The Three-Fund Portfolio
- Taylor Larimore
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"He Has Read Over 250 Investing Books"
Bogleheads:
Another nice article about The Three Fund Portfolio:
HE HAS READ OVER 250 INVESTING BOOKS
Best wishes.
Taylor
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
Re: "He Has Read Over 250 Investing Books"
Yes, a nice article about a nice gentleman. Thank you Taylor.Taylor Larimore wrote:Bogleheads:
Another nice article about The Three Fund Portfolio:
HE HAS READ OVER 250 INVESTING BOOKS
Best wishes.
Taylor
Bob
- PhysicianOnFIRE
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Re: "He Has Read Over 250 Investing Books"
Thank you for the mention and the inspiration, and for all that you do.Taylor Larimore wrote:Bogleheads:
Another nice article about The Three Fund Portfolio:
HE HAS READ OVER 250 INVESTING BOOKS
Best wishes.
Taylor
Best,
-PoF
Re: The Three-Fund Portfolio
Thanks for posting that up!
I must say, I certainly need to catch up on my reading after seeing that list
I must say, I certainly need to catch up on my reading after seeing that list
"In uncertain times, show equanimity. Otherwise you are an unfit shareholder" -Charlie Munger
- PhysicianOnFIRE
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Re: The Three-Fund Portfolio
Don't worry. You've got plenty of time. Some of the titles are more than thirty years old.wizzard wrote:Thanks for posting that up!
I must say, I certainly need to catch up on my reading after seeing that list
The best part is, Taylor has read them so you don't have to. Three Funds and you're done!
- abuss368
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Re: The Three-Fund Portfolio
Awesome Taylor! Many thanks for your tireless contributions!
John C. Bogle: “Simplicity is the master key to financial success."
- abuss368
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Re: The Three-Fund Portfolio
Hi Taylor,
Do you think Vanguard will ever go back to the Three Fund Portfolio?
Best.
Do you think Vanguard will ever go back to the Three Fund Portfolio?
Best.
John C. Bogle: “Simplicity is the master key to financial success."
Re: The Three-Fund Portfolio
I sure do, I've read 4 books in the past 2 months so little by little!PhysicianOnFIRE wrote:Don't worry. You've got plenty of time. Some of the titles are more than thirty years old.wizzard wrote:Thanks for posting that up!
I must say, I certainly need to catch up on my reading after seeing that list
The best part is, Taylor has read them so you don't have to. Three Funds and you're done!
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
- abuss368
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Re: The Three-Fund Portfolio
Remember our mentor Jack Bogle's excellent advice "Simplicity is the master key to financial success".wizzard wrote:
It's so simple, yet so many people make it harder than it should be. Sure its not exciting, but it works!
John C. Bogle: “Simplicity is the master key to financial success."
Re: 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.abuss368 wrote:Hi Taylor,
Do you think Vanguard will ever go back to the Three Fund Portfolio?
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?
(I think not)
Bob
- abuss368
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Re: The Three-Fund Portfolio
Do you invest in international bonds?CABob wrote: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.abuss368 wrote:Hi Taylor,
Do you think Vanguard will ever go back to the Three Fund Portfolio?
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?
(I think not)
John C. Bogle: “Simplicity is the master key to financial success."
- abuss368
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Re: The Three-Fund Portfolio
For a while, Vanguard essentially had a Three Fund Portfolio before adding international bonds. There recommendation tool also noted the three funds.CABob wrote: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.abuss368 wrote:Hi Taylor,
Do you think Vanguard will ever go back to the Three Fund Portfolio?
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?
(I think not)
John C. Bogle: “Simplicity is the master key to financial success."
- abuss368
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Re: The Three-Fund Portfolio
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.CABob wrote: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.abuss368 wrote:Hi Taylor,
Do you think Vanguard will ever go back to the Three Fund Portfolio?
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?
(I think not)
John C. Bogle: “Simplicity is the master key to financial success."
- Taylor Larimore
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- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Adding more funds to The Three-Fund Portfolio?
Abuss:But the question remains as to whether Taylor will start a new conversation to promote a Four Fund Portfolio?
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.
Best wishes."The enemy of a good plan is the dream of a perfect plan." -- Jack Bogle
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: The Three-Fund Portfolio
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
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
- Taylor Larimore
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"The Best Way to Diversify Equity Risk"
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
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
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Re: The Three-Fund Portfolio
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?
Re: The Three-Fund Portfolio
Yes, no question about it. You get a lower expense ratio and no downside.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?
Bob
- Kitty Telltales
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Re: The Three-Fund Portfolio
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.
Re: The Three-Fund Portfolio
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?CABob wrote:Yes, no question about it. You get a lower expense ratio and no downside.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?
- Taylor Larimore
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Investor shares vs. Admiral shares ?
Kitty: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?
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
Re: The Three-Fund Portfolio
Perhaps this link about share classes will be informative.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.
Bob
- Kitty Telltales
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Re: The Three-Fund Portfolio
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.
- abuss368
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Re: The Three-Fund Portfolio
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.
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: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio
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!
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!
Re: The Three-Fund Portfolio
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
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
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Re: The Three-Fund Portfolio
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.
- Fieldsy1024
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Re: The Three-Fund Portfolio
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.
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.
- Taylor Larimore
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"Why Buy Bonds?"
Yes. I think it would be an excellent all-stock portfolio.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)?
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
- abuss368
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Re: The Three-Fund Portfolio
Hi Fieldsy1024,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.
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: “Simplicity is the master key to financial success."
- Fieldsy1024
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Re: "Why Buy Bonds?"
Thank you and abuss for feedback.Taylor Larimore wrote:Yes. I think it would be an excellent all-stock portfolio.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)?
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
Last edited by Fieldsy1024 on Fri Jul 08, 2016 2:10 pm, edited 1 time in total.
Re: The Three-Fund Portfolio
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.
- Fieldsy1024
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Re: The Three-Fund Portfolio
I simply want to try this allocation while I am 31 years old and I feel like it.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.
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Re: "Why Buy Bonds?"
Great article!Taylor Larimore wrote:Yes. I think it would be an excellent all-stock portfolio.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)?
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
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Re: The Three-Fund Portfolio
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.
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.
- Lieutenant.Columbo
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Re: The Three-Fund Portfolio
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
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!
- Taylor Larimore
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Same 3 Funds in Retirement ?
JLMA: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
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
- Taylor Larimore
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Total Bond Market or Tax-Exempt Bond Fund?
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)."
"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
Re: The Three-Fund Portfolio
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.Fieldsy1024 wrote:I simply want to try this allocation while I am 31 years old and I feel like it.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.
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!
- Lieutenant.Columbo
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Re: Total Bond Market or Tax-Exempt Bond Fund?
Taylor,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)."
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!
- Taylor Larimore
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- Location: Miami FL
Tax-advantaged accounts filled with Total Bond Market?
JLMA:JLMA wrote:Taylor,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)."
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
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
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Re: Tax-advantaged accounts filled with Total Bond Market?
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!
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Re: Tax-advantaged accounts filled with Total Bond Market?
JLMA: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
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
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longvest and The Three-Fund Portfolio
longvest wrote:
Best wishes
Taylor
Thank you for sharing.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.
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: longvest and The Three-Fund Portfolio
Taylor,Taylor Larimore wrote:longinvest wrote:Thank you for sharing.... 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.
Best wishes
Taylor
what did
mean by "at most market cap"?longinvest
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!
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Re: longvest and The Three-Fund Portfolio
JLMA,JLMA wrote:Taylor,Taylor Larimore wrote:longinvest wrote:Thank you for sharing.... 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.
Best wishes
Taylor
what didmean by "at most market cap"?longinvest
thank you
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. ..."
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: longvest and The Three-Fund Portfolio
Thank you very much for explaining what you meant.longinvest wrote:JLMA,JLMA wrote:Taylor,Taylor Larimore wrote:longinvest wrote:Thank you for sharing.... 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.
Best wishes
Taylor
what didmean by "at most market cap"?longinvest
thank you
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. ..."
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!
Re: "Why Buy Bonds?"
I like that he chastises people who also avoid international stocks.Taylor Larimore wrote:Yes. I think it would be an excellent all-stock portfolio.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)?
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
Re: The Three-Fund Portfolio
"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-peo ... 2016-8/#-1
Sorry if this was posted already. Good read.
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-peo ... 2016-8/#-1
Sorry if this was posted already. Good read.
Long is the way and hard, that out of Hell leads up to light.
Re: The Three-Fund Portfolio
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.
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.
~ Member of the Active Retired Force since 2014 ~