3 fund Portfolio vs Multiple funds

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etguy
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3 fund Portfolio vs Multiple funds

Post by etguy » Mon Nov 13, 2017 10:02 pm

I agree holding 3 portfolios ( total stock, total international stock, total bond ) will make it easier for us to manage, follow closely and all that. Some call it " Lazy portfolio" . On the other hand there are good funds out there with long standing good history . So why should one limit himself or herself to just 3 funds ? I know the giants of this forum advice inexperienced investors like myself to do the 3 portfolio . Other than the simplicity for the investor and also the fact with those 3 you pretty much cover everything in a smaller portion, is there another good reason ?

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badbreath
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Re: 3 fund Portfolio vs Multiple funds

Post by badbreath » Mon Nov 13, 2017 10:26 pm

there are many good portfolios you need to pick one

https://portfoliocharts.com/portfolios/
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

Lou354
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Re: 3 fund Portfolio vs Multiple funds

Post by Lou354 » Mon Nov 13, 2017 10:27 pm

Here’s a list of advantages from one of those giants. viewtopic.php?t=88005

racy
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Re: 3 fund Portfolio vs Multiple funds

Post by racy » Mon Nov 13, 2017 10:30 pm

Also, Lazy Portfolios: https://www.marketwatch.com/lazyportfolio (click the portfolio name to see the Vanguard funds each holds).

Dave55
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Re: 3 fund Portfolio vs Multiple funds

Post by Dave55 » Tue Nov 14, 2017 10:12 am

here is another great site with 150 portfolios:

https://www.whitecoatinvestor.com/150-p ... han-yours/

Dave

dbr
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Re: 3 fund Portfolio vs Multiple funds

Post by dbr » Tue Nov 14, 2017 10:28 am

etguy wrote:
Mon Nov 13, 2017 10:02 pm
I agree holding 3 portfolios ( total stock, total international stock, total bond ) will make it easier for us to manage, follow closely and all that. Some call it " Lazy portfolio" . On the other hand there are good funds out there with long standing good history . So why should one limit himself or herself to just 3 funds ? I know the giants of this forum advice inexperienced investors like myself to do the 3 portfolio . Other than the simplicity for the investor and also the fact with those 3 you pretty much cover everything in a smaller portion, is there another good reason ?
A good reason is that there is little likelihood that any alternative will improve on the return for risk taken of an appropriate three fund portfolio. Certainly there will not improvement based on finding other "good funds that are out there."

My argument is that it is important for people to understand what they are doing when they invest. A corollary is that if you have to ask if you should add this fund or that fund or try to engineer a more complicated portfolio, then you shouldn't do it. If you want some areas to study you could start to investigate factor investing, tilting to REITS or to emerging markets, adding commodities or in general including alternative investments such as gold, timber, etc. or whatever other topics you might find of interest. Larry Swedroe has a series of books that discuss many of these things which also give rise to sometimes contentious and usually very confused discussions here on the Forum.

I think you should also take account of the possibility that people who write books about investing simply have nothing to sell if the recommendation is a three fund approach of appropriate risk and return. Those authors have to fill their pages with "recipe" portfolios, each more complicated than the next for "more and more sophisticated" investors. To me "recipe" investing seems like a kind of odd joke on the investor.

Milo
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Re: 3 fund Portfolio vs Multiple funds

Post by Milo » Tue Nov 14, 2017 10:41 am

racy wrote:
Mon Nov 13, 2017 10:30 pm
Also, Lazy Portfolios: https://www.marketwatch.com/lazyportfolio (click the portfolio name to see the Vanguard funds each holds).

Hah! I just followed this link and clicked on the "Second Grader's Starter" portfolio link. And it's pretty much the classic three fund portfolio. It actually uses the exact allocations that I use. And is close to Vanguard's Target Retirement Fund allocations. It's kind of humbling that after all my angst over picking my portfolio, all the research I did including this forum, I wound up with something referred to as the "Second Grader's Starter" portfolio.

On a related note, I can see why people recommending the "Three Fund Portfolio" choose to call it that rather than "Second Grader's Starter" portfolio. :D

bloom2708
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Re: 3 fund Portfolio vs Multiple funds

Post by bloom2708 » Tue Nov 14, 2017 10:46 am

If you buy the whole market (Total US, Total International, Total US Bond), then if you buy other "good" funds, you are just buying more of what you already own.

More than likely those "good" funds cost more.

This is a tough concept. More is not always more.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

dbr
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Re: 3 fund Portfolio vs Multiple funds

Post by dbr » Tue Nov 14, 2017 10:55 am

Milo wrote:
Tue Nov 14, 2017 10:41 am
racy wrote:
Mon Nov 13, 2017 10:30 pm
Also, Lazy Portfolios: https://www.marketwatch.com/lazyportfolio (click the portfolio name to see the Vanguard funds each holds).

Hah! I just followed this link and clicked on the "Second Grader's Starter" portfolio link. And it's pretty much the classic three fund portfolio. It actually uses the exact allocations that I use. And is close to Vanguard's Target Retirement Fund allocations. It's kind of humbling that after all my angst over picking my portfolio, all the research I did including this forum, I wound up with something referred to as the "Second Grader's Starter" portfolio.

On a related note, I can see why people recommending the "Three Fund Portfolio" choose to call it that rather than "Second Grader's Starter" portfolio. :D
One of the most dangerous and pernicious messages in those books and blogs is the implication that a three fund portfolio is for beginners, people who are ignorant, investors that are not sophisticated, and so on. Those ideas are the basic tools of con-men and parasites that prey on investors and take away their money. In the case of bloggers and writers of books that is the content they need to be able to sell their writing. None of it is really in the interest of investors.

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BogleMelon
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Re: 3 fund Portfolio vs Multiple funds

Post by BogleMelon » Tue Nov 14, 2017 10:59 am

etguy wrote:
Mon Nov 13, 2017 10:02 pm
So why should one limit himself or herself to just 3 funds ?
You are not "limiting yourself" by owning just 3 funds. Almost all the stocks of the world and all the US bonds are in these 3 funds.
And you are not getting more of diversification when you own more than these funds.
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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BogleMelon
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Re: 3 fund Portfolio vs Multiple funds

Post by BogleMelon » Tue Nov 14, 2017 11:02 am

Another way to look at it. The other "good funds" invest in the same exact companies that the US stock index fund investing in. It is the same Apple and same Microsoft stocks you own. Except that, when you buy the same stocks under the "Fancy amazing" fund, you simply pay more fees.
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

dcabler
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Re: 3 fund Portfolio vs Multiple funds

Post by dcabler » Tue Nov 14, 2017 11:35 am

Count me among those who don't believe the 3 fund portfolio is "best", whatever that means. It is certainly good. It is certainly good enough for many, many people especially if you are inclined to set-it-and-forget-it and want easy rebalancing.

There are certainly many other portfolios out there that for the same volatility, have historically generated higher returns or, alternatively, for the same historic returns, have done so with lower volatility than the 3 fund portfolio. The questions that come up are always "will it persist?", "is there really enough historical data to make a conclusion?", etc. They are mostly unanswerable. So despite all of the math and all of this historic backtesting, there is still going to be a "leap of faith" required when it comes to investing, no matter what portfolio you choose.

As it's been said, "there are many roads to Dublin" and the 3 fund is but one.

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