The Three-Fund Portfolio

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Toons
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Re: The Three Fund Portfolio

Postby Toons » Sun Jan 18, 2015 12:56 pm

Leeraar wrote:
Jhwkzo wrote:Being an amateur at this, I am trying to understand the (practical) process of investing using a 3 Fund Portfolio.

If I wished to invest $11,500 annually in a 3 Fund Portfolio while meeting the following requirements:

1. max my Roth IRA contribution ($5500)
2. use a 60:40 stock:bond allocation

what could be some ways to do it (or alternate solutions)?

Also, since some of the funds would lie in taxable accounts, would a yearly rebalancing be impacted by taxes?

I'd just invest it all in Vanguard LifeStrategy Moderate which is 60/40, and be done. There will be some taxes due to distributions in the taxable account. Do not let the tax tail wag the dog.

L.


+1 So true regarding taxes. :happy
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Re: Life Strategy and Target Funds alternative

Postby Taylor Larimore » Sun Jan 18, 2015 1:30 pm

chaz wrote:
Taylor Larimore wrote:
I might add that Mike Piper personally uses the Vanguard LifeStrategy funds, which are about as pure a one-fund implementation of the three-fund portfolio as you can get.

Leeraar:

Mr. Piper is a very knowledgeable investor who is on our Panel of Experts at Boglehead Conferences. I agree with Mike that for an investor without a taxable account (Total Bond Market is tax-inefficient), a single Vanguard Life Strategy or Target Fund can be an excellent alternative.

Best wishes.
Taylor

Taylor,

Is the Balanced Index fund all right though it has only 2 funds?

Thanks.

Chaz:

In my opinion, Vanguard's Balanced Index Fund (VBIAX admiral shares), even in a tax-advantaged account, is not an ideal 1-fund portfolio for several reasons:

* Minimum investment is $3,000 (VBINX investor shares). STAR and Target Fund minimums are $1,000.

* A 60% stock/40% bond allocation is seldom suitable for an entire lifetime.

* Balanced Index Fund invests roughly 60% in stocks and 40% in bonds by tracking two indexes that represent broad barometers for the U.S. equity and U.S. taxable bond markets. Life Strategy Funds contain 4 index funds. Target Funds contain up to five index funds for greater 1-fund diversification.

* Target funds automatically become more conservative with age.

* It is difficult to integrate a fund with a fixed 60% stock/40% bond allocation into other parts of a portfolio to meet the overall asset-allocation plan.

For investors with both tax-deferred and taxable accounts, The Three Fund Portfolio is the better choice primarily for its better bond diversification, flexibility, and superior tax-efficiency.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby chaz » Sun Jan 18, 2015 1:49 pm

Thanks, Taylor.
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"Does 3-Funds Offer Higher Returns Or Lower Risk"

Postby Taylor Larimore » Mon Jan 19, 2015 1:31 pm

Bogleheads:

Below is the link to a lengthy discussion about The Three Fund Portfolio in another thread:

Does 3-funds offer higher returns or lower risk?

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby Christine_NM » Mon Jan 19, 2015 2:07 pm

Corrections on Balanced Index:

Since as you state above it has Admiral shares, by definition it does not have "two funds". It is one balanced fund, like Wellington or Wellesley, not a fund of funds. I am wary of taking advice from people who misstate the basic characteristics of anything, a fund or a car or an appliance.

I have found Bal Index to be an excellent core fund for a built-it-yourself portfolio that is fixed like a life strategy fund until you adjust it like a target date fund.

I don't always complain when you all bash Bal Index, but the time has come again. As a longtime Bal Index owner I find that it is only unsuitable (obviously) for a taxable investor who wants only tax-exempt bonds.

For an low bracket investor it is fine in a taxable account. I'm in the middle at 25-28% with nearly $800k in taxable Bal Index. And as they say, by leaving it alone I am "rich beyond my wildest dreams of avarice" -- I think that's how the saying goes. Anyway, I don't worry about money or taxes.

Have a nice day :happy
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

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Correction

Postby Taylor Larimore » Mon Jan 19, 2015 3:09 pm

Christine:

Thank you for the correction. I have edited my post to reflect that Balanced Index Fund does not contain two index funds but simply tracks two indexes.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: "Does 3-Funds Offer Higher Returns Or Lower Risk"

Postby BogleInvestorLondon » Mon Jan 19, 2015 11:32 pm

Taylor Larimore wrote:Bogleheads:

Below is the link to a lengthy discussion about The Three Fund Portfolio in another thread:

Does 3-funds offer higher returns or lower risk?

Best wishes.
Taylor


Hi Taylor

Thanks for the link. You might want to correct it since it takes me to the reply page.

The below should be correct:

viewtopic.php?mode=reply&f=10&t=155969#pr2339837

All the best.

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Re: The Three Fund Portfolio

Postby Taylor Larimore » Tue Jan 20, 2015 12:23 pm

BogleInvestorLondon:

Thank you for the correction. I edited my post.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby abuss368 » Thu Jan 22, 2015 9:13 am

The Three Fund Portfolio is an excellent choice for many investors. I know as I have relatives using it and are very happy with it. The other popular choice in our family has been Jack Bogle's Two Fund Portfolio: Total Stock and Total Bond!

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: The Three Fund Portfolio

Postby stemikger » Thu Jan 22, 2015 10:20 am

Christine_NM wrote:Corrections on Balanced Index:

Since as you state above it has Admiral shares, by definition it does not have "two funds". It is one balanced fund, like Wellington or Wellesley, not a fund of funds. I am wary of taking advice from people who misstate the basic characteristics of anything, a fund or a car or an appliance.

I have found Bal Index to be an excellent core fund for a built-it-yourself portfolio that is fixed like a life strategy fund until you adjust it like a target date fund.

I don't always complain when you all bash Bal Index, but the time has come again. As a longtime Bal Index owner I find that it is only unsuitable (obviously) for a taxable investor who wants only tax-exempt bonds.

For an low bracket investor it is fine in a taxable account. I'm in the middle at 25-28% with nearly $800k in taxable Bal Index. And as they say, by leaving it alone I am "rich beyond my wildest dreams of avarice" -- I think that's how the saying goes. Anyway, I don't worry about money or taxes.

Have a nice day :happy


Chrisine you are in good company. John Bogle is asked quite often how many funds does an index investor need and his answer is always the same, which is the Vanguard Balanced Index Fund.

Here is John Bogle on Target Date Funds:

http://www.morningstar.com/cover/videoc ... ?id=301426
Press on Regardless!!! | Holding the Balanced Index Fund through thick and thin!!

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Re: The Three Fund Portfolio

Postby parsi1 » Thu Jan 22, 2015 2:00 pm

I have never considered social security and pension as part of my asset allocation. I am 55 years old and currently 90% in target retirement 2020 which is currently almost 60/40.
How should I know if this is a right allocation for me if I factor in the SS and pension?
Thanks for any help

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Re: The Three Fund Portfolio

Postby chaz » Thu Jan 22, 2015 2:49 pm

parsi1 wrote:I have never considered social security and pension as part of my asset allocation. I am 55 years old and currently 90% in target retirement 2020 which is currently almost 60/40.
How should I know if this is a right allocation for me if I factor in the SS and pension?
Thanks for any help

Good AA IMO.
Chaz | | | | “Money is better than poverty, if only for financial reasons." Woody Allen | | | | http://www.bogleheads.org/wiki/index.php/Main_Page

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Re: The Three Fund Portfolio

Postby abuss368 » Thu Jan 22, 2015 6:07 pm

parsi1 wrote:I have never considered social security and pension as part of my asset allocation. I am 55 years old and currently 90% in target retirement 2020 which is currently almost 60/40.
How should I know if this is a right allocation for me if I factor in the SS and pension?
Thanks for any help


I have not considered the value of social security either. I can not rebalance that value when the market declines.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Become a millionaire with The Three Fund Portfolio

Postby Taylor Larimore » Sat Feb 14, 2015 11:17 pm

Bogleheads:

In his most recent book, If You Can, Dr. William Bernstein endorses The Three Fund Portfolio:
Would you believe me if I told you there's is an investment strategy that a seven year old could understand, will take you 15 minutes of work per year, outperform 90% of finance professionals in the long run, and make you a millionaire over time?

Well, it is true, and here it is: Start by saving 15% of your salary at age 25 into a 401(k) plan, an IRA, or a taxable account (or all three). Put equal amounts of that 15% into just three different mutual funds:

* A U.S. total stock market mutual fund
* An international stock market mutual fund
* A U.S. total bond market index fund

http://www.etf.com/docs/IfYouCan.pdf

Happy Valentine Day!
Taylor




 
 




"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Life Strategy and Target Funds alternative

Postby AE81 » Sun Feb 15, 2015 11:05 am

Taylor Larimore wrote:
* Minimum investment is $3,000 (VBINX investor shares). Life Strategy and Target Fund minimums are $1,000.



STAR fund and the Target Retirement series have a $1,000 minimum. The LifeStrategy funds have a $3,000 minimum

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Re: The Three Fund Portfolio

Postby Taylor Larimore » Sun Feb 15, 2015 11:46 am

Taylor Larimore wrote:
* Minimum investment is $3,000 (VBINX investor shares). Life Strategy and Target Fund minimums are $1,000.

AE81 wrote:STAR fund and the Target Retirement series have a $1,000 minimum. The LifeStrategy funds have a $3,000 minimum

AE81:

Thank you for the correction. I will edit my post.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby BogleInvestorLondon » Sun Feb 15, 2015 2:54 pm

For UK investors the minimum when investing directly through Vanguard is £100,000 (roughly just over $150,000).

I wonder why the difference is so big.

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Vanguard "Select Funds"

Postby Taylor Larimore » Sun Feb 22, 2015 5:49 pm

Bogleheads:

Today I learned that Vanguard keeps a short list of "Select Funds."

The three funds in The Three Fund Portfolio are on the list.

Vanguard Select Funds

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Vanguard "Select Funds"

Postby abuss368 » Sun Feb 22, 2015 9:09 pm

Taylor Larimore wrote:Bogleheads:

Today I learned that Vanguard keeps a short list of "Select Funds."

The three funds in The Three Fund Portfolio are on the list.

Vanguard Select Funds

Best wishes.
Taylor


Hi Taylor,

I have never seen that page from Vanguard before so thank you fro providing. They included Total International Bond as they are really marketing that fund. They also included Short Term TIPS and a few active funds. Interesting.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Simpler and Smarter Investing With a 3 Index Fund Portfolio

Postby Taylor Larimore » Mon Mar 02, 2015 5:25 pm

Bogleheads:

"Saving to Invest" is a financial website with over 100,000 monthly visitors. In its latest blog, the editor wrote:
I am streamlining and simplifying my investing strategy. In a nutshell this means going from holding a bunch of stocks, ETFs and mutual funds to just holding three low-cost index funds that provide the diversification and exposure I need.

Simpler and Smarter Investing With a 3 Index Fund Portfolio

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby macav933 » Tue Mar 03, 2015 9:30 pm

Decided to go with a Schwab ETF version of the 3 Fund Portfolio. My question centers around the weighting of the 3 International funds. Your thoughts?

SCHB US Broad Market

SCHZ. US Aggregate Bond

SCHC International Small Cap Equity
SCHF international Equity
SCHE Emerging Market Equity

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Re: The Three Fund Portfolio

Postby tj » Tue Mar 03, 2015 9:49 pm

macav933 wrote:Decided to go with a Schwab ETF version of the 3 Fund Portfolio. My question centers around the weighting of the 3 International funds. Your thoughts?

SCHB US Broad Market

SCHZ. US Aggregate Bond

SCHC International Small Cap Equity
SCHF international Equity
SCHE Emerging Market Equity



Just use SCHF. It includes samll and Emerging. If you're content with SCHB, you should be content with SCHF

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Re: The Three Fund Portfolio

Postby Taylor Larimore » Tue Mar 03, 2015 10:17 pm

macav933 wrote:Decided to go with a Schwab ETF version of the 3 Fund Portfolio. My question centers around the weighting of the 3 International funds. Your thoughts?

SCHB US Broad Market

SCHZ. US Aggregate Bond

SCHC International Small Cap Equity
SCHF international Equity
SCHE Emerging Market Equity

macav933:

In my opinion, ONE total international market index fund (SCHF) is all you should consider. Jack Bogle (who knows more than we do) believes you don't even need an international fund.

Are you aware that SCHC and SCHE expense ratios are about twice SCHF.

In the 2011 international bear market SCHC and SCHE both fell much more than SCHF. They offered no diversification benefit--only a bigger loss.

Strive for simplicity -- not complexity.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby pingo » Wed Mar 04, 2015 1:56 pm

tj wrote:Just use SCHF. It includes samll and Emerging. If you're content with SCHB, you should be content with SCHF


Not so. SCHF is essentially a Developed-only large cap fund, although it does hold a few mid caps. (Source link.)

I agree that it's okay to use only SCHF for one's international exposure, although I myself use SCHF, SCHE and SCHC.

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Re: The Three Fund Portfolio

Postby abuss368 » Wed Mar 04, 2015 10:24 pm

Taylor Larimore wrote:
macav933 wrote:Decided to go with a Schwab ETF version of the 3 Fund Portfolio. My question centers around the weighting of the 3 International funds. Your thoughts?

SCHB US Broad Market

SCHZ. US Aggregate Bond

SCHC International Small Cap Equity
SCHF international Equity
SCHE Emerging Market Equity

macav933:

In my opinion, ONE total international market index fund (SCHF) is all you should consider. Jack Bogle (who knows more than we do) believes you don't even need an international fund.

Are you aware that SCHC and SCHE expense ratios are about twice SCHF.

In the 2011 international bear market SCHC and SCHE both fell much more than SCHF. They offered no diversification benefit--only a bigger loss.

Strive for simplicity -- not complexity.

Best wishes
Taylor


Hi Taylor,

Are you going to stay the course with international equity considering Mr. Bogle's perspective.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: The Three Fund Portfolio

Postby Leeraar » Thu Mar 05, 2015 3:34 am

abuss368 wrote:
Taylor Larimore wrote:Strive for simplicity -- not complexity.

Best wishes
Taylor
Hi Taylor,

Are you going to stay the course with international equity considering Mr. Bogle's perspective.

Best.

It was New Year's Day, 2012. I logged on to Bogleheads, and Taylor had posted the first message in this thread.

For me, it was a revelation. It was the answer to a problem I had been struggling with for years. I had been reading Bogleheads for about six months, and had gotten the idea about index funds and the total market. But, I never realized it could be so simple.

After doing some research, I discovered the LifeStrategy Funds, which are as pure an implementation of the 3-fund portfolio in one fund as you can find. So, I moved 80% of assets to LS Moderate VSMGX (60/40) and then added bonds, 10% VFSUX (Short Term Investment Grade) and 10% VBILX (Intermediate Term) to bring the overall AA to 48/52. 50/50 in my book. I could not be more satisfied.

Yes, I know Vanguard has added international bonds, and has recently been tampering with the international allocations in the LS funds. That does not bother me enough to contemplate a change. I am exactly with Mike Piper on this:

http://www.obliviousinvestor.com/vangua ... egy-funds/

I have also been fortunate enough to be able to thank both Taylor Larimore and Jack Bogle in person at a couple of Bogleheads Conferences.

On Jack Bogle: A great man. But, he has been around for decades, and probably makes at least one public utterance each working day. I would caution against a theological analysis ("Bible study class") of all that he has said.

The three-fund portfolio is majestic in its depth of understanding, and simplicity. The availability of an international allocation does not contradict what Jack Bogle says. If you wish, set your international allocation to zero and go with a two-fund portfolio.

Taylor, thank you again!

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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Re: The Three Fund Portfolio

Postby abuss368 » Thu Mar 05, 2015 7:49 am

Leeraar wrote:
abuss368 wrote:
Taylor Larimore wrote:Strive for simplicity -- not complexity.

Best wishes
Taylor
Hi Taylor,

Are you going to stay the course with international equity considering Mr. Bogle's perspective.

Best.

It was New Year's Day, 2012. I logged on to Bogleheads, and Taylor had posted the first message in this thread.

For me, it was a revelation. It was the answer to a problem I had been struggling with for years. I had been reading Bogleheads for about six months, and had gotten the idea about index funds and the total market. But, I never realized it could be so simple.

After doing some research, I discovered the LifeStrategy Funds, which are as pure an implementation of the 3-fund portfolio in one fund as you can find. So, I moved 80% of assets to LS Moderate VSMGX (60/40) and then added bonds, 10% VFSUX (Short Term Investment Grade) and 10% VBILX (Intermediate Term) to bring the overall AA to 48/52. 50/50 in my book. I could not be more satisfied.

Yes, I know Vanguard has added international bonds, and has recently been tampering with the international allocations in the LS funds. That does not bother me enough to contemplate a change. I am exactly with Mike Piper on this:

http://www.obliviousinvestor.com/vangua ... egy-funds/

I have also been fortunate enough to be able to thank both Taylor Larimore and Jack Bogle in person at a couple of Bogleheads Conferences.

On Jack Bogle: A great man. But, he has been around for decades, and probably makes at least one public utterance each working day. I would caution against a theological analysis ("Bible study class") of all that he has said.

The three-fund portfolio is majestic in its depth of understanding, and simplicity. The availability of an international allocation does not contradict what Jack Bogle says. If you wish, set your international allocation to zero and go with a two-fund portfolio.

Taylor, thank you again!

L.


What a great story. Thank you for sharing. The older I get the more I realize the Three Fund Portfolio is difficult to beat. LifeStrategy and Target funds are even harder to beat.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Stay the course?

Postby Taylor Larimore » Thu Mar 05, 2015 8:52 am

Are you going to stay the course with international equity considering Mr. Bogle's perspective.

Abuss:

I intend to stay the course based primarily on this quote by Mr. Bogle in Common Sense on Mutual Funds:
Stay the Course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times and I meant it every time. It is the most important single piece of investment wisdom I can give to you."

My international stock allocation is based primarily on this Vanguard study:

Considerations for investing in non-U.S. equities

Keep investing simple.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby RevYoung » Fri Mar 13, 2015 2:46 pm

Taylor,

I am 33 years old, and I had never invested before. I found a website a year or two ago that made a lot of sense to me: Mike's now-defunct LongTermReturns .com. I read everything there and wanted more. By the time I had payed off some loans and was ready to take action, though, I couldn't find the site anymore! (The story of his site can be read in a different thread: viewtopic.php?f=10&t=118571) Needless to say, I was a bit disheartened. I had a vague recollection of the kinds of advice he was giving: low-costs, indexing, etc. But I had no idea what a Boglehead was. I felt lost.

After far too much time Googling, I found this forum. I have finished reading this entire thread—from your first amazing post in 2012 through your post a week ago. It took a while, but I read every single post. Lots of great things to think about! I am also halfway through "The Bogleheads Guide to Retirement". My wife and I have maxed out 401k employer match and Roth IRAs for each of us. It's not much, but it's a start. And we're using the Three Fund Portfolio across the board.

I wish I could convey how much I appreciate what you've done. I know that words cannot suffice, but I'll try: thank you. I am forever indebted to you and your generosity in sharing your time and wisdom.

Have a wonderful weekend!
“For wisdom is a defence, and money is a defence: but the excellency of knowledge is, that wisdom giveth life to them that have it.”

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A reply to remember

Postby Taylor Larimore » Fri Mar 13, 2015 2:59 pm

RevYoung:

Your kind reply assures me "a wonderful weekend!"

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby PT53 » Fri Mar 13, 2015 7:49 pm

Newbie Boglehead here and I have been reading this great thread and the Core Four thread. All this is very empowering, got the books and I am planning on using the Three Fund for my Taxable and Tax Advantaged accounts. I may be going with a mirrored asset allocation instead of a spread allocation with tax exempt bonds in the taxable account.

I read the following post on The Core Four Thread:

Rick Ferri wrote:
Why not use Vanguard Total International Stock Index Fund
VGTSX


In a tax-exempt account it is "six of one, half dozen of the other." However, in a taxable account, the Vanguard FTSE All-World ex-US Index Fund is a fund of stocks and has pass through of foreign tax credits. The Vanguard Total International Stock Index fund does not because it is a fund-of-funds. Why not? Ask the IRS.

Rick Ferri



My question is
Seven years later is this still correct that FTSE would be better in a taxable account than VGTSX for the foreign tax credit? When I look on Vanguard VGTSX seems to be a fund of stocks now and not a fund of Funds.
Thanks,
PT53

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Re: The Three Fund Portfolio

Postby BrandonBogle » Fri Mar 13, 2015 8:53 pm

Welcome PT53!

And congratulations on a great tenant in any investment advice - be willing to ask and be willing to be challenge (if it's true and worthwhile, it will survive the challenge).

In response to your query, it is no longer true for the purposes of passing through the foreign taxes paid; Vanguard's Total International Fund now passes along its foreign tax credits. I hold it and its pass through credits are on my 1099. Vanguard has a page where they detail all the international funds that pass through the foreign taxes that you can use the foreign tax credit on. That page can be viewed here: 2014 foreign tax credit worksheets for eligible Vanguard funds

Now, using FTSE vs. Total International is a different question (where you can see where I stand on that), but the decision should not be made b/c of tax treatment.

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Re: The Three Fund Portfolio

Postby PT53 » Fri Mar 13, 2015 9:17 pm

Thank you Brandonbogle!

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Re: The Three Fund Portfolio

Postby tj » Sat Mar 14, 2015 12:36 am

BrandonBogle wrote:Welcome PT53!

And congratulations on a great tenant in any investment advice - be willing to ask and be willing to be challenge (if it's true and worthwhile, it will survive the challenge).

In response to your query, it is no longer true for the purposes of passing through the foreign taxes paid; Vanguard's Total International Fund now passes along its foreign tax credits. I hold it and its pass through credits are on my 1099. Vanguard has a page where they detail all the international funds that pass through the foreign taxes that you can use the foreign tax credit on. That page can be viewed here: 2014 foreign tax credit worksheets for eligible Vanguard funds

Now, using FTSE vs. Total International is a different question (where you can see where I stand on that), but the decision should not be made b/c of tax treatment.


Furthermore, fund of funds pass along tax credits too. If you have a LifeStrategy fund, you would still get the tax credit.

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Re: The Three Fund Portfolio

Postby abuss368 » Sat Mar 14, 2015 10:01 am

tj wrote:
BrandonBogle wrote:Welcome PT53!

And congratulations on a great tenant in any investment advice - be willing to ask and be willing to be challenge (if it's true and worthwhile, it will survive the challenge).

In response to your query, it is no longer true for the purposes of passing through the foreign taxes paid; Vanguard's Total International Fund now passes along its foreign tax credits. I hold it and its pass through credits are on my 1099. Vanguard has a page where they detail all the international funds that pass through the foreign taxes that you can use the foreign tax credit on. That page can be viewed here: 2014 foreign tax credit worksheets for eligible Vanguard funds

Now, using FTSE vs. Total International is a different question (where you can see where I stand on that), but the decision should not be made b/c of tax treatment.


Furthermore, fund of funds pass along tax credits too. If you have a LifeStrategy fund, you would still get the tax credit.


In an IRA it would not matter.
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Re: The Three Fund Portfolio

Postby tj » Sat Mar 14, 2015 10:56 am

abuss368 wrote:
tj wrote:
BrandonBogle wrote:Welcome PT53!

And congratulations on a great tenant in any investment advice - be willing to ask and be willing to be challenge (if it's true and worthwhile, it will survive the challenge).

In response to your query, it is no longer true for the purposes of passing through the foreign taxes paid; Vanguard's Total International Fund now passes along its foreign tax credits. I hold it and its pass through credits are on my 1099. Vanguard has a page where they detail all the international funds that pass through the foreign taxes that you can use the foreign tax credit on. That page can be viewed here: 2014 foreign tax credit worksheets for eligible Vanguard funds

Now, using FTSE vs. Total International is a different question (where you can see where I stand on that), but the decision should not be made b/c of tax treatment.


Furthermore, fund of funds pass along tax credits too. If you have a LifeStrategy fund, you would still get the tax credit.


In an IRA it would not matter.


In an IRA, it never would have mattered. My point was that the tax code has changed since the time of that poster's quote.

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Re: The Three Fund Portfolio

Postby LadyGeek » Sat Mar 14, 2015 6:34 pm

FYI - New member ecvol posted here asking for help to start a 3-fund portfolio. I moved it into a stand-alone thread: [Help with starting a] Three Fund Portfolio
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Re: The Three Fund Portfolio

Postby selftalk » Fri Apr 03, 2015 8:14 am

Would an asset allocation in the equity portion in both taxable and tax sheltered accounts of VTSAX 80% and VTIAX 20% be intelligent to structure for a long term approach in view of Taylor`s views ? He seems to have the most experience on this website.

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Re: The Three Fund Portfolio

Postby abuss368 » Fri Apr 03, 2015 8:34 am

selftalk wrote:Would an asset allocation in the equity portion in both taxable and tax sheltered accounts of VTSAX 80% and VTIAX 20% be intelligent to structure for a long term approach in view of Taylor`s views ? He seems to have the most experience on this website.


What are the names of those two funds as I am unfamiliar with ticker symbols.
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Re: The Three Fund Portfolio

Postby TXAGBH » Fri Apr 03, 2015 8:38 am

abuss368 wrote:
selftalk wrote:Would an asset allocation in the equity portion in both taxable and tax sheltered accounts of VTSAX 80% and VTIAX 20% be intelligent to structure for a long term approach in view of Taylor`s views ? He seems to have the most experience on this website.


What are the names of those two funds as I am unfamiliar with ticker symbols.


I think he's asking about VG Admiral shares: TSM (80%) & TISM (20%).

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Re: The Three Fund Portfolio

Postby selftalk » Fri Apr 03, 2015 8:39 am

VTSAX Vanguard total Stock Market Index Fund and VTIAX Vanguard Total International Fund --- both are the admiral shares.

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International Equity Allocation ?

Postby Taylor Larimore » Fri Apr 03, 2015 10:16 am

selftalk wrote:Would an asset allocation in the equity portion in both taxable and tax sheltered accounts of VTSAX 80% and VTIAX 20% be intelligent to structure for a long term approach in view of Taylor`s views ? He seems to have the most experience on this website.

Selftalk:

Try to avoid holding the same funds in different accounts.

I agree with Vanguard's Research recommendation:
Empirical and practical issues suggest a starting allocation to international
stocks of 20%, with an upper limit based on the proportion of the global
market they represent.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three Fund Portfolio

Postby abuss368 » Fri Apr 03, 2015 1:40 pm

selftalk wrote:Would an asset allocation in the equity portion in both taxable and tax sheltered accounts of VTSAX 80% and VTIAX 20% be intelligent to structure for a long term approach in view of Taylor`s views ? He seems to have the most experience on this website.


Hi selftalk,

Vanguard has generally recommended that international equities comprise 20% - market weight of the overall equity allocation.

Best.
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Re: The Three Fund Portfolio

Postby gvsucavie03 » Sat Apr 04, 2015 6:12 am

I just recently gave two lectures in a fellow colleague's Personal Finance class consisting of mostly high school seniors. The main topic was investing with index funds, a three-fund portfolio (actually suggested a target retirement fund for simplicity), and controlling costs as the main points. They were really interested and had never understood how easy it is to be an informed, DIY investor. I also recommended BH Guide to Investing as a resource book to read once they get to that point in life.

My colleague (who was out on a trip that day) had asked me to go through my presentation with him so he can understand. It is a Dave Ramsey course, so this subject is where a lot of disagreements come up and I did spend some time with the students clarifying some of Dave's 'misconceptions' (need an advisor, 12% returns, only buy top-performing active funds, 8% withdrawal rate, 100% stock for life). I really do think they got it. Once they heard me say TR fund for life is all you need, they felt at ease.

Thanks Taylor and the other BH's for your great information!

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Re: The Three Fund Portfolio

Postby pingo » Sat Apr 04, 2015 1:13 pm

^ Wonderful!

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Re: The Three Fund Portfolio

Postby gvsucavie03 » Sat Apr 04, 2015 4:37 pm

pingo wrote:^ Wonderful!


Both my colleague and the teacher's union have been asking for information. I mention the book and wiki whenever I can. That book (BH Guide to Investing) is a resource every American should have on their shelf. Soooo valuable.

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Re: The Three Fund Portfolio

Postby abuss368 » Sat Apr 04, 2015 6:51 pm

gvsucavie03 wrote:I just recently gave two lectures in a fellow colleague's Personal Finance class consisting of mostly high school seniors. The main topic was investing with index funds, a three-fund portfolio (actually suggested a target retirement fund for simplicity), and controlling costs as the main points. They were really interested and had never understood how easy it is to be an informed, DIY investor. I also recommended BH Guide to Investing as a resource book to read once they get to that point in life.

My colleague (who was out on a trip that day) had asked me to go through my presentation with him so he can understand. It is a Dave Ramsey course, so this subject is where a lot of disagreements come up and I did spend some time with the students clarifying some of Dave's 'misconceptions' (need an advisor, 12% returns, only buy top-performing active funds, 8% withdrawal rate, 100% stock for life). I really do think they got it. Once they heard me say TR fund for life is all you need, they felt at ease.

Thanks Taylor and the other BH's for your great information!


Great story!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: The Three Fund Portfolio

Postby LadyGeek » Sat Apr 04, 2015 8:27 pm

gvsucavie03 - If you want to discuss this further, post in Help create a Financial Presentation: Calling all Bogleheads, which was used to create this wiki article: Bogleheads® financial literacy project
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Re: The Three Fund Portfolio

Postby fortyofforty » Wed Apr 15, 2015 10:19 am

Any thoughts on constructing a Three Fund Portfolio inside the government's Thrift Savings Plan? I am specifically wondering about the use of the F (Total Bond Market) fund and G (guaranteed government securities) fund, and how and why people would choose between the two.
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Re: The Three Fund Portfolio

Postby BrandonBogle » Wed Apr 15, 2015 10:45 am

fortyofforty wrote:Any thoughts on constructing a Three Fund Portfolio inside the government's Thrift Savings Plan? I am specifically wondering about the use of the F (Total Bond Market) fund and G (guaranteed government securities) fund, and how and why people would choose between the two.


fortyofforthy, I would check out these threads for more info:
- Wiki: Three-Fund Portfolio (there is a section for the TSP half way down)
- Wiki: Thrift Savings Plan (there are points about using these funds in various scenarios, such as a total market approach)


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