The Three-Fund Portfolio

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"He Has Read Over 250 Investing Books"

Postby Taylor Larimore » Tue Jun 21, 2016 9:57 am

Bogleheads:

Another nice article about The Three Fund Portfolio:

HE HAS READ OVER 250 INVESTING BOOKS

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

User avatar
CABob
Posts: 4174
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: "He Has Read Over 250 Investing Books"

Postby CABob » Tue Jun 21, 2016 10:30 am

Taylor Larimore wrote:Bogleheads:

Another nice article about The Three Fund Portfolio:

HE HAS READ OVER 250 INVESTING BOOKS

Best wishes.
Taylor

Yes, a nice article about a nice gentleman. Thank you Taylor.
Bob

User avatar
PhysicianOnFIRE
Posts: 248
Joined: Fri Jan 08, 2016 3:46 pm
Location: Up North
Contact:

Re: "He Has Read Over 250 Investing Books"

Postby PhysicianOnFIRE » Tue Jun 21, 2016 11:10 am

Taylor Larimore wrote:Bogleheads:

Another nice article about The Three Fund Portfolio:

HE HAS READ OVER 250 INVESTING BOOKS

Best wishes.
Taylor


Thank you for the mention and the inspiration, and for all that you do.

Best,
-PoF

User avatar
wizzard
Posts: 70
Joined: Fri May 20, 2016 12:32 pm

Re: The Three-Fund Portfolio

Postby wizzard » Tue Jun 21, 2016 11:18 am

Thanks for posting that up!
I must say, I certainly need to catch up on my reading after seeing that list :shock:
"In uncertain times, show equanimity. Otherwise you are an unfit shareholder" -Charlie Munger

User avatar
PhysicianOnFIRE
Posts: 248
Joined: Fri Jan 08, 2016 3:46 pm
Location: Up North
Contact:

Re: The Three-Fund Portfolio

Postby PhysicianOnFIRE » Tue Jun 21, 2016 10:24 pm

wizzard wrote:Thanks for posting that up!
I must say, I certainly need to catch up on my reading after seeing that list :shock:


Don't worry. You've got plenty of time. Some of the titles are more than thirty years old.

The best part is, Taylor has read them so you don't have to. Three Funds and you're done!

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Tue Jun 21, 2016 11:34 pm

Awesome Taylor! Many thanks for your tireless contributions!
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

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Wed Jun 22, 2016 9:59 am

Hi Taylor,

Do you think Vanguard will ever go back to the Three Fund Portfolio?

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

User avatar
wizzard
Posts: 70
Joined: Fri May 20, 2016 12:32 pm

Re: The Three-Fund Portfolio

Postby wizzard » Wed Jun 22, 2016 11:24 am

PhysicianOnFIRE wrote:
wizzard wrote:Thanks for posting that up!
I must say, I certainly need to catch up on my reading after seeing that list :shock:


Don't worry. You've got plenty of time. Some of the titles are more than thirty years old.

The best part is, Taylor has read them so you don't have to. Three Funds and you're done!


I sure do, I've read 4 books in the past 2 months so little by little!

It's so simple, yet so many people make it harder than it should be. Sure its not exciting, but it works!
"In uncertain times, show equanimity. Otherwise you are an unfit shareholder" -Charlie Munger

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Wed Jun 22, 2016 11:36 am

wizzard wrote:
It's so simple, yet so many people make it harder than it should be. Sure its not exciting, but it works!


Remember our mentor Jack Bogle's excellent advice "Simplicity is the master key to financial success".
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

User avatar
CABob
Posts: 4174
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: The Three-Fund Portfolio

Postby CABob » Wed Jun 22, 2016 11:51 am

abuss368 wrote:Hi Taylor,

Do you think Vanguard will ever go back to the Three Fund Portfolio?

I'm not Taylor but what do you mean by Vanguard going back? The have had and will continue to have all of the "ingredients" for the 3-fund.
Or are you referring to their target date and Life Strategy funds where they have relatively recently added international bond funds making them 4-funds? From what I have heard from VG I think they are convinced that international bonds are a good addition to a diversified portfolio so I suspect they will stay with them for the foreseeable future.
But the question remains as to whether Taylor will start a new conversation to promote a Four Fund Portfolio?
:confused (I think not) :P
Bob

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Wed Jun 22, 2016 11:59 am

CABob wrote:
abuss368 wrote:Hi Taylor,

Do you think Vanguard will ever go back to the Three Fund Portfolio?

I'm not Taylor but what do you mean by Vanguard going back? The have had and will continue to have all of the "ingredients" for the 3-fund.
Or are you referring to their target date and Life Strategy funds where they have relatively recently added international bond funds making them 4-funds? From what I have heard from VG I think they are convinced that international bonds are a good addition to a diversified portfolio so I suspect they will stay with them for the foreseeable future.
But the question remains as to whether Taylor will start a new conversation to promote a Four Fund Portfolio?
:confused (I think not) :P


Do you invest in international bonds?
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

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Wed Jun 22, 2016 11:59 am

CABob wrote:
abuss368 wrote:Hi Taylor,

Do you think Vanguard will ever go back to the Three Fund Portfolio?

I'm not Taylor but what do you mean by Vanguard going back? The have had and will continue to have all of the "ingredients" for the 3-fund.
Or are you referring to their target date and Life Strategy funds where they have relatively recently added international bond funds making them 4-funds? From what I have heard from VG I think they are convinced that international bonds are a good addition to a diversified portfolio so I suspect they will stay with them for the foreseeable future.
But the question remains as to whether Taylor will start a new conversation to promote a Four Fund Portfolio?
:confused (I think not) :P


For a while, Vanguard essentially had a Three Fund Portfolio before adding international bonds. There recommendation tool also noted the three funds.
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

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Wed Jun 22, 2016 9:00 pm

CABob wrote:
abuss368 wrote:Hi Taylor,

Do you think Vanguard will ever go back to the Three Fund Portfolio?

I'm not Taylor but what do you mean by Vanguard going back? The have had and will continue to have all of the "ingredients" for the 3-fund.
Or are you referring to their target date and Life Strategy funds where they have relatively recently added international bond funds making them 4-funds? From what I have heard from VG I think they are convinced that international bonds are a good addition to a diversified portfolio so I suspect they will stay with them for the foreseeable future.
But the question remains as to whether Taylor will start a new conversation to promote a Four Fund Portfolio?
:confused (I think not) :P


Actually, I started the "Vanguard - Four Fund Portfolio" thread a while ago and there were very Good responses. I would like to keep it going.
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

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Adding more funds to The Three-Fund Portfolio?

Postby Taylor Larimore » Wed Jun 22, 2016 10:33 pm

But the question remains as to whether Taylor will start a new conversation to promote a Four Fund Portfolio?

Abuss:

Among the benefits of the The Three-Fund Portfolio is its low-cost, extraordinary diversification (over 17,000 securities), its tax-efficiency and simplicity (see link below). It is a sophisticated and superior portfolio for most investors.

I have no reason to promote a more complex four, five or ten-fund fund portfolio.
"The enemy of a good plan is the dream of a perfect plan." -- Jack Bogle

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

Cruncher
Posts: 144
Joined: Mon Feb 01, 2010 12:56 am

Re: The Three-Fund Portfolio

Postby Cruncher » Sun Jun 26, 2016 5:58 pm

Taylor,

I hang on the fringes of Bogle forum time ... thank you for your contribution to society.

I know that be a little heavy, but thanks anyway.

Ditto your work with my grandpa a generation ago.

Regarding the 3-fund portfolio, I have just recently converted to a 3-fund portfolio. I've been a slice 'n dicer for the last 7 years or so ...

Cheers my friend!

Adam

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"The Best Way to Diversify Equity Risk"

Postby Taylor Larimore » Sun Jun 26, 2016 8:17 pm

Bogleheads:

In a recent study, Morningstar reported: "Despite a proliferation of diversification alternatives, high-quality bonds remained among the best asset classes to diversify equity risk over numerous periods. Notably, the correlation between the S&P 500 and the Barclays US Aggregate Bond Index over the three-, five-, and 10-year periods was 0.1, -0.17, and 0.04, respectively."

Vanguard high-quality Total Bond Market Index Fund is the bond portion of The Three-Fund Portfolio.

The Best Way to Diversify Equity Risk

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

Kitty Telltales
Posts: 88
Joined: Thu Mar 17, 2016 8:36 am
Location: Europe sometimes Florida

Re: The Three-Fund Portfolio

Postby Kitty Telltales » Mon Jun 27, 2016 8:54 am

While placing an order for VTSMX, the Vanguard site asked if I would like to change it the Total Stock Market Index Admiral 0585 due to lower costs. Would the Bogleheads advice this switch?

User avatar
CABob
Posts: 4174
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: The Three-Fund Portfolio

Postby CABob » Mon Jun 27, 2016 9:15 am

Kitty Telltales wrote:While placing an order for VTSMX, the Vanguard site asked if I would like to change it the Total Stock Market Index Admiral 0585 due to lower costs. Would the Bogleheads advice this switch?

Yes, no question about it. You get a lower expense ratio and no downside.
Bob

Kitty Telltales
Posts: 88
Joined: Thu Mar 17, 2016 8:36 am
Location: Europe sometimes Florida

Re: The Three-Fund Portfolio

Postby Kitty Telltales » Mon Jun 27, 2016 9:27 am

Thanks CABob1 I see that they make the suggestion due to minimum investment amounts, but is it really the same? I should be reading the fine print before hitting buy, I know. :wink: :wink:

dbr
Posts: 21210
Joined: Sun Mar 04, 2007 9:50 am

Re: The Three-Fund Portfolio

Postby dbr » Mon Jun 27, 2016 9:31 am

CABob wrote:
Kitty Telltales wrote:While placing an order for VTSMX, the Vanguard site asked if I would like to change it the Total Stock Market Index Admiral 0585 due to lower costs. Would the Bogleheads advice this switch?

Yes, no question about it. You get a lower expense ratio and no downside.


Yes, but it should be understood this is not really a switch as it is just selecting one share class of the same fund instead of another one. It wasn't investment advice to invest in something different. In fact I think Vanguard will have changed the investment over without asking if the amount invested exceeds the minimum. I am not sure you can invest in an investor share class rather than the Admiral version if the investment exceeds the minimum. Has anyone done that?

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Investor shares vs. Admiral shares ?

Postby Taylor Larimore » Mon Jun 27, 2016 9:50 am

Kitty Telltales wrote:While placing an order for VTSMX, the Vanguard site asked if I would like to change it the Total Stock Market Index Admiral 0585 due to lower costs. Would the Bogleheads advice this switch?

Kitty:

Vanguard was trying to help you by alerting you to the lower cost Admiral shares (0.05%/$10,000 minimum) vs. higher cost Investor shares (0.16%/$3,000 minimum).

This is one of the advantages of having fewer but larger funds.

Make the no-cost switch.

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

User avatar
CABob
Posts: 4174
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: The Three-Fund Portfolio

Postby CABob » Mon Jun 27, 2016 9:58 am

Kitty Telltales wrote:Thanks CABob1 I see that they make the suggestion due to minimum investment amounts, but is it really the same? I should be reading the fine print before hitting buy, I know. :wink: :wink:

Perhaps this link about share classes will be informative.
Bob

Kitty Telltales
Posts: 88
Joined: Thu Mar 17, 2016 8:36 am
Location: Europe sometimes Florida

Re: The Three-Fund Portfolio

Postby Kitty Telltales » Mon Jun 27, 2016 10:50 am

Thank you Bob for the web page which precisely answered my question, and especially Taylor for giving me confidence with his wise words. I'm making decisions from the center of Europe, where it's surprisingly calm and favorable sailing, despite the Brexit vote last week. I wouldn't have the confidence I've needed without what I've learned from the Bogleheads....again thanks so much.

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Mon Jul 04, 2016 5:48 pm

Jack Bogle:

The other thing that's typical of an industry that's going kind of marketing-wild is think about [how much] are people saying you should put in these exotic, if you will, (international) bond funds. And they say, well, maybe 5% of your bond position or 10% of your bond position. Well, that's not going to change your returns. They're expensive. They have hedging costs--I guess about half are hedged and half are not. I don't even an opinion about which is which because I wouldn't buy either.
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

boglephreak
Posts: 410
Joined: Fri Apr 22, 2016 5:16 pm

Re: The Three-Fund Portfolio

Postby boglephreak » Wed Jul 06, 2016 2:41 am

tl:dr - should i purchase small cap in taxable to complement my S&P 500 in 401k to emulate the TSM? or just treat S&P 500 as the same as TSM?

75% of our retirement money is in my 401k, which only offers a S&P 500 index (other funds are active with 1.0%+ ER). all of our bonds are in my wife's 401k and I dont want to put anything else in there (this is about 15% of our total retirement money). i am currently building our TISM in our taxable account (thanks brexit!). once we get the TISM up to our preferred allocation, should we then allocate future contributions to TSM/TISM to maintain the allocation between US/int'l (necessarily treating TSM and S&P 500 as the same)? or should i purchase small cap in the taxable account to make the S&P 500 look more like TSM (effectively changing it to a four fund portfolio) as well as TISM to maintain the allocation? i am concerned that with S&P 500 we are not getting the benefit of small cap that we would with TSM, and that it is heavily weighted towards large cap.

also, if we should buy small cap. which Vanguard fund (our taxable account is at VG) and how much percentage S&P 500:Small Cap to emulate TSM?

if it matters, we are aiming for 70:20:10 (US, Int'l, Bonds); we are currently 75:10:15 but quickly approaching the desired allocation. also, i am using new money to build the portfolio, i am not selling anything.

thanks!

User avatar
LadyGeek
Site Admin
Posts: 36368
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: The Three-Fund Portfolio

Postby LadyGeek » Wed Jul 06, 2016 8:16 am

boglephreak - Those are good questions, but the answer on how to allocate your funds depends on what you have now.

It's best to keep all of your information in one spot. I recommend you bump your earlier thread and ask there. 401k Portfolio Advice
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

boglephreak
Posts: 410
Joined: Fri Apr 22, 2016 5:16 pm

Re: The Three-Fund Portfolio

Postby boglephreak » Wed Jul 06, 2016 11:40 am

Thanks LadyGeek. I was wondering about the issue as more theoretical than me specifically, but I will go ahead and update/bump my old thread so people have my information available to answer.

User avatar
Fieldsy1024
Posts: 621
Joined: Sun Feb 24, 2013 8:23 am

Re: The Three-Fund Portfolio

Postby Fieldsy1024 » Fri Jul 08, 2016 7:53 am

If I wanted to test myself by taking out the bond portion of this portfolio, would going 80 VTSAX/ 20 Int'l be something that might be a good portfolio (for someone who wants 100% stocks).

I'd like to try it, but would like to hear from Taylor and others who have a lot of experience with this 3 fund. I'd like as few funds as possible, so that is why I was just thinking of keeping that two. Is another two fund or 3 fund (100% stocks) better than the 80/20 I listed above.

Thank you so much.

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"Why Buy Bonds?"

Postby Taylor Larimore » Fri Jul 08, 2016 8:23 am

Fieldsy1024 wrote:If I wanted to test myself by taking out the bond portion of this portfolio, would going 80 VTSAX/ 20 Int'l be something that might be a good portfolio (for someone who wants 100% stocks)?

Yes. I think it would be an excellent all-stock portfolio.

However, I believe there are very few investors who should have 100% stock portfolios. Jason Zweig, is one of the most knowledgeable personal finance writers in the business. I saved this article from 1999:


WHY BUY BONDS?

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

User avatar
abuss368
Posts: 11130
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: The Three-Fund Portfolio

Postby abuss368 » Fri Jul 08, 2016 9:04 am

Fieldsy1024 wrote:If I wanted to test myself by taking out the bond portion of this portfolio, would going 80 VTSAX/ 20 Int'l be something that might be a good portfolio (for someone who wants 100% stocks).

I'd like to try it, but would like to hear from Taylor and others who have a lot of experience with this 3 fund. I'd like as few funds as possible, so that is why I was just thinking of keeping that two. Is another two fund or 3 fund (100% stocks) better than the 80/20 I listed above.

Thank you so much.


Hi Fieldsy1024,

That is a lot of risks which may or may not make much difference over time. I recall Warren Buffett's mentor Benjamin Grahan noted that all investors should have at least 25% or so in bonds.

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

User avatar
Fieldsy1024
Posts: 621
Joined: Sun Feb 24, 2013 8:23 am

Re: "Why Buy Bonds?"

Postby Fieldsy1024 » Fri Jul 08, 2016 1:58 pm

Taylor Larimore wrote:
Fieldsy1024 wrote:If I wanted to test myself by taking out the bond portion of this portfolio, would going 80 VTSAX/ 20 Int'l be something that might be a good portfolio (for someone who wants 100% stocks)?

Yes. I think it would be an excellent all-stock portfolio.

However, I believe there are very few investors who should have 100% stock portfolios. Jason Zweig, is one of the most knowledgeable personal finance writers in the business. I saved this article from 1999:


WHY BUY BONDS?

Best wishes.
Taylor

Thank you and abuss for feedback.
Last edited by Fieldsy1024 on Fri Jul 08, 2016 2:10 pm, edited 1 time in total.

dbr
Posts: 21210
Joined: Sun Mar 04, 2007 9:50 am

Re: The Three-Fund Portfolio

Postby dbr » Fri Jul 08, 2016 2:03 pm

I don't understand the concept expressed here of "testing myself" or "trying out" an asset allocation. This is not attempting to run a mile 15 seconds faster than you did before to test yourself or trying out a certain model of car to see if you like it. The important features of an asset allocation need enough time to develop that there really isn't a second time. Some experiences that might happen might just as well never happen. Worse than that, even if one discerns that a certain outcome has in fact materialized one cannot make the mistake of confusing outcome and strategy.

User avatar
Fieldsy1024
Posts: 621
Joined: Sun Feb 24, 2013 8:23 am

Re: The Three-Fund Portfolio

Postby Fieldsy1024 » Fri Jul 08, 2016 2:11 pm

dbr wrote:I don't understand the concept expressed here of "testing myself" or "trying out" an asset allocation. This is not attempting to run a mile 15 seconds faster than you did before to test yourself or trying out a certain model of car to see if you like it. The important features of an asset allocation need enough time to develop that there really isn't a second time. Some experiences that might happen might just as well never happen. Worse than that, even if one discerns that a certain outcome has in fact materialized one cannot make the mistake of confusing outcome and strategy.


I simply want to try this allocation while I am 31 years old and I feel like it.

gvsucavie03
Posts: 1097
Joined: Sat Feb 16, 2013 8:30 am

Re: "Why Buy Bonds?"

Postby gvsucavie03 » Fri Jul 08, 2016 3:19 pm

Taylor Larimore wrote:
Fieldsy1024 wrote:If I wanted to test myself by taking out the bond portion of this portfolio, would going 80 VTSAX/ 20 Int'l be something that might be a good portfolio (for someone who wants 100% stocks)?

Yes. I think it would be an excellent all-stock portfolio.

However, I believe there are very few investors who should have 100% stock portfolios. Jason Zweig, is one of the most knowledgeable personal finance writers in the business. I saved this article from 1999:


WHY BUY BONDS?

Best wishes.
Taylor


Great article!

golfallday
Posts: 117
Joined: Sat Feb 14, 2009 3:43 am
Location: College Point, NY

Re: The Three-Fund Portfolio

Postby golfallday » Thu Jul 28, 2016 12:27 pm

Great stuff Taylor, as always. I learn something every time I read your posts and threads. I don't have a TSM fund in my 457, so my 3 fund portfolio is:

55% VIIIX (.02% ER)
15% Northern Trust Collective Trust MSCI ACWI ex-US Index (.09% ER)
30% VBTIX (.06% ER)

It's a simple AA, but as Dr Bernstein stated in one of his books, "Get over it!" I auto rebalance the first week of December. I'm comfortable with this allocation for the foreseeable future. I'm 52 and will keep this mix until I'm 60.

User avatar
Lieutenant.Columbo
Posts: 755
Joined: Sat Sep 05, 2015 9:20 pm
Location: 30th Parallel North

Re: The Three-Fund Portfolio

Postby Lieutenant.Columbo » Sat Jul 30, 2016 7:17 pm

does one hold the VERY SAME three broad funds during de-accumulation (retirement) as they did during accumulation?

if so, why?

if not, why not?

thank you
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Same 3 Funds in Retirement ?

Postby Taylor Larimore » Sat Jul 30, 2016 7:39 pm

JLMA wrote:does one hold the VERY SAME three broad funds during de-accumulation (retirement) as they did during accumulation?

if so, why?

if not, why not?

thank you

JLMA:

Yes, hold the same three funds for the many reasons in my opening post.

You will probably want to increase your Total Bond Fund allocation (for less risk) as you get older.

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

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Total Bond Market or Tax-Exempt Bond Fund?

Postby Taylor Larimore » Sun Jul 31, 2016 9:55 am

abuss368 wrote:
"What tax bracket maximum is best for Total Bond in taxable accounts?"

Tax-expert, David Grabner replied:
"My rule of thumb is that corporate and municipal bonds of equal risk are priced to break even in a 25% bracket. Therefore, I recommend Total Bond Market in a 25% bracket unless Vanguard has a muni fund for your state, you live in a state which has an income tax but exempts all munis, or you are in some tax phase-out (for example, the child tax credit; muni income is not counted for this phase-out)."
"Simplicity is the master key to financial success." -- Jack Bogle

mc2
Posts: 66
Joined: Wed Jan 13, 2016 10:27 am

Re: The Three-Fund Portfolio

Postby mc2 » Fri Aug 05, 2016 10:47 am

Fieldsy1024 wrote:
dbr wrote:I don't understand the concept expressed here of "testing myself" or "trying out" an asset allocation. This is not attempting to run a mile 15 seconds faster than you did before to test yourself or trying out a certain model of car to see if you like it. The important features of an asset allocation need enough time to develop that there really isn't a second time. Some experiences that might happen might just as well never happen. Worse than that, even if one discerns that a certain outcome has in fact materialized one cannot make the mistake of confusing outcome and strategy.


I simply want to try this allocation while I am 31 years old and I feel like it.


Ya know, I can relate. I was a long time lurker and often had bogle-esque investment mindset with interests in low-cost VG funds. I then read a lot, educated myself and gave my self-designed allocation a whirl. As I got a little older, I learned the value of simplicity and now am a happy 3-funder. Interestingly enough, I used to have a number of funds via 401k that were not index and those have lagged the S&P 500 at 1 and 3 year benchmarks. It was proof enough that I don't have to overthink anything and ignoring the noise has been very freeing.

Adjusting to Admiral and 3 fund cut my expense ratio by over 0.5% and my portfolio is performing very well.

So...I think it's good to start somewhere by yourself and with time, you'll learn even more and make good investment decisions as long as you keep your ears open and listen.

Good luck!

User avatar
Lieutenant.Columbo
Posts: 755
Joined: Sat Sep 05, 2015 9:20 pm
Location: 30th Parallel North

Re: Total Bond Market or Tax-Exempt Bond Fund?

Postby Lieutenant.Columbo » Fri Aug 05, 2016 11:43 am

Taylor Larimore wrote:abuss368 wrote:
"What tax bracket maximum is best for Total Bond in taxable accounts?"

Tax-expert, David Grabner replied:
"My rule of thumb is that corporate and municipal bonds of equal risk are priced to break even in a 25% bracket. Therefore, I recommend Total Bond Market in a 25% bracket unless Vanguard has a muni fund for your state, you live in a state which has an income tax but exempts all munis, or you are in some tax phase-out (for example, the child tax credit; muni income is not counted for this phase-out)."


Taylor,

Does this mean that someone in the 30%plus Tax bracket should not hold Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) in TAXABLE? Which one instead?

thank you
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Tax-advantaged accounts filled with Total Bond Market?

Postby Taylor Larimore » Fri Aug 05, 2016 3:31 pm

JLMA wrote:
Taylor Larimore wrote:abuss368 wrote:
"What tax bracket maximum is best for Total Bond in taxable accounts?"

Tax-expert, David Grabner replied:
"My rule of thumb is that corporate and municipal bonds of equal risk are priced to break even in a 25% bracket. Therefore, I recommend Total Bond Market in a 25% bracket unless Vanguard has a muni fund for your state, you live in a state which has an income tax but exempts all munis, or you are in some tax phase-out (for example, the child tax credit; muni income is not counted for this phase-out)."

Taylor,

Does this mean that someone in the 30% plus Tax bracket should not hold Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) in TAXABLE? Which one instead?

thank you

JLMA:

Assume you have filled your tax-advantaged accounts (IRA, 401k, etc.) with Total Bond Market, and want more bonds:

* If you are in a 25% income-tax bracket or less Total Bond Market is OK in taxable.

* If your income-tax bracket is over 25%, then Vanguard Intermediate-Term Tax-Exempt Fund in a taxable account is a good choice to complete your bond allocation.

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

User avatar
Lieutenant.Columbo
Posts: 755
Joined: Sat Sep 05, 2015 9:20 pm
Location: 30th Parallel North

Re: Tax-advantaged accounts filled with Total Bond Market?

Postby Lieutenant.Columbo » Fri Aug 05, 2016 4:48 pm

Taylor Larimore wrote:JLMA:

Assume you have filled your tax-advantaged accounts (IRA, 401k, etc.) with Total Bond Market, and want more bonds:

* If you are in a 25% income-tax bracket or less Total Bond Market is OK in taxable.

* If your income-tax bracket is over 25%, then Vanguard Intermediate-Term Tax-Exempt Fund in a taxable account is a good choice to complete your bond allocation.

Best wishes.
Taylor



understood; thank you very much

so, would you say that someone currently in a tax bracket higher than 25%, would be better off by eventually selling all the Intermediate-Term Tax-Exempt Fund held in the Taxable account and replacing it with the Total Bond Market fund When/if the tax bracket goes down to or below 25%?

thanks
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Tax-advantaged accounts filled with Total Bond Market?

Postby Taylor Larimore » Fri Aug 05, 2016 5:22 pm

JLMA wrote:
Taylor Larimore wrote:JLMA:

Assume you have filled your tax-advantaged accounts (IRA, 401k, etc.) with Total Bond Market, and want more bonds:

* If you are in a 25% income-tax bracket or less Total Bond Market is OK in taxable.

* If your income-tax bracket is over 25%, then Vanguard Intermediate-Term Tax-Exempt Fund in a taxable account is a good choice to complete your bond allocation.

Best wishes.
Taylor



understood; thank you very much

so, would you say that someone currently in a tax bracket higher than 25%, would be better off by eventually selling all the Intermediate-Term Tax-Exempt Fund held in the Taxable account and replacing it with the Total Bond Market fund When/if the tax bracket goes down to or below 25%?

thanks


JLMA:

Yes--assuming capital gains are not large (which they shouldn't be).

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

User avatar
Taylor Larimore
Advisory Board
Posts: 25200
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

longvest and The Three-Fund Portfolio

Postby Taylor Larimore » Sat Aug 06, 2016 1:56 pm

longvest wrote:
I have learned that by living below my means and investing in Total Market index funds using a Three-Fund Portfolio, I will reap my fair share of the future returns of three broad markets, whatever these returns are.

No more anxiety trying to get a specific target rate of return. No more worry about selecting the best asset allocation. I just needed to select a reasonable ratio of bonds (at least 25%) and of stocks (at least 25%), and to decide what ratio of the stock allocation (at least 20%, at most market cap) to invest internationally. The only required ongoing maintenance is to rebalance my portfolio once a year, if the allocation gets too far off target.

Thank you for sharing.

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

User avatar
Lieutenant.Columbo
Posts: 755
Joined: Sat Sep 05, 2015 9:20 pm
Location: 30th Parallel North

Re: longvest and The Three-Fund Portfolio

Postby Lieutenant.Columbo » Sat Aug 06, 2016 2:05 pm

Taylor Larimore wrote:longinvest wrote:
... I just needed to select a reasonable ratio of bonds (at least 25%) and of stocks (at least 25%), and to decide what ratio of the stock allocation (at least 20%, at most market cap) to invest internationally. The only required ongoing maintenance is to rebalance my portfolio once a year, if the allocation gets too far off target.

Thank you for sharing.

Best wishes
Taylor


Taylor,

what did
longinvest
mean by "at most market cap"?

thank you
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

longinvest
Posts: 2302
Joined: Sat Aug 11, 2012 8:44 am

Re: longvest and The Three-Fund Portfolio

Postby longinvest » Sat Aug 06, 2016 2:28 pm

JLMA wrote:
Taylor Larimore wrote:longinvest wrote:
... I just needed to select a reasonable ratio of bonds (at least 25%) and of stocks (at least 25%), and to decide what ratio of the stock allocation (at least 20%, at most market cap) to invest internationally. The only required ongoing maintenance is to rebalance my portfolio once a year, if the allocation gets too far off target.

Thank you for sharing.

Best wishes
Taylor


Taylor,

what did
longinvest
mean by "at most market cap"?

thank you

JLMA,

I am not Taylor, but I can explain what I meant.

In the above quote from my post "The Futility of Predicting Future Returns", I meant that one should put no more into international stock markets than their market weighting relative to all world stock markets.

Here's an example. Currently, the U.S. stock market represents approximately 53% of all world stock markets. Correspondingly, international stock markets represent 47% of all world stock markets, for a U.S. investor. So, my suggestion was that a U.S. investor should put between 20% and 50% of his stock allocation into international stocks.

Here's another example. Currently, the Canadian stock market represents approximately 3% of all world stock markets. Correspondingly, international stock markets represent 97% of all world stock markets, for a Canadian investor. So, my suggestion was that a Canadian investor should put between 20% and 95% of his stock allocation into international stocks.

Yes, I've rounded some numbers.

But this diverts from the main object of Taylor's citation, which was about using the Three-Fund Porfolio:

"I have learned that by living below my means and investing in Total Market index funds using a Three-Fund Portfolio, I will reap my fair share of the future returns of three broad markets, whatever these returns are.

No more anxiety trying to get a specific target rate of return. No more worry about selecting the best asset allocation. ...
"
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

User avatar
Lieutenant.Columbo
Posts: 755
Joined: Sat Sep 05, 2015 9:20 pm
Location: 30th Parallel North

Re: longvest and The Three-Fund Portfolio

Postby Lieutenant.Columbo » Sat Aug 06, 2016 2:39 pm

longinvest wrote:
JLMA wrote:
Taylor Larimore wrote:longinvest wrote:
... I just needed to select a reasonable ratio of bonds (at least 25%) and of stocks (at least 25%), and to decide what ratio of the stock allocation (at least 20%, at most market cap) to invest internationally. The only required ongoing maintenance is to rebalance my portfolio once a year, if the allocation gets too far off target.

Thank you for sharing.

Best wishes
Taylor


Taylor,

what did
longinvest
mean by "at most market cap"?

thank you

JLMA,

I am not Taylor, but I can explain what I meant.

In the above quote from my post "The Futility of Predicting Future Returns", I meant that one should put no more into international stock markets than their market weighting relative to all world stock markets.

Here's an example. Currently, the U.S. stock market represents approximately 53% of all world stock markets. Correspondingly, international stock markets represent 47% of all world stock markets, for a U.S. investor. So, my suggestion was that a U.S. investor should put between 20% and 50% of his stock allocation into international stocks.

Here's another example. Currently, the Canadian stock market represents approximately 3% of all world stock markets. Correspondingly, international stock markets represent 97% of all world stock markets, for a Canadian investor. So, my suggestion was that a Canadian investor should put between 20% and 95% of his stock allocation into international stocks.

Yes, I've rounded some numbers.

But this diverts from the main object of Taylor's citation, which was about using the Three-Fund Porfolio:

"I have learned that by living below my means and investing in Total Market index funds using a Three-Fund Portfolio, I will reap my fair share of the future returns of three broad markets, whatever these returns are.

No more anxiety trying to get a specific target rate of return. No more worry about selecting the best asset allocation. ...
"


Thank you very much for explaining what you meant.

I realize I diverted. But I'm trying to soak in as much as I can from everything I learn at BHs, and these side questions help me understand the message better.
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

TOJ
Posts: 325
Joined: Wed Mar 02, 2016 9:19 pm

Re: "Why Buy Bonds?"

Postby TOJ » Fri Aug 12, 2016 5:07 pm

Taylor Larimore wrote:
Fieldsy1024 wrote:If I wanted to test myself by taking out the bond portion of this portfolio, would going 80 VTSAX/ 20 Int'l be something that might be a good portfolio (for someone who wants 100% stocks)?

Yes. I think it would be an excellent all-stock portfolio.

However, I believe there are very few investors who should have 100% stock portfolios. Jason Zweig, is one of the most knowledgeable personal finance writers in the business. I saved this article from 1999:


WHY BUY BONDS?

Best wishes.
Taylor


I like that he chastises people who also avoid international stocks.

User avatar
F150HD
Posts: 510
Joined: Fri Sep 18, 2015 7:49 pm

Re: The Three-Fund Portfolio

Postby F150HD » Sun Aug 14, 2016 10:43 am

"A financial planner says most people don't need to pay someone to manage their investments
Matt Becker, Mom and Dad Money Aug. 12, 2016, 10:00 AM "

...For example, when Ferri and Benke evaluated a simple three fund portfolio made up of US stocks, international stocks, and US bonds, they found that the index-based portfolio outperformed the actively managed portfolio 82.9% of the time....


http://www.businessinsider.com/most-people-dont-need-to-pay-someone-to-manage-investments-2016-8/#-1

Sorry if this was posted already. Good read.

User avatar
cfs
Posts: 3361
Joined: Fri Feb 23, 2007 1:22 am
Location: Sabático de Foros

Re: The Three-Fund Portfolio

Postby cfs » Wed Aug 17, 2016 2:57 pm

Another article on 3FP

Another good article on The Three-Fund Portfolio by Alex Bryan from Morningstar.

Most Investors Probably Won't Outperform This Simple Portfolio

Good luck with your investments.

Thanks for reading.
~ Luke 10:25-37 ~


Return to “Investing - Theory, News & General”

Who is online

Users browsing this forum: Kohaku, Numbers, Yahoo [Bot] and 30 guests