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Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 8:44 pm
by abuss368
Bogleheads -

Jack Bogle often recommends a Two Fund Portfolio of Total Stock Market and Total Bond Market for most investors. He has also recommended a simple Balanced Index fund for investors (choosing to invest for the benefit of his grandchildren with this fund). In addition, Warren Buffett recommends a Two Fund Portfolio of the S&P 500 and Treasury Bonds (Berkshire Hathaway annual Shareholder Letter - 2013 and numerous interviews).

After a lifetime of investing and learning, I am growing more and more convinced that a simple and effective Two Fund Portfolio of Total Stock Market and Total Bond Market, properly allocated, is a very ideal investment portfolio for many investors.

Advantages
* Avoids wasted time.
* Less complexity.
* No fund manager risk.
* High diversified with thousands of securities.
* Very low expense ratios.
* Less funds = earlier eligibility for lower-cost Admiral shares.
* No style drift.
* No asset bloat.
* Very low (often hidden) turnover costs.
* No tracking error.
* No fund overlap.
* No front-running that reduces sub-index returns.
* Both funds rebalance automatically within the fund.
* No cash drag within the funds.
* No risk of under-performing the market.
* Will out perform many investors.
* Tax efficient.
* No financial adviser risk.
* Very simple account statements.
* Easy to maintain for the owner, spouse, caregivers, and heirs.
* More free time.

Best of all: simplicity!

Jack Bogle: "Simplicity is the master key to financial success"

Morningstar's 15-Year Category performance - updated on January 01, 2019:

TOP 17% = Vanguard Total Stock Market (VTSMX)
TOP 4% = After tax.

TOP 9% = Vanguard Total Bond Market (VBTLX) in last (2008) bear market.

GOLD Analyst Rating: Total Stock Market
SILVER Analyst Rating: Total Bond Market

Fund Placement For Maximum Tax-Efficiency: Place Total Bond Market in tax-advantaged account(s). If tax advantage account(s) are full or bonds need to be held in a taxable account, a tax exempt bond fund may be an option depending on the overall tax impact. Place Total Stock Market in either a tax-advantaged account or taxable account.

*************************************************************************************************************************************

Edited: November 23, 2019

Bogleheads -

Over the past few days and weeks we have arrived at a decision to transition and simplify our portfolio. Ultimately we decided to move towards Jack Bogle's Two Fund Portfolio and Warren Buffett's Two Fund Portfolio approach. We have been on a crusade to simplify both our financial and non-financial lives and it is working and starting to pay dividends.

Our journey as a Boglehead has evolved tremendously over the years. Many years ago we left Vanguard and became individual stock pickers with a belief that we were smarter than the market and would be above average. Put in a couple of hours daily or every few days and one can definitely beat the Gordon Gekko's and Wall Street on the other side of any given trade correct? Of course! After many years of reading individual company reports, listening to conference calls, reading investment newsletters, and achieving some very big wins and also very big losses (which no one ever wants to discuss), we knew there had to be a different (and better) way. We moved back to Vanguard and never looked back.

Once the move to Vanguard was completed, we still did not know any better and began to invest in (or collect) a lot of mutual funds. I believe at one point we held over 15 or 18 different types of funds. Small Cap, Commodities, Inflation bonds, GNMA bonds, International Value, Wellington? Sure add it to the list was often the response.

We continued to evolve over the years to a more total market approach while continuing to increase our investment education by reading Jack Bogle's books, interviews, articles, as well as other investment experts. The path to financial simplicity started.

We focused on Total Stock, Total International, US REIT, and Total Bond. It was not long before International REIT and International Bond were included. While not a bad portfolio in some respects as the four main asset classes were present: stocks, bonds, real estate, and cash. Would one go wrong over the long term? Perhaps not.

All the while, and perhaps not discussed enough on the forum, I was aware my spouse would not respond well to managing that portfolio with six moving parts. In addition, my spouse was never on board with international. She was right, and I should have listened to her, my parents, Mr. Bogle, and Mr. Buffett earlier. Our portfolio would be much larger.

As we continued to build and add money to that total market portfolio, multiple funds were always out of balance from the target asset allocation. There were times other funds would have no additional investments for a year (or more). I started to feel with six different funds, combined with IRA limitations of only $6,000 a year, that we may be splitting hairs. Over the long term that would not move the needle. At the point of retirement with bonds expected to be a higher allocation (and stocks that much of a lower allocation), a few of the funds are going to drop below 5% of the portfolio. We pulled out "The Bogleheads Guide to Investing" from the bookshelf and reviewed the pages where an investor starts simple with a couple of funds, adds additional funds, and ultimately removes them at retirement as the allocation becomes immaterial to the portfolio as a whole. We have a preference of less funds and much bigger balances in each individual fund.

During this journey, international has been nothing short of a complete disappointment. If it is not Brexit, it is Greece, Brazil, Argentina, the challenges in France, Japan's shrinking economy and debt to GDP ratio, and the China trade war and economic slowdown. We could continue. Recently we watched an interview with Jack Bogle about one year ago, where Mr. Bogle noted each of these individual countries and why investors should avoid them.

In some respects and pushing us to simplify even more were quotes and advice from essentially two of the very best investors of all time who know more about investing than any of us ever will: Jack Bogle and Warren Buffett.

We continued to review historical information while being well aware that past performance is no guarantee of future results. More inline with Mr. Bogle's reversion to the mean. We noticed that international stocks are simply challenging. We could understand the increased risk if the increased reward was there. Outside of a few years here or there it simply has never arrived. There is a quote from Jack Bogle that since 1994 the US Markets are up 700% + and the International markets up 270% +. International REITs were dropping harder than international stocks. International bonds performed inline or close to U.S. bonds and are hedged (so why split hairs). US REITs, while showing a benefit at times (and certainly more risk at times), over the long term reverted to the total stock market return.

All the while during this questioning and thinking, we had family who invested in the Two Fund Portfolio for a very long time and were either retired or still in the accumulation years. Everyone was extremely happy with the simplicity and thankful for the results (good as well as bad markets). Their portfolio's were simple and maintenance free and they were enjoying life! They would tell us to "listen to Bogle and Buffett. They know what they are talking about!" I started to think maybe that is a better mousetrap!

Will this be the right decision over the long term? No one knows. I know with certainty that our portfolio will never be below average. Any of us can always complicate our portfolios and add additional funds. Only the beauty of hindsight will determine that. In the interim we investors, and Bogleheads will continue to debate what funds are needed and where. I know this much, we are going to give this a good run and "stay the course".
"Jack Bogle: "Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. bond-market index portfolio."

Warren Buffet: "My advice could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers."

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 8:50 pm
by elgob.bogle
Please cite reference. Thanks.

elgob

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 8:57 pm
by JoMoney
I follow Buffett's advice of keeping enough in cash (including short-term low risk bonds) that I feel comfortable and putting the rest in a low-cost S&P500 fund.

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 9:06 pm
by JoMoney
elgob.bogle wrote:Please cite reference. Thanks.

elgob
This is frequently and repeatedly the advice they've given, Bogle in his books, Buffett in BRK annual reports, invterviews, etc..
Jack Bogle in The Little Book Of Common Sense Investing, CH.18 wrote:DEEP DOWN, I REMAIN absolutely confident that the vast majority of American families will be well served by owning their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S.bond-market index portfolio. (Investors in high tax brackets, however, would hold a very low-cost quasi-index portfolio of high-grade intermediate-term municipal bonds.)...
Warren Buffett in 2013 BRK Letter to Shareholders wrote:...What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.
http://www.berkshirehathaway.com/letters/2013ltr.pdf

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 10:03 pm
by abuss368
elgob.bogle wrote:Please cite reference. Thanks.

elgob
Seriously? Consider a simple search. Also look at Jack's many books.

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 10:28 pm
by stemikger
abuss368 wrote:Bogleheads,

Jack Bogle often recommends a simple investment portfolio of Total Stock and Total Bond. He has also recommended a simple Balanced Index fund. I have family that invest in the simple two fund portfolio that Jack recommends and are very satisfied with the simplicity and investment results. Warren Buffett also recommends a simple two fund portfolio.

How many Bogleheads invest in the Jack Bogle Two Fund Portfolio?

The older I get, the more I wonder!
I've been a member of this club for quite a while now. I may have jumped around with my AA due to listening to too much noise, but I never wavered from the same two funds. Over the years, my company's 401K changed bond index funds, but they were always the same idea, they followed the same index.

I currently hold the Vanguard Institutional Index Fund and the Blackrock U.S. Debt Index Fund. My AA is 65/35. My plan in retirement is to either hold the Total Stock Index and the Total Bond Index or simply the Vanguard Balanced Index. Retirement should be care free and what could make life easier than holding one or two funds.

Also, with the blessing of John Bogle and Warren Buffett, it's really hard to second guess your decision.

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri Apr 01, 2016 10:32 pm
by LiveSimple
JoMoney wrote:I follow Buffett's advice of keeping enough in cash (including short-term low risk bonds) that I feel comfortable and putting the rest in a low-cost S&P500 fund.
Will follow this model, in a decade with Total Stock Market Index Fund, to make things simple. :happy :happy :happy

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 2:25 am
by stemikger
LiveSimple wrote:
JoMoney wrote:I follow Buffett's advice of keeping enough in cash (including short-term low risk bonds) that I feel comfortable and putting the rest in a low-cost S&P500 fund.
Will follow this model, in a decade with Total Stock Market Index Fund, to make things simple. :happy :happy :happy
Just curious, why wait a decade?

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 5:17 am
by Quark
JoMoney wrote:
elgob.bogle wrote:Please cite reference. Thanks.

elgob
This is frequently and repeatedly the advice they've given, Bogle in his books, Buffett in BRK annual reports, invterviews, etc..
Jack Bogle in The Little Book Of Common Sense Investing, CH.18 wrote:DEEP DOWN, I REMAIN absolutely confident that the vast majority of American families will be well served by owning their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S.bond-market index portfolio. (Investors in high tax brackets, however, would hold a very low-cost quasi-index portfolio of high-grade intermediate-term municipal bonds.)...
Warren Buffett in 2013 BRK Letter to Shareholders wrote:...What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.
http://www.berkshirehathaway.com/letters/2013ltr.pdf
Buffett will leave his wife a bequest of well over a billion dollars. It's far from clear that his advice applies to someone with a much smaller portfolio. He does recommend index funds; the issue is 90% in stocks.

Bogle has recently (i.e., after the date of his book) been saying that Total Bond Market is too heavily invested in government bonds. Bogle doesn't like government bonds because their yield is so low. Presumably Buffett does not care about this for his wife, given the size of the bequest.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 5:38 am
by JoMoney
Quark wrote:...
Buffett will leave his wife a bequest of well over a billion dollars. It's far from clear that his advice applies to someone with a much smaller portfolio. He does recommend index funds; the issue is 90% in stocks. ...
Buffett has not publicly disclosed how much he'll be leaving his wife. The vast majority of his wealth is promised to charitable organizations. But that's besides the point, his advice has been the same to others that ask regardless of the dollar figure.
"Have a cash reserve, whatever makes you comfortable" and the rest in a low cost index fund averaged in over time.
Warren giving that advice to Lebron James:
https://www.youtube.com/watch?v=0QvXd7S2sn4
"it's the same advice I give 99% of people ... buying an index fund and doing it over time ... nobody's ever followed that and gotten other than a decent result - nobody"

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 5:57 am
by gvsucavie03
I think there is a lot of wisdom in this model, but I also think it is prudent to diversify with non-US stock. The global economy is very different now than when Bogle and Buffet started investing. There has to be at least a small amount of bias in their opinion of International markets.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 6:26 am
by Quark
JoMoney wrote:
Quark wrote:...
Buffett will leave his wife a bequest of well over a billion dollars. It's far from clear that his advice applies to someone with a much smaller portfolio. He does recommend index funds; the issue is 90% in stocks. ...
Buffett has not publicly disclosed how much he'll be leaving his wife. The vast majority of his wealth is promised to charitable organizations. But that's besides the point, his advice has been the same to others that ask regardless of the dollar figure.
"Have a cash reserve, whatever makes you comfortable" and the rest in a low cost index fund averaged in over time.
Warren giving that advice to Lebron James:
https://www.youtube.com/watch?v=0QvXd7S2sn4
"it's the same advice I give 99% of people ... buying an index fund and doing it over time ... nobody's ever followed that and gotten other than a decent result - nobody"
I have a hard time seeing how most investors, for example, retirees with a 4% withdrawal rate, can comfortably weather a major downturn with only 10% in cash reserves.

Buffett, as all right thinking people, recommends broad low cost index funds, but 99% of people shouldn't be 90% equities. As a matter of fact, 99% of people really can't be 90% equities given the overall composition of the market.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 7:16 am
by JoMoney
Quark wrote:... I have a hard time seeing how most investors, for example, retirees with a 4% withdrawal rate, can comfortably weather a major downturn with only 10% in cash reserves.

Buffett, as all right thinking people, recommends broad low cost index funds, but 99% of people shouldn't be 90% equities. As a matter of fact, 99% of people really can't be 90% equities given the overall composition of the market.
You seem to be stuck on the 90% equity figure. Despite the allocation he set for his wife, and what he thinks people should do, he's also said multiple times that people should hold the amount that makes them "comfortable" or allows them to "sleep well at night".
Obviously, the amount that would make you "comfortable" is different from Buffett's. Perhaps you'd like to throw out a number you think is a good allocation, and people can chime in as to why they think your allocation is inappropriate for 99% of people. ... that would be silly, and pointless.. Your allocation and risk tolerance is an individual thing.
Bogle has frequently used the 60-65% equity number, or age in bonds as examples, there tons of ridicule about those numbers as well.. You'll have to figure out what you're willing to accept and what's right for you.
John Bogle wrote:While I cannot give any investor a neat formula for risk control, I am comforted to share that inadequacy with the likes of Paul Samuelson, who tells us, “there is no way any professor of economics or any minister of the church can tell you what your risk tolerance must be.
No, nor can any Wall Street seer, nor any money manager, nor any indexing advocate, nor even any grizzled veteran of 50 years in this wonderful business.
http://johncbogle.com/speeches/JCB_NE_Pension_4-00.pdf

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 7:52 am
by Clive
Quark wrote:I have a hard time seeing how most investors, for example, retirees with a 4% withdrawal rate, can comfortably weather a major downturn with only 10% in cash reserves.

Buffett, as all right thinking people, recommends broad low cost index funds, but 99% of people shouldn't be 90% equities. As a matter of fact, 99% of people really can't be 90% equities given the overall composition of the market.
Stocks throwing off a 4% dividend might see prices/dividends halve in value, leaving a 2% shortfall. Which 10% and drawing 2%/year provides 5 years of cover. Which is around the length of time of the down-trend before the bottom is reached and starts a uptrend. i.e. helps avoid having to sell stock at below average prices.

Bonds are loans. With treasury bonds you are lending to someone who can influence both the interest rates and the tax rates. Too much in bonds is also a risk. If instead of a bond bullet you utilised a stock/gold barbell as a bond proxy, then a 80/20 stock/bond might be mapped to 90/10 stock/gold. https://www.portfoliovisualizer.com/bac ... entage=0.0

Longer dated bonds tend to have a shorter term inverse correlation to stocks (days/weeks), gold tends to have a multi-year inverse correlation to stocks - if stocks are trending down over several years in a row then gold can be trending higher over those same years.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 8:39 am
by Quark
JoMoney wrote:You seem to be stuck on the 90% equity figure.
You quoted Buffett's letter that included the 90% equity figure. Many people believe 90% is generally applicable. I don't. If you don't, then we don't have any disagreement.

I certainly agree with a broadly diversified low cost index fund for equities and enough bonds to be comfortable.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 8:43 am
by knpstr
I am in the 1 fund portfolio at the moment.. But will transition to 2 fund in about 20 years when I'm 50

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 8:48 am
by Quark
Clive wrote:
Quark wrote:I have a hard time seeing how most investors, for example, retirees with a 4% withdrawal rate, can comfortably weather a major downturn with only 10% in cash reserves.

Buffett, as all right thinking people, recommends broad low cost index funds, but 99% of people shouldn't be 90% equities. As a matter of fact, 99% of people really can't be 90% equities given the overall composition of the market.
Stocks throwing off a 4% dividend might see prices/dividends halve in value, leaving a 2% shortfall. Which 10% and drawing 2%/year provides 5 years of cover. Which is around the length of time of the down-trend before the bottom is reached and starts a uptrend. i.e. helps avoid having to sell stock at below average prices.
Stocks are currently yielding about 2%. If stocks were to halve in value, they'd yield 4%, all else being equal. All else could well not be equal - the circumstances that resulted in a 50% drop could easily result in a decrease in dividends.

Standard advice is to focus on total return, not yield. Standard advice is also to rebalance. Rebalancing to 90/10 is not easy if stocks halve in value.

After five years of selling bonds in order to avoid selling stocks, you'd have no bonds left. 100% equities is rather aggressive. If a downturn continued, you'd have to sell stocks at depressed prices.[/quote]
Clive wrote:...Too much in bonds is also a risk....
Too much of anything is also a risk. Bonds tend to be much less risky than stocks, especially if you use the conventional definition of variance (or std dev) as risk.[/quote]

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 8:49 am
by oldcomputerguy
Quark wrote: Bogle has recently (i.e., after the date of his book) been saying that Total Bond Market is too heavily invested in government bonds.
I find it interesting looking at the disparity of alleged "total" bond funds. In particular, Vanguard Total Bond Fund (VBTLX) consists of 43.5% Treasury/Agency bonds and 20.5% Mortgage-backed, for a total of approximately 64% government issue (almost half again that of the Barkley's Aggregate Index). On the other hand, Fidelity Total Bond Fund (FTBFX) has a huge concentration in corporate bonds (approximately 50%), twice the percentage contained in the Barkley's Aggregate index, and 20% government issues, half the percentage of the Index; and Fidelity U.S. Bond Index (FSITX), which is not titled as a "total" bond fund, tracks the Barkley's Aggregate Index very closely.

I guess it goes to show that you really have to pay attention to what you're actually buying.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 8:49 am
by LiveSimple
stemikger wrote:
LiveSimple wrote:
JoMoney wrote:I follow Buffett's advice of keeping enough in cash (including short-term low risk bonds) that I feel comfortable and putting the rest in a low-cost S&P500 fund.
Will follow this model, in a decade with Total Stock Market Index Fund, to make things simple. :happy :happy :happy
Just curious, why wait a decade?
As of now, no international. But have some % in sectors.

At a high level, our portfolio is follows:

Cash / Bond : 25%
Total Stock Market Index : 25%
Extended Market Index : 25%
Sectors : 25%

Somehow happy / mindset, that I am re balancing to the above allocation.

The re balancing itch, will fade away over time and also, do not want to think, by going to Total Stock Market Index, missing something, without re balancing yearly !!

More of a mental attitude than anything !!!

But telling my son / daughter to invest in Total Stock Market Index Fund, until they have some 5 figure to think about asset allocation.
( Don't know, what they hear or will listen, but as a parent want to show them, the right thing. For sure they will get it in 10 -20 years)

Disclosure : My son will be 18, this week, the gift is a "Vanguard account in his name", with Total Stock Market Index Fund, and a weekly periodic investment of a small amount ($10 - $25), to show, saving / investing small amount, adds up over time.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat Apr 02, 2016 9:26 am
by selftalk
My Jack Bogle portfolio consists of VTI / VTSAX and for the bond portion it`s my government pension and social security benefits and a very small money market fund at a local bank. That`s it and I feel no stress or doubts to change that even if the international index funds rise and out pace the U.S. markets.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 5:42 am
by Dandy
Not quite there. 1/3 of my TIRA is in Balanced Index and almost 1/2 of my Taxable is in Total Stock Market. But, I will likely always have enough assets in "safe" assets (a la Dr Bernstein) to fund retirement expenses until at least age 90.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 9:30 am
by ByThePond
2 funds for me, mostly. Other than 8% cash, I'm in a TIAA 403b with a total US stock index, the rest fully in these two funds, 75/25, overall non-cash AA.
After retirement, I'll probably use the 403b to fund a SPIA, which should complement SS in covering my living expenses.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 9:36 am
by digit8
It isn't remotely practicable for us due to our different workplace retirement plans, but in retirement I'd love to keep our investments to TSM and TBM. Backed with reasonable amount of savings, maybe a CD ladder, I can't imagine I'd need anything else. My kids, I'd recommend a healthy dose of international in both bonds and equities, but within our lifetimes I expect the two funds to give "good enough" returns.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 10:38 am
by pascalwager
JoMoney wrote:
Quark wrote:... I have a hard time seeing how most investors, for example, retirees with a 4% withdrawal rate, can comfortably weather a major downturn with only 10% in cash reserves.

Buffett, as all right thinking people, recommends broad low cost index funds, but 99% of people shouldn't be 90% equities. As a matter of fact, 99% of people really can't be 90% equities given the overall composition of the market.
You seem to be stuck on the 90% equity figure. Despite the allocation he set for his wife, and what he thinks people should do, he's also said multiple times that people should hold the amount that makes them "comfortable" or allows them to "sleep well at night".
Obviously, the amount that would make you "comfortable" is different from Buffett's. Perhaps you'd like to throw out a number you think is a good allocation, and people can chime in as to why they think your allocation is inappropriate for 99% of people. ... that would be silly, and pointless.. Your allocation and risk tolerance is an individual thing.
Bogle has frequently used the 60-65% equity number, or age in bonds as examples, there tons of ridicule about those numbers as well.. You'll have to figure out what you're willing to accept and what's right for you.
John Bogle wrote:While I cannot give any investor a neat formula for risk control, I am comforted to share that inadequacy with the likes of Paul Samuelson, who tells us, “there is no way any professor of economics or any minister of the church can tell you what your risk tolerance must be.
No, nor can any Wall Street seer, nor any money manager, nor any indexing advocate, nor even any grizzled veteran of 50 years in this wonderful business.
http://johncbogle.com/speeches/JCB_NE_Pension_4-00.pdf
Warren Buffet does seem to really stand by the 10% short-term bonds (cash) figure. He followed up by saying, explicitly, that holding 20, 30, or 40% bonds is "silly".

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 11:57 am
by Alchemist
JoMoney wrote:I follow Buffett's advice of keeping enough in cash (including short-term low risk bonds) that I feel comfortable and putting the rest in a low-cost S&P500 fund.
Same here with one caveat. My Roth is in FUSVX (Spartan 500 index fund) but my taxable is in VTSAX (Total U.S. Stock Market).

No slice and dice, no tilts, no re-balancing. Simple, lowest cost possible, and nearly immune to behavior errors....no fiddling possible. No worrying if this or that 'factor' will out perform or what my asset mix should be. Buy up all the Roth space. Once full, put everything else in taxable. One fund in each account.

The Majesty of Simplicity.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 12:02 pm
by Dandy
Warren Buffet does seem to really stand by the 10% short-term bonds (cash) figure. He followed up by saying, explicitly, that holding 20, 30, or 40% bonds is "silly".
I believe what Buffet is leaving to his wife is 90% S&P 500 and 10% short term Treasuries? In any event her 10% short term bonds will probably amount to 100's of millions - so no risk to her with that nest egg. I know he is a believer in the US stock market but don't know that he sees only 10% in bonds for normal investors. If he does -- ignore it unless you are very young and very risk tolerant.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 12:16 pm
by patrick013
Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)

Vanguard 500 Index Fund Admiral Shares (VFIAX)

Jack Bogle in The Little Book Of Common Sense Investing is quite
positive on the above two funds and I would be happy investing
in them at any time.

Average annual returns % for the past 10 years :

Interm Bond = 6.05
S&P 500 = 7.00

Total Bond = 4.86
Total Stock = 7.04

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 2:20 pm
by pascalwager
Dandy wrote:
Warren Buffet does seem to really stand by the 10% short-term bonds (cash) figure. He followed up by saying, explicitly, that holding 20, 30, or 40% bonds is "silly".
I believe what Buffet is leaving to his wife is 90% S&P 500 and 10% short term Treasuries? In any event her 10% short term bonds will probably amount to 100's of millions - so no risk to her with that nest egg. I know he is a believer in the US stock market but don't know that he sees only 10% in bonds for normal investors. If he does -- ignore it unless you are very young and very risk tolerant.
I don't believe that Buffet would leave his wife hundreds of millions of dollars. I would guess no more than $10 million. She's already elderly, or nearly-so, they live a modest lifestyle, and live in a farming/ranching oriented state.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sun Apr 03, 2016 3:03 pm
by JoMoney
pascalwager wrote:...
Warren Buffet does seem to really stand by the 10% short-term bonds (cash) figure. He followed up by saying, explicitly, that holding 20, 30, or 40% bonds is "silly".
I think this might be what you're refferring to. Where he said he thinks it's silly to have some ratio in bonds
https://www.youtube.com/watch?v=1N3g47P-iRc
But he also stated that was his look on it at that point in time, not necessarily for all time.
He said that he doesn't think anyone should be 40% in bonds, but he also said he would suggest people have enough cash on hand so they feel comfortable.
If 40% is where someone is comfortable, then I would imagine that's what it is, the fact that Warren Buffett wouldn't be comfortable with that allocation is besides the point.
He also said they need to have the proper attitude where if stocks go down 20% in the next month they're not going to be bothered. If it would bother you, I would think you need a more conservative allocation, but that doesn't mean it's not right for someone else.

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 10:27 am
by lostdog
My Jack Bogle portfolio is Vanguard Total Stock Market Admiral and Vanguard Intermediate-Term Bond Index Fund. Very simple. Re-balance once a year with a 5% band in my retirement accounts. I am not interested in International investing as it most likely won't make a difference anyway ("When experts disagree, it is often because it does not make a foreseeable difference." -- Taylor Larimore, author of The Bogleheads' Guide to Investing).

In my taxable I have the Vanguard Balanced Index Fund Admiral. I have a different goal for my taxable account and it is not part of my retirement AA. I call my taxable account the semi-retirement goal. I am in a low tax bracket, the fund doesn't create capital gains distributions, it's always at a 60/40 AA with no capital gains for rebalancing and I don't care about the long term capital gains when selling small portions of the fund.

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 10:29 am
by lostdog
patrick013 wrote:Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)

Vanguard 500 Index Fund Admiral Shares (VFIAX)

Jack Bogle in The Little Book Of Common Sense Investing is quite
positive on the above two funds and I would be happy investing
in them at any time.

Average annual returns % for the past 10 years :

Interm Bond = 6.05
S&P 500 = 7.00

Total Bond = 4.86
Total Stock = 7.04
+1

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 12:08 pm
by Clive
Quark wrote:Standard advice is to focus on total return, not yield. Standard advice is also to rebalance. Rebalancing to 90/10 is not easy if stocks halve in value.

After five years of selling bonds in order to avoid selling stocks, you'd have no bonds left. 100% equities is rather aggressive. If a downturn continued, you'd have to sell stocks at depressed prices.
Buffett suggest enough in cash/bonds to feel comfortable and the rest in stocks.

If your comfort level is 20 years of living expenses and that's 40% of the total (2% withdrawal rate) then you start with 60/40 stock/bonds and spend 2%/year to drawdown bonds to zero over 20 years leaving 100% stock. Average 80/20 stock/bond. No rebalancing involved. Prospects for growth from stocks over 20 years are reasonable especially when reinvesting dividends. If 1% x 20 years is enough then start with 80/20, end at 100/0, average 90/10 which is the camp Buffett is in.

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 1:09 pm
by abuss368
lostdog wrote:My Jack Bogle portfolio is Vanguard Total Stock Market Admiral and Vanguard Intermediate-Term Bond Index Fund. Very simple. Re-balance once a year with a 5% band in my retirement accounts. I am not interested in International investing as it most likely won't make a difference anyway ("When experts disagree, it is often because it does not make a foreseeable difference." -- Taylor Larimore, author of The Bogleheads' Guide to Investing).

In my taxable I have the Vanguard Balanced Index Fund Admiral. I have a different goal for my taxable account and it is not part of my retirement AA. I call my taxable account the semi-retirement goal. I am in a low tax bracket, the fund doesn't create capital gains distributions, it's always at a 60/40 AA with no capital gains for rebalancing and I don't care about the long term capital gains when selling small portions of the fund.
Hi lostdog,

You have a very simple and effective investment portfolio. Now stay the course!

Best.

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 2:38 pm
by munemaker
abuss368 wrote:Bogleheads,

Jack Bogle often recommends a simple investment portfolio of Total Stock and Total Bond. He has also recommended a simple Balanced Index fund. I have family that invest in the simple two fund portfolio that Jack recommends and are very satisfied with the simplicity and investment results. Warren Buffett also recommends a simple two fund portfolio.

How many Bogleheads invest in the Jack Bogle Two Fund Portfolio?

The older I get, the more I wonder!
I currently have 3 fund, but am considering downsizing to the 2 fund.

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 2:52 pm
by azanon
pascalwager wrote:
Dandy wrote:
Warren Buffet does seem to really stand by the 10% short-term bonds (cash) figure. He followed up by saying, explicitly, that holding 20, 30, or 40% bonds is "silly".
I believe what Buffet is leaving to his wife is 90% S&P 500 and 10% short term Treasuries? In any event her 10% short term bonds will probably amount to 100's of millions - so no risk to her with that nest egg. I know he is a believer in the US stock market but don't know that he sees only 10% in bonds for normal investors. If he does -- ignore it unless you are very young and very risk tolerant.
I don't believe that Buffet would leave his wife hundreds of millions of dollars. I would guess no more than $10 million. She's already elderly, or nearly-so, they live a modest lifestyle, and live in a farming/ranching oriented state.
Does one leave money to their wife after they die, or is it essentially your wife's to begin when you die because, .... well, you're married?

I'll admit I don't know exactly what kind of asset protection he has against his wife, but I just thought in a general sense if you're married, and you wanted to know your individual net worth, you'd calculate that by dividing you and your spouse's net worth combined by 2. :mrgreen: The only obvious exceptions I'm aware of is if you had money in your name prior to marriage, then never co-mingled after marrying. or 2. You individually inherited money from someone else then never co-mingled that money in a joint account or spent money from that account for a joint expense.

I suspect this can get very complicated, but I would think a spouse is starting off with a really strong claim against their spouse's estate, short of a pre-numptual agreement.

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 5:23 pm
by lostdog
abuss368 wrote:
lostdog wrote:My Jack Bogle portfolio is Vanguard Total Stock Market Admiral and Vanguard Intermediate-Term Bond Index Fund. Very simple. Re-balance once a year with a 5% band in my retirement accounts. I am not interested in International investing as it most likely won't make a difference anyway ("When experts disagree, it is often because it does not make a foreseeable difference." -- Taylor Larimore, author of The Bogleheads' Guide to Investing).

In my taxable I have the Vanguard Balanced Index Fund Admiral. I have a different goal for my taxable account and it is not part of my retirement AA. I call my taxable account the semi-retirement goal. I am in a low tax bracket, the fund doesn't create capital gains distributions, it's always at a 60/40 AA with no capital gains for rebalancing and I don't care about the long term capital gains when selling small portions of the fund.
Hi lostdog,

You have a very simple and effective investment portfolio. Now stay the course!

Best.
Thanks Abuss. No fiddling with it. :D

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 7:32 pm
by tomd37
Can't recall my prior thoughts right now, but for taxable investments doesn't Vanguard have a fund of ~60/40 ratio that uses a tax exempt bond fund along with a good stock fund. I wish my recall was better that it is but age is becoming a factor unfortunately :annoyed

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 7:49 pm
by gvsucavie03
tomd37 wrote:Can't recall my prior thoughts right now, but for taxable investments doesn't Vanguard have a fund of ~60/40 ratio that uses a tax exempt bond fund along with a good stock fund. I wish my recall was better that it is but age is becoming a factor unfortunately :annoyed
VTMFX is 50/50 US Stock and tax-exempt muni's

Re: Jack Bogle - Two Fund Portfolio

Posted: Thu May 26, 2016 7:53 pm
by tomd37
That is it and thanks a lot.

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri May 27, 2016 10:26 am
by pinot3
30% VFIAX (Vanguard 500 index Admiral), 70% VBILX (Vanguard Intermediate term bond index Admiral). Thanks to Jack Bogle for 2 fund and Rick Ferri for AA (center of gravity for retirees). 64 and retired. :happy

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri May 27, 2016 12:53 pm
by lostdog
pinot3 wrote:30% VFIAX (Vanguard 500 index Admiral), 70% VBILX (Vanguard Intermediate term bond index Admiral). Thanks to Jack Bogle for 2 fund and Rick Ferri for AA (center of gravity for retirees). 64 and retired. :happy
Nice plan.

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri May 27, 2016 2:00 pm
by BolderBoy
abuss368 wrote:How many Bogleheads invest in the Jack Bogle Two Fund Portfolio?
I do this in my retirement accounts. In taxable I do a tax-exempt bond fund and tax-exempt money market fund.

Re: Jack Bogle - Two Fund Portfolio

Posted: Fri May 27, 2016 9:53 pm
by fortyofforty
I heard Jack Bogle in a radio interview several years ago specifically recommend the Balanced Index fund as a "one fund" portfolio, as appropriate for many investors. I believe it was on the Wharton School's business channel.

Re: Jack Bogle - Two Fund Portfolio

Posted: Sat May 28, 2016 1:09 am
by Munir
I agree with the concept, but instead of VBILX, and because of its long duration, I use a VBTLX and VFIDX combination which approximates the portfolio of VBILX but with a shorter duration.

VBILX is the Intermediate Bond Index Fund- duration 6.6 years
VFIDX is the Intermediate Investment Grade Fund- duration 5.5 years
VBTLX is the Total Bond Market Fund- duration 5.8 years

The new Core Bond Fund (VBCOX) has a short duration too (5.6 years) but its portfolio has not been finalized yet - as far as I can tell.

Re: Jack Bogle - Two Fund Portfolio

Posted: Tue Aug 01, 2017 10:31 pm
by rattlenap
I do the Vanguard Balanced Index fund and plan on being in that for the rest of my life.

Re: Jack Bogle - Two Fund Portfolio

Posted: Tue Aug 01, 2017 11:33 pm
by siamond
abuss368 wrote:How many Bogleheads invest in the Jack Bogle Two Fund Portfolio?
Seems to me that the folks seeking such level of simplicity would be much better off with a single LifeStrategy fund (pick the one you like based on your tolerance for volatility, and be done with it). This is the recommendation I make to many people I speak with, when I sense that they really don't want to hear much more than that.

PS. I would *not* recommend a Target-Date fund though. Definitely not.

Re: Jack Bogle - Two Fund Portfolio

Posted: Tue Aug 01, 2017 11:37 pm
by stemikger
rattlenap wrote:I do the Vanguard Balanced Index fund and plan on being in that for the rest of my life.
Awesome!! Same here!

Unfortunately, my 401K does not have the balanced index fund, so I hold two funds, but it comes to the same AA (60/40).

I do hold the Balanced Index in my TIRA and upon retirement, it will all go in the balanced index fund (for life).

:sharebeer

Re: Jack Bogle - Two Fund Portfolio

Posted: Tue Aug 01, 2017 11:59 pm
by patrick013
abuss368 wrote:
Jack Bogle often recommends a simple investment portfolio of Total Stock and Total Bond.
I think S&P strips were being sold on ezchanges before Bogle went to college.
But even before that they were mostly railroad stocks and a few industrials
I think. But, yeah, give Vanguard the credit for making the 500 stock market
portfolio publicly available.

My first portfolio offered was S&P 500 strips and some CD's from an account
with an exchange broker.

I like the 500 with the IT bond index better than TSM with TBM. That's
probably because of supply and demand and all the buy and hold investors
out there.

But tilt towards something, why not. MC, SC, maybe even utilities.

Re: Jack Bogle - Two Fund Portfolio

Posted: Wed Aug 02, 2017 12:05 am
by Big Dog
Seems to me that the folks seeking such level of simplicity would be much better off with a single LifeStrategy fund (pick the one you like based on your tolerance for volatility, and be done with it).
Since the life strategy funds include international equities and international bonds, doesn't that defeat the purpose of a Two-Fund portfolio ala Jack, in other words, Total Stock and Total Bond (sans international)?

In answer to the OP, 2-Funder here, at least as best as possible. (inherited individual stocks which have a high cap gain, so waiting until I die to pass them on tax free, and one of my 401k's does not offer Total Stock and have had to mix a couple of funds to approximate.)

But 2-funs intent is all-in.

Re: Jack Bogle - Two Fund Portfolio

Posted: Wed Aug 02, 2017 12:24 am
by oldzey
Affirmative - I use two funds:

Total U.S. Stock Market Index Fund
TIAA Traditional