for the link to my original post recommending the 3-fund portfolio (plus a money market fund). It is gratifying for me to see how well that post has stood the test of time. Vanguard has recognized its merits by adopting it for their Target and Life Strategy Funds.

I made more than 25,000 posts on the old Morningstar Vanguard Diehard forum trying to help investors. I hope I live long enough to do the same here. It is immensely satisfying to be a soldier in Mr. Bogle's crusade "to give ordinary investors a fair shake."

Best wishes.
Taylor

[abuss368]

Hi Sunny:

Thank you for the link to my original post recommending the 3-fund portfolio (plus a money market fund). It is gratifying for me to see how well that post has stood the test of time. Vanguard has recognized its merits by adopting it for their Target and Life Strategy Funds.

I made more than 25,000 posts on the old Morningstar Vanguard Diehard forum trying to help investors. I hope I live long enough to do the same here. It is immensely satisfying to be a soldier in Mr. Bogle's crusade "to give ordinary investors a fair shake."

Best wishes.
Taylor

Hi Taylor,

Thank you for your tireless contributions.

You are an inspiration to us all.

Best.

[Curious2077]

Thank you Taylor, we really appreciate your generosity!

[NOLA]

Question - When it comes to comparing the 3 Fidelity funds above, and all other funds for that matter, does the total amount of $ include the expenses as well? Or is it based on no ER?

[pingo]

Question - When it comes to comparing the 3 Fidelity funds above, and all other funds for that matter, does the total amount of $ include the expenses as well? Or is it based on no ER?

Great question! Here's an answer from another thread:

Thanks for this. So do the Morningstar charts always include all expenses of the fund? I'm comparing some actively managed funds to Vanguard's indexes and was curious about this. I couldn't find this info on the Morningstar webpage.

Morningstar charts will include regular expenses extracted in the form of expense ratios, as well as income from dividends/capital gains/etc. They will not account for excess one-time expenses such as Loads or early withdrawal penalties. Taxes are also (understandably, since it is not possible without knowing the exact situation) not addressed in their charts.

No Vanguard funds have Loads, FYI. Some international funds do have purchase fees, withdrawal fees, and/or early withdrawal penalties.

(This link takes you directly to the above quote.)

And from the same thread:

Other than the exceptions Kenyan points out, the expenses are included in Morningstar fund returns, especially asset turnover. If I understand correctly, no one even has to subtract the transaction costs of asset turnover from a fund's return. Rather, the fund pays the costs of transactions from money in the fund, which results in less money in the fund. Whatever's left is the fund's return, so returns from a source like M* will always be net of turnover.

It's like a pitcher of water: we just look at the water inside the pitcher. Water that has been poured out is not there for us to measure.

The calculations (or digging into SAI's or whathaveyou) that M* has to do is in order to figure out what a fund's asset turnover is, so that we can have an accurate understanding of unseen costs that produce a drag on returns. That, however, is an additional step they have to take. It is not one that is taken to accurately measure fund returns. (At least, that is how I understand it.) ...

(This link takes you directly to the second quote.)

[NOLA]

Thanks for taking the time to answer so quickly. So the funds with higher ER performed better in the example above, however due to the ER they all ended up with the same return?

[quez]

With additional collaboration, there are now 6 ways to do this without Vanguard mutual funds: Three-fund portfolio

• Dreyfus
• Fidelity
• Northern Funds
• T. Rowe Price
• Thrift Savings Plan
• TIAA-CREF

Please review the table in Other than Vanguard, Boglehead-style as well as the linked articles.

Blackrock Ishares and Charles Schwab are in a new table under "Three-fund Portfolios using ETFs."

555- your post is referenced in TIAA-CREF, thanks.

This is a very useful information. As an European I ask you if anyone can help me replicate the three fund portfolio only using EUR based ETF and cappitalising instead of distributing. For me, it's being very hard to settle down this task.

Thanks!

[pingo]

Thanks for taking the time to answer so quickly. So the funds with higher ER performed better in the example above, however due to the ER they all ended up with the same return?

That would be correct. I would appear, as we often say, that any outperformance in the funds' picks could not overcome the additional expense to find the outperforming assets, nor could it do much to alter the funds' trajectories because at the end of the day, they all have the same asset allocation plan: the same stock/bond (and cash) ratio; the same U.S./International ratio.

Not too long ago I did a similar comparison (nothing scientific) between the 3 Fidelity Freedom versions that had more conservative allocations and the results favored the two actively managed ones, despite overlapping assets between the underlying funds and holding "real dogs", for which they have been criticized.

I even did a comparisons between those same three Freedom funds and Vanguard Target funds (which are three fund portfolios). I could see how during the last bubble the Freedom funds showed higher returns; when the bubble popped the Freedom funds underperformed Vanguard by what looked to be the same amount. (Reversion to the mean, anyone?) Both recovered to the same points and had become indistinguishable for my purposes (not that that will persist). I opined (without investigating further, mind you) that Fidelity Freedoms' more bubbly tendency during the bubble could easily be explained by their allocations to commodities, which Vanguard does not use for their target retirement funds. (Read: different asset allocations!) Remember all the commodity speculation? Oil at $150/barrel or something like that? Vanguard looked sweeter for having the same result with less loss during the crisis, but some argue that commodities can be beneficial to a portfolio.

My point, of course, in not pro-active management or to ignore high costs. (I prefer the opposite, thank you!) One's overall asset allocation is extremely important and that a portfolio with just a few inexpensive and broad-based index funds is effective.

But as I previously expressed, I am often very comfortable recommending reasonably-priced Freedom funds, depending on the poster. For those who desire simplicity via target funds, employer-sponsored Freedom Funds can be effective, even if they're actively-managed and more expensive than Vanguard, and even if it is a wee counter-culture here. (It's really Nisiprius who made the light go on in my head in one his thousands of sage posts. In fact, here's a recent one.

Regarding costs, I believe the three target funds I had mentioned are all of Fidelity's variations, but expense will still vary among employer plans. Higher costs will affect a fund's relative performance (and even the costs I show above may catchup with the funds), so I might be less confident in the choice depending on other available options. It all depends on the specific situation of the investor.

(Disclosure: I do not own any Fidelity funds, but Mrs. Pingo and I do invest Vanguard Target Retirement funds.)

[abuss368]

The three fund portfolio rocks!

[FabLab]

The three fund portfolio rocks!

Could not agree more

As a personal aside, along with all of the positive attributes that Taylor likes to enumerate, I have found that over time it has lowered the stress level surrounding portfolio ownership compared to any/all other methods I may have employed during my lifetime. Priceless!