The Three-Fund Portfolio

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Forester
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Re: The Three-Fund Portfolio

Post by Forester » Sat Aug 10, 2019 5:28 pm

REITs, mid cap, small cap are practically absent from the total market index.

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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sat Aug 10, 2019 8:38 pm

Forester wrote:
Sat Aug 10, 2019 5:28 pm
REITs, mid cap, small cap are practically absent from the total market index.
Forester:

U.S. Total Market Index Funds hold the U.S. market weights in REITS, mid-cap and small-cap stocks.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk." -- "The odds of outpacing an all-market index fund are, well, terrible."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by abuss368 » Sun Aug 11, 2019 7:56 pm

Forester wrote:
Sat Aug 10, 2019 5:28 pm
REITs, mid cap, small cap are practically absent from the total market index.
They are included in both Total Stock and Total International Stock by market weight.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by DecumulatorDoc » Mon Aug 12, 2019 6:31 am

Taylor Larimore wrote:
Sat Aug 10, 2019 8:38 pm
Forester wrote:
Sat Aug 10, 2019 5:28 pm
REITs, mid cap, small cap are practically absent from the total market index.
Forester:

U.S. Total Market Index Funds hold the U.S. market weights in REITS, mid-cap and small-cap stocks.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk." -- "The odds of outpacing an all-market index fund are, well, terrible."
Both statements from Forester and Taylor ring true. REITs are under-represented in total market weighting relative to percentage of GDP by at least 50%. Depending on your real estate holdings outside of the portfolio, many like to add a separate allocation to REIT. Regardless of how you characterize the REIT holding, its low correlation with stocks and bonds reduces volatility and adds diversification to your portfolio. REIT long term performance is nothing to sneeze at either.

Rick Ferri's traditional Core Four portfolio has 10% of equities in REITs. If REITs work for you, take that road to Dublin.
:sharebeer

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Re: The Three-Fund Portfolio

Post by KBREAMK » Mon Aug 12, 2019 11:55 am

Bonds have always confused me! I am in a 3 fund portfolio and use VBMFX for my fixed income piece. With all the recent news about bond yields being low and, possibly, going negative is there any cause for long term concern for those that use VBMFX? I am a disciplined stay the course investor and will only adjust my AA when we're off by more than 5% so I am not panicking or anything like that. I am just trying to understand the relationship between falling bond yields and VBMFX's long term success. Thanks in advance for your comments and BH wisdom.

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Re: The Three-Fund Portfolio

Post by dbr » Mon Aug 12, 2019 11:59 am

KBREAMK wrote:
Mon Aug 12, 2019 11:55 am
Bonds have always confused me! I am in a 3 fund portfolio and use VBMFX for my fixed income piece. With all the recent news about bond yields being low and, possibly, going negative is there any cause for long term concern for those that use VBMFX? I am a disciplined stay the course investor and will only adjust my AA when we're off by more than 5% so I am not panicking or anything like that. I am just trying to understand the relationship between falling bond yields and VBMFX's long term success. Thanks in advance for your comments and BH wisdom.
You should not be concerned about the long term "success" of that fund but rather with the long term success of your portfolio. Bonds are a part of that portfolio for the purpose of reducing the variability of the portfolio return at a cost in portfolio return. Only if your portfolio is almost all bonds is it likely that low and perhaps lower current interest rates should be of concern, and possibly not even then if you are choosing the right tradeoff for portfolio risk and return. VBMFX is not going to "fail."

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Re: The Three-Fund Portfolio

Post by Carol88888 » Wed Aug 14, 2019 3:19 pm

abuss368 wrote:
Mon Jul 29, 2019 5:37 pm
TimM wrote:
Mon Jul 29, 2019 10:12 am
I read somewhere in this thread that REIT's are included in the three fund portfolio. Am I right in thinking REIT's are considered stocks, not bonds, and thus are included in the Total Stock Market fund?
You can certainly invest in REITs (or anything for that matter), but the simplicity and beauty of the Three Fund Portfolio is that is holds market weight and is easy to manage.
But how are REITs taxed? I thought for some reason that they did get the qualified dividend rate.

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Re: The Three-Fund Portfolio

Post by LadyGeek » Wed Aug 14, 2019 7:51 pm

Carol88888 - You can ask that question by starting a thread in the Personal Finance (Not Investing) forum, which is for tax questions. You'll get a response focused on your own situation. (This thread is for the 3-fund portfolio.)
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Re: The Three-Fund Portfolio

Post by abuss368 » Wed Aug 14, 2019 9:43 pm

Carol88888 wrote:
Wed Aug 14, 2019 3:19 pm
abuss368 wrote:
Mon Jul 29, 2019 5:37 pm
TimM wrote:
Mon Jul 29, 2019 10:12 am
I read somewhere in this thread that REIT's are included in the three fund portfolio. Am I right in thinking REIT's are considered stocks, not bonds, and thus are included in the Total Stock Market fund?
You can certainly invest in REITs (or anything for that matter), but the simplicity and beauty of the Three Fund Portfolio is that is holds market weight and is easy to manage.
But how are REITs taxed? I thought for some reason that they did get the qualified dividend rate.
I would consider starting a separate thread. The short answer is REITs are taxed differently that includes dividends, capital gains, and return of capital. REITs are not needed with the Three Fund Portfolio.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by jbdvm1988 » Sat Aug 24, 2019 7:15 pm

Is there any advantage/disadvantage of putting all of my 401k assets into a vanguard destination retirement fund ( eg VTHRX) which looks like a four fund approach on an automatic glide path or does the three fund portfolio work better? I have a taxable account the same size as my 401k and I would like advice on which style (glide vs three fund) of investing is best

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Three-Fund or Target Portfolio

Post by Taylor Larimore » Sat Aug 24, 2019 8:02 pm

jbdvm1988 wrote:
Sat Aug 24, 2019 7:15 pm
Is there any advantage/disadvantage of putting all of my 401k assets into a vanguard destination retirement fund ( eg VTHRX) which looks like a four fund approach on an automatic glide path or does the three fund portfolio work better? I have a taxable account the same size as my 401k and I would like advice on which style (glide vs three fund) of investing is best
jbdvm1988:

The Three-Fund Portfolio is best when a portfolio (like yours) contains both taxable and tax-advantaged accounts. This is because separate funds allow you to place your tax-inefficient securities (taxable bonds) in tax-advantaged accounts, and place tax-efficient securities (stocks) in taxable accounts.

Note: VTHRX (Vanguard Target Retirement 2030) has both stocks and bonds. This means that one or the other will be in the wrong type account.

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

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Re: The Three-Fund Portfolio

Post by jbdvm1988 » Sat Aug 24, 2019 8:09 pm

Thanks Taylor. So is it best to adjust asset allocation on my own instead of being lazy and letting the glide path happen in the destination fund?

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Asset allocation

Post by Taylor Larimore » Sat Aug 24, 2019 8:20 pm

jbdvm1988 wrote:
Sat Aug 24, 2019 8:09 pm
Thanks Taylor. So is it best to adjust asset allocation on my own instead of being lazy and letting the glide path happen in the destination fund?
jbdvm1988:

A Target Fund's "glide path" is based on age. A glide path is helpful but it is an average and does not consider an individual's goals, risk-tolerance or personal financial situation. It is usually a mistake to select a target fund's retirement date when selecting a target fund. Knowledgeable investors use their desired asset-allocation to select the appropriate target fund.

Use this Vanguard asset-allocation tool to help determining your desired asset-allocation:

https://personal.vanguard.com/us/FundsI ... unds/tools

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

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Re: The Three-Fund Portfolio

Post by jbdvm1988 » Sat Aug 24, 2019 8:24 pm

Thanks again. My wife is so impressed that such an expert as yourself is willing to respond to my questions

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Re: Asset allocation

Post by bertilak » Sat Aug 24, 2019 8:40 pm

Taylor Larimore wrote:
Sat Aug 24, 2019 8:20 pm
A Target Fund's "glide path" is based on age. A glide path is helpful but it is an average and does not consider an individual's goals, risk-tolerance or personal financial situation. It is usually a mistake to select a target fund's retirement date when selecting a target fund. Knowledgeable investors use their desired asset-allocation to select the appropriate target fund.
And even that is problematic because if your selected AA is just tight, the glide path may not be. For example if you choose a fund that is currently on a steep glide path that may not be what you want even if the initial AA is to your liking. Another way to look at it: you chose a fund that is many years from the target date but you are not so many years from your actual target. These are all SMALL difficulties, but why accept them if you don't have to? Automaton is less of a help if it is automating someone else's average situation and not your actual situation. That goes for both the starting AA and the change in the AA over time.

Therefore the three-fund portfolio is easier to get, and keep, right. ("Right" being defined by what you want. Nobody knows ahead of time what would have been the right choice when the future you looks back.)
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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Re: The Three-Fund Portfolio

Post by OffGridder » Sun Aug 25, 2019 6:40 pm

Hi Taylor,

I know simplicity is the key attribute of the 3 Fund Portfolio. I have read that you do not spend more than an hour per year managing your portfolio. Does that mean you only make one annual lump sum withdrawal to cover the next year's estimated expenses rather then withdrawing incrementally on an as needed basis? I am just curious. Maybe you have enough non-portfolio income streams that you have no need to withdraw at all.😊

Thanks,
Dave
"Goodness is the only investment that never fails." | H.D. Thoreau

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Re: The Three-Fund Portfolio

Post by abuss368 » Sun Aug 25, 2019 6:50 pm

OffGridder wrote:
Sun Aug 25, 2019 6:40 pm
Hi Taylor,

I know simplicity is the key attribute of the 3 Fund Portfolio. I have read that you do not spend more than an hour per year managing your portfolio. Does that mean you only make one annual lump sum withdrawal to cover the next year's estimated expenses rather then withdrawing incrementally on an as needed basis? I am just curious. Maybe you have enough non-portfolio income streams that you have no need to withdraw at all.😊

Thanks,
Dave
One option is to run all transactions through a money market account including having dividends credited there.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by dbr » Sun Aug 25, 2019 6:54 pm

OffGridder wrote:
Sun Aug 25, 2019 6:40 pm
Hi Taylor,

I know simplicity is the key attribute of the 3 Fund Portfolio. I have read that you do not spend more than an hour per year managing your portfolio. Does that mean you only make one annual lump sum withdrawal to cover the next year's estimated expenses rather then withdrawing incrementally on an as needed basis? I am just curious. Maybe you have enough non-portfolio income streams that you have no need to withdraw at all.😊

Thanks,
Dave
I can't speak for Taylor, of course, but even including time to log into various accounts I would imagine an hour is enough time to withdraw money several times a year and do some other account maintenance as well. It is also possible to arrange with brokers to distribute money from accounts without you having to do anything, including perhaps a monthly withdrawal and in some cases distributing an RMD from a retirement account. In theory a person could probably do the bare minimum necessary to make needed withdrawals at zero time spent per year.

I probably spend about twenty times as much time simply taking a peek to make sure things are what they are supposed to be as I spend actually buying or selling something or moving money around. I do pay attention, for example, to checking unread messages in message centers online and not ignoring email I get from someone who holds one of my accounts.

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Re: The Three-Fund Portfolio

Post by OffGridder » Sun Aug 25, 2019 7:47 pm

abuss368 wrote:
Sun Aug 25, 2019 6:50 pm

One option is to run all transactions through a money market account including having dividends credited there.
Thank you for your reply. Yes, that is what I do. Monthly withdrawals from the MM to checking to pay expenses. I replenish the MM once per year in December by withdrawing from my 3 fund portfolio based on my target AA.

Just wondering what Taylor does.

Best Regards,
Dave
"Goodness is the only investment that never fails." | H.D. Thoreau

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Re: The Three-Fund Portfolio

Post by abuss368 » Sun Aug 25, 2019 7:56 pm

OffGridder wrote:
Sun Aug 25, 2019 7:47 pm
abuss368 wrote:
Sun Aug 25, 2019 6:50 pm

One option is to run all transactions through a money market account including having dividends credited there.
Thank you for your reply. Yes, that is what I do. Monthly withdrawals from the MM to checking to pay expenses. I replenish the MM once per year in December by withdrawing from my 3 fund portfolio based on my target AA.

Just wondering what Taylor does.

Best Regards,
Dave
I am interested in Taylor’s responses too!
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Managing a portfolio

Post by Taylor Larimore » Sun Aug 25, 2019 10:20 pm

OffGridder wrote:
Sun Aug 25, 2019 6:40 pm
Hi Taylor,

I know simplicity is the key attribute of the 3 Fund Portfolio. I have read that you do not spend more than an hour per year managing your portfolio. Does that mean you only make one annual lump sum withdrawal to cover the next year's estimated expenses rather then withdrawing incrementally on an as needed basis? I am just curious. Maybe you have enough non-portfolio income streams that you have no need to withdraw at all.😊

Thanks,
Dave
Dave:

There appears to be a misunderstanding.

I do not include contributions and withdrawals as "managing" my portfolio. However, I do include re-balancing and my annual RMD (Required Minimum Distribution) as "managing."

My few funds and a small trust are all with Vanguard. My annual statements give me all the information I need.

Simplicity has its virtues.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Hold high the idea of simplicity in investing and avoid trading because trading gives more money to Wall Street and less money to the investor."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Managing a portfolio

Post by OffGridder » Mon Aug 26, 2019 12:28 am

Taylor Larimore wrote:
Sun Aug 25, 2019 10:20 pm
OffGridder wrote:
Sun Aug 25, 2019 6:40 pm
Hi Taylor,

I know simplicity is the key attribute of the 3 Fund Portfolio. I have read that you do not spend more than an hour per year managing your portfolio. Does that mean you only make one annual lump sum withdrawal to cover the next year's estimated expenses rather then withdrawing incrementally on an as needed basis? I am just curious. Maybe you have enough non-portfolio income streams that you have no need to withdraw at all.😊

Thanks,
Dave
Dave:

There appears to be a misunderstanding.

I do not include contributions and withdrawals as "managing" my portfolio. However, I do include re-balancing and my annual RMD (Required Minimum Distribution) as "managing."

My few funds and a small trust are all with Vanguard. My annual statements give me all the information I need.

Simplicity has its virtues.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Hold high the idea of simplicity in investing and avoid trading because trading gives more money to Wall Street and less money to the investor."
Taylor,
Thank you for the clarification of what you meant by "managing" your portfolio. Would you mind sharing how you structure the frequency of your withdrawals needed for expenses? Do you withdraw as needed, monthly, quarterly or annually? I believe I have read that you take your RMD distribution as a lump sum in December.

Best Regards,
Dave
"Goodness is the only investment that never fails." | H.D. Thoreau

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Re: The Three-Fund Portfolio

Post by ruralavalon » Mon Aug 26, 2019 9:11 am

OffGridder wrote:
Sun Aug 25, 2019 6:40 pm
Hi Taylor,

I know simplicity is the key attribute of the 3 Fund Portfolio. I have read that you do not spend more than an hour per year managing your portfolio. Does that mean you only make one annual lump sum withdrawal to cover the next year's estimated expenses rather then withdrawing incrementally on an as needed basis? I am just curious. Maybe you have enough non-portfolio income streams that you have no need to withdraw at all.😊

Thanks,
Dave
Our largest account is my rollover IRA. After age 70.5 the law specifies taking Required Minimum Distributions (RMDs) from that account every year.

We have set up the RMDs with Vanguard so that they automatically take the RMDs every month, proportionally from each fund in that account, and transfer that directly to our joint checking account.

Most years everything is automatic and I spend no time at all managing our investments.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Managing a portfolio

Post by dbr » Mon Aug 26, 2019 9:29 am

OffGridder wrote:
Mon Aug 26, 2019 12:28 am


Taylor,
Thank you for the clarification of what you meant by "managing" your portfolio. Would you mind sharing how you structure the frequency of your withdrawals needed for expenses? Do you withdraw as needed, monthly, quarterly or annually? I believe I have read that you take your RMD distribution as a lump sum in December.

Best Regards,
Dave
It takes me less than five minutes to take an RMD from the one tax deferred account I have and maybe a couple of minutes each month to transfer money from some taxable savings to my checking account. Even if you include moving money around a person might spend under an hour a year managing investments. I don't think I have bought or sold to rebalance in years. I think the largest time consuming factor is the process of logging on if they need some kind of two factor authentication or ask security questions. Also, my 401k provider continues to "upgrade" their interface and it seems to take more and more time to find the navigation to the withdrawal page. I also have to remember to put the data from the paper they send me about how much the RMD is in a file where I can find the number quickly. The most time consuming process in taking an RMD is figuring out how much tax I want withheld because instead of paying estimated taxes I put the payment in withholding from the RMD at year end. I have a page in an Excel file where I put what I think I need withheld and the RMD notice for easy finding. But I don't count tax preparation as investment management time.

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Re: Managing a portfolio

Post by OffGridder » Mon Aug 26, 2019 10:39 am

dbr wrote:
Mon Aug 26, 2019 9:29 am
.... Even if you include moving money around a person might spend under an hour a year managing investments. I don't think I have bought or sold to rebalance in years. ....
dbr,
Thank you for your feedback. Is your IRA/401K your only account or do you maintain the same asset allocation in each of your accounts? I locate my 3 funds based on tax effiency, which in my case means my taxable account is 100% equities. If equities are below my target allocation, I will still sell equities in my taxable for expenses and rebalance in my Roth by exchanging bonds for equities.

Best Regards,
Dave
"Goodness is the only investment that never fails." | H.D. Thoreau

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Re: Managing a portfolio

Post by dbr » Mon Aug 26, 2019 10:42 am

OffGridder wrote:
Mon Aug 26, 2019 10:39 am
dbr wrote:
Mon Aug 26, 2019 9:29 am
.... Even if you include moving money around a person might spend under an hour a year managing investments. I don't think I have bought or sold to rebalance in years. ....
dbr,
Thank you for your feedback. Is your IRA/401K your only account or do you maintain the same asset allocation in each of your accounts? I locate my 3 funds based on tax effiency, which in my case means my taxable account is 100% equities. If equities are below my target allocation, I will still sell equities in my taxable for expenses and rebalance in my Roth by exchanging bonds for equities.

Best Regards,
Dave
The 401k is mostly bonds and the taxable accounts are mostly stock funds. Like I said rebalancing hasn't been actionable for some time, at least after withdrawals.

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Portfolio Withdrawals

Post by Taylor Larimore » Mon Aug 26, 2019 10:47 am

Taylor,
Thank you for the clarification of what you meant by "managing" your portfolio. Would you mind sharing how you structure the frequency of your withdrawals needed for expenses? Do you withdraw as needed, monthly, quarterly or annually? I believe I have read that you take your RMD distribution as a lump sum in December.

Best Regards,
Dave
Dave:

I enjoy a guarantied lifetime income from my government pension, social security, and two Single Premium Immediate Annuities. They provide more than enough for my normal living expenses (I have good health insurance).

In 1980, at about age 80, we purchased the two single-premium lifetime annuities (SPIAs) guaranteeing a lifetime income. This allowed us to use our remaining 3-fund portfolio (now 2-funds) to give our children an automatic monthly payment which I have been able to slowly increase. Thank you Jack!

You are correct. I take my RMD distribution in December which eliminates IRS Quarterly Withholding.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom:“The courage to press on regardless--regardless of whether we face calm seas or rough seas, and especially when the market storms howl around us--is the quintessential attribute of the successful investor.”
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Portfolio Withdrawals

Post by OffGridder » Mon Aug 26, 2019 11:23 am

Taylor Larimore wrote:
In 1980, at about age 80, we purchased the two single-premium lifetime annuities (SPIAs) guaranteeing a lifetime income.
Wow Taylor, you have lead a blessed life. I can only hope to live 120 years 😁 and look as young and be as articulate a you.

Thanks for everything you do

Best Regards,
Dave

[ quote fixed by admin LadyGeek]
"Goodness is the only investment that never fails." | H.D. Thoreau

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Re: The Three-Fund Portfolio

Post by CPA_RIA » Tue Aug 27, 2019 9:10 am

I have a unique question about this investing approach. I have about $650k in investments, $500k is in a 401(K) that is invested in a Vanguard Target Date fund (2045 - I'm 40yo). The remaining $150k is in a High Interest Taxable Savings account earning 2%/annually. I want to get this taxable portion to work in a 3-fund portfolio but would like some feedback on my AA. I have one striking caveat - I'm the CFO of an Asset Management firm that invests exclusively in US Taxable Corporate Bonds. Thus, my career is entirely linked to this asset class! The CFA Institute would advise that I limit my portfolio's exposure to Corporate Bonds as a result. Being of a conservative persuasion I don't want to simply increase my equity exposure to compensate, but I'm unsure of how to replace this fund. Is the Total Bond Market fund diverse enough to mitigate this risk? Should I consider a 4th fund? If so, what would you recommend?

Thanks in advance!

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Re: The Three-Fund Portfolio

Post by CPA_RIA » Tue Aug 27, 2019 9:18 am

**Corporate Bonds represent 26% of the VBTLX....just FYI!

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Re: The Three-Fund Portfolio

Post by dbr » Tue Aug 27, 2019 9:22 am

CPA_RIA wrote:
Tue Aug 27, 2019 9:10 am
I have a unique question about this investing approach. I have about $650k in investments, $500k is in a 401(K) that is invested in a Vanguard Target Date fund (2045 - I'm 40yo). The remaining $150k is in a High Interest Taxable Savings account earning 2%/annually. I want to get this taxable portion to work in a 3-fund portfolio but would like some feedback on my AA. I have one striking caveat - I'm the CFO of an Asset Management firm that invests exclusively in US Taxable Corporate Bonds. Thus, my career is entirely linked to this asset class! The CFA Institute would advise that I limit my portfolio's exposure to Corporate Bonds as a result. Being of a conservative persuasion I don't want to simply increase my equity exposure to compensate, but I'm unsure of how to replace this fund. Is the Total Bond Market fund diverse enough to mitigate this risk? Should I consider a 4th fund? If so, what would you recommend?

Thanks in advance!
You can invest in an intermediate treasury fund or even in a TIPS fund, or perhaps a mixture of the two.

Jack Bogle, among others, has criticized the total bond fund for not being diversified enough due to not enough allocation to corporates.

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Re: The Three-Fund Portfolio

Post by CPA_RIA » Tue Aug 27, 2019 9:27 am

Good point. Now that I continue to think this through... If I do a 60/40 equity/FI split, this means about 11% of my TOTAL PORTFOLIO's exposure is to Corporate Bonds....that's not really a scary amount.

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Re: Portfolio Withdrawals

Post by abuss368 » Tue Aug 27, 2019 10:58 am

OffGridder wrote:
Mon Aug 26, 2019 11:23 am
Taylor Larimore wrote:
In 1980, at about age 80, we purchased the two single-premium lifetime annuities (SPIAs) guaranteeing a lifetime income.
Wow Taylor, you have lead a blessed life. I can only hope to live 120 years 😁 and look as young and be as articulate a you.

Thanks for everything you do

Best Regards,
Dave

[ quote fixed by admin LadyGeek]
:sharebeer
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Re: The Three-Fund Portfolio

Post by abuss368 » Tue Aug 27, 2019 11:00 am

CPA_RIA wrote:
Tue Aug 27, 2019 9:18 am
**Corporate Bonds represent 26% of the VBTLX....just FYI!
I would have no problem simply investing in Total Bond Index. Since you noted you invest in a Target Retirement with Vanguard, that already includes Total Bond Index and Total International Bond Index.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Managing a portfolio

Post by abuss368 » Tue Aug 27, 2019 2:21 pm

OffGridder wrote:
Mon Aug 26, 2019 10:39 am
Is your IRA/401K your only account or do you maintain the same asset allocation in each of your accounts?

Best Regards,
Dave
Hi Dave -

There are two strategies available: 1) Equal Location (same funds for the most part - bonds may be different - in each account), and 2) Asset Location - stocks and bonds in different accounts. Rick Ferri has often advised on the merits of Equal Location. In my opinion either strategy is fine and you should selected the one that best works for you. We may be dancing on the head of a needle.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by chocolateolive » Wed Sep 04, 2019 8:37 pm

In the near future, if we experience a worldwide recession and the US is no longer a superpower since China will have taken the number one position and the US is left without much industry at all, will this 3 fund portfolio or passive investing in the US market still hold up?

I know that in the past, the boglehead philosophy was that even during a recession, you stay the course because the US economy will obviously recover and gains will come back.

However, in such a changing world where the US is a failing country, and may never recover from a recession the way it has in the past, will advice be different? Would it be crazy to think that cashing out of the US market completely might be a recommended option?

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Wed Sep 04, 2019 8:42 pm

chocolateolive wrote:
Wed Sep 04, 2019 8:37 pm
Would it be crazy to think that cashing out of the US market completely might be a recommended option?
chocolateolive:

In my opinion "cashing out of the US market completely," with few exceptions, would be "crazy."

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

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Re: The Three-Fund Portfolio

Post by Brianmcg321 » Thu Sep 05, 2019 5:03 am

chocolateolive wrote:
Wed Sep 04, 2019 8:37 pm
In the near future, if we experience a worldwide recession and the US is no longer a superpower since China will have taken the number one position and the US is left without much industry at all, will this 3 fund portfolio or passive investing in the US market still hold up?

I know that in the past, the boglehead philosophy was that even during a recession, you stay the course because the US economy will obviously recover and gains will come back.

However, in such a changing world where the US is a failing country, and may never recover from a recession the way it has in the past, will advice be different? Would it be crazy to think that cashing out of the US market completely might be a recommended option?

If you ever live in a world where the market "never" recovers, you need to worry about where your going to get food, and where you can get guns. Because your going to need them. Investing will be the least of your worries.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

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Re: The Three-Fund Portfolio

Post by abuss368 » Thu Sep 05, 2019 7:01 pm

chocolateolive wrote:
Wed Sep 04, 2019 8:37 pm
In the near future, if we experience a worldwide recession and the US is no longer a superpower since China will have taken the number one position and the US is left without much industry at all, will this 3 fund portfolio or passive investing in the US market still hold up?

I know that in the past, the boglehead philosophy was that even during a recession, you stay the course because the US economy will obviously recover and gains will come back.

However, in such a changing world where the US is a failing country, and may never recover from a recession the way it has in the past, will advice be different? Would it be crazy to think that cashing out of the US market completely might be a recommended option?
Interesting as usually the topic is related to international stocks and not US stocks.

In my opinion that would be very foolish.

Stay the course and tune out the market noise.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by abuss368 » Thu Sep 05, 2019 7:02 pm

Brianmcg321 wrote:
Thu Sep 05, 2019 5:03 am
chocolateolive wrote:
Wed Sep 04, 2019 8:37 pm
In the near future, if we experience a worldwide recession and the US is no longer a superpower since China will have taken the number one position and the US is left without much industry at all, will this 3 fund portfolio or passive investing in the US market still hold up?

I know that in the past, the boglehead philosophy was that even during a recession, you stay the course because the US economy will obviously recover and gains will come back.

However, in such a changing world where the US is a failing country, and may never recover from a recession the way it has in the past, will advice be different? Would it be crazy to think that cashing out of the US market completely might be a recommended option?

If you ever live in a world where the market "never" recovers, you need to worry about where your going to get food, and where you can get guns. Because your going to need them. Investing will be the least of your worries.
Fair and reasonable point.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by quickhitta » Thu Oct 10, 2019 6:44 pm

What is a Vanguard Total Stock Market, and why should we only invest only 5%?

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Thu Oct 10, 2019 7:45 pm

quickhitta wrote:
Thu Oct 10, 2019 6:44 pm
What is a Vanguard Total Stock Market, and why should we only invest only 5%?
quickhitta:

Welcome to the Bogleheads Forum!

You can read about Vanguard Total Stock Market Index Fund HERE.

There is no "5%" limit.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "My preferred index fund happens to be the total stock market which includes large, medium, and small stocks."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by abuss368 » Thu Oct 10, 2019 8:31 pm

quickhitta wrote:
Thu Oct 10, 2019 6:44 pm
What is a Vanguard Total Stock Market, and why should we only invest only 5%?
Welcome to the Bogleheads!

Vanguard Total Stock Market Index Fund is an excellent fund to hold "forever".

Advantages include:

* No style drift
* No market capitalization drift
* No manager risk
* Diversified - includes thousands of securities
* Very low cost
* Holds market weigts
* No/minimal capital gain distributions.

I am unsure where a 5% allocation was recommended. Investors can use this one fund for the US only allocation and sleep well at night.
Last edited by abuss368 on Fri Oct 11, 2019 6:09 am, edited 1 time in total.
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Re: The Three-Fund Portfolio

Post by LadyGeek » Thu Oct 10, 2019 9:25 pm

quickhitta wrote:
Thu Oct 10, 2019 6:44 pm
What is a Vanguard Total Stock Market, and why should we only invest only 5%?
Welcome! Perhaps you are referring to an amount that should be contributed by your salary to a retirement plan at work?

Are you looking for help with your investments? If so, I recommend you post your portfolio in the Personal Investments forum using the Asking Portfolio Questions format? It will make you think about the "big picture" while giving us the info we need to point you in the right direction.

If you have any questions, ask in that thread.

Also, see the wiki: Getting started
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Re: The Three-Fund Portfolio

Post by rossington » Fri Oct 11, 2019 1:02 am

abuss368 wrote:
Thu Oct 10, 2019 8:31 pm
* No capital gains
Hopefully lots of capital gains.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: The Three-Fund Portfolio

Post by abuss368 » Fri Oct 11, 2019 6:08 am

rossington wrote:
Fri Oct 11, 2019 1:02 am
abuss368 wrote:
Thu Oct 10, 2019 8:31 pm
* No capital gains
Hopefully lots of capital gains.
I think I understand your response. I was referring to capital gains distributions.
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Re: The Three-Fund Portfolio

Post by rossington » Fri Oct 11, 2019 11:27 am

abuss368 wrote:
Fri Oct 11, 2019 6:08 am
rossington wrote:
Fri Oct 11, 2019 1:02 am
abuss368 wrote:
Thu Oct 10, 2019 8:31 pm
* No capital gains
Hopefully lots of capital gains.
I think I understand your response. I was referring to capital gains distributions.
+1 (Saw the edit).
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: The Three-Fund Portfolio

Post by abuss368 » Fri Oct 11, 2019 6:03 pm

rossington wrote:
Fri Oct 11, 2019 11:27 am
abuss368 wrote:
Fri Oct 11, 2019 6:08 am
rossington wrote:
Fri Oct 11, 2019 1:02 am
abuss368 wrote:
Thu Oct 10, 2019 8:31 pm
* No capital gains
Hopefully lots of capital gains.
I think I understand your response. I was referring to capital gains distributions.
+1 (Saw the edit).
I can not remember the last time total stock index declared a capital gain distribution.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by LadyGeek » Thu Oct 17, 2019 9:37 pm

I removed an off-topic post conjecturing on economic policy. The discussion is getting derailed.

Please stay on-topic, which is the investing aspects.
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Re: Questions regarding 3 fund portfolio and active investing

Post by 1789 » Sun Oct 20, 2019 2:28 am

Dear Taylor,

Thank you for your contributions to Boglehead community and providing valuable advise to many people. Just finished reading thread and it took 4 days!. I am also done with reading both Bogleheads guide to investing and Bogleheads guide to 3-Fund portfolio. Here are my questions to you:

1) In Bogleheads guide to investing (excellent book btw) at one point it is mentioned that all authors of the book have some active vanguard mutual funds. Can you explain what and why do you own as actively managed funds?

2) In Bogleheads guide to 3-fund portfolio, your first lesson learned is “%100 stocks is dangerous” where you gave example from 1929 - the great depression. Do you still believe strictly that 100% stocks is not appropriate even for a person who is at their 20s?

Special thanks to all bogleheads for their inputs on this thread.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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