The Three-Fund Portfolio

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saltycaper
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Re: The Three-Fund Portfolio

Post by saltycaper » Fri Feb 09, 2018 2:49 pm

cegibbs wrote:
Fri Feb 09, 2018 11:42 am

Also, when I used the Vanguard asset allocation link you provided it suggested I go with a 70/30 portfolio. I’m currently 65/35. Should I make that change at the same time?
Nobody can decide your asset allocation for you, including Vanguard. If you want to be 65/35, don't change just because you used Vanguard's calculator. A number of posters have found their calculator to be on the "aggressive" side compared to what they themselves decided. There is no reason to believe 70/30 is more "correct" than 65/35. A 5% difference is unlikely to be material to most investors anyway.
Quod vitae sectabor iter?

ankonaman
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Re: The Three-Fund Portfolio

Post by ankonaman » Sat Feb 10, 2018 12:59 pm

How would the new Global Wellington Fund Admiral Shares stack up against the 3 fund portfolio?

tj
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Re: The Three-Fund Portfolio

Post by tj » Sat Feb 10, 2018 1:46 pm

ankonaman wrote:
Sat Feb 10, 2018 12:59 pm
How would the new Global Wellington Fund Admiral Shares stack up against the 3 fund portfolio?
Which allocation of the 3 fund? In any event, way too early to know.

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CABob
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Re: The Three-Fund Portfolio

Post by CABob » Sat Feb 10, 2018 2:03 pm

tj wrote:
Sat Feb 10, 2018 1:46 pm
ankonaman wrote:
Sat Feb 10, 2018 12:59 pm
How would the new Global Wellington Fund Admiral Shares stack up against the 3 fund portfolio?
Which allocation of the 3 fund? In any event, way too early to know.
And it most likely would depend on the time frame used for comparison.
Bob

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Taylor Larimore
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Average is Better

Post by Taylor Larimore » Mon Feb 12, 2018 3:01 pm

Bogleheads:

Does it pay to be "average" by using total market index funds? Here is the answer:

In 2010 Bruce Berkowitz, manager of the Fairholme Fund (FAIRX) was named "Morningstar Fund Manager of the Decade." Investors poured into the fund.

On February 9, 2018, Morningstar compared the average annual returns of the Fairholme Fund (FAIRX still managed by Mr. Berkowitz) with Vanguard Total Stock Market Index Fund (VTSAX):

FUND................... 1-year----- 3-years--- 5-years---10-years*

VTSAX.................+14.83%------10.37%----13.52%-----9.51%

FAIRX...................-18.50%------1.35%------3.93% -----4.12%

* $10,000 invested in VTSAX became $24,660. $10,000 invested in FAIRX became $14,870

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

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Re: Average is Better

Post by MichaelRpdx » Mon Feb 12, 2018 6:23 pm

Taylor Larimore wrote:
Mon Feb 12, 2018 3:01 pm
Bogleheads:

Does it pay to be "average" by using total market index funds? Here is the answer:

In 2010 Bruce Berkowitz, manager of the Fairholme Fund (FAIRX) was named "Morningstar Fund Manager of the Decade." Investors poured into the fund.

On February 9, 2018, Morningstar compared the average annual returns of the Fairholme Fund (FAIRX still managed by Mr. Berkowitz) with Vanguard Total Stock Market Index Fund (VTSAX):

FUND................... 1-year----- 3-years--- 5-years---10-years*

VTSAX.................+14.83%------10.37%----13.52%-----9.51%

FAIRX...................-18.50%------1.35%------3.93% -----4.12%

* $10,000 invested in VTSAX became $24,660. $10,000 invested in FAIRX became $14,870

Best wishes.
Taylor
"But, but," some will object, "VTSAX is 100% equities. What about a balanced portfolio like a Three Fund investor would have?"

OK? What about? I present three examples:

FUND..................................... 1-year----- 3-years--- 5-years---10-years*
LifeStrategy Mod Growth......16.47% ----- 8.12% ----- 8.63% ---- 6.14%
Balanced Index Fund Adm ...15.56% ----- 8.82% --- 10.03% ---- 7.75%
Wellesley Income Fund Inv ...10.51% ----- 6.45% ---- 7.12% ---- 7.26%
Be Appropriate && Follow Your Curiosity

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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Feb 12, 2018 7:53 pm

"VTSAX is 100% equities. What about a balanced portfolio like a Three Fund investor would have?"
Michael:

My comparison, was between the stock "Fund of the Decade" and the stock fund in The Three-Fund Portfolio which should please Three-Fund investors. Nothing more.

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

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MichaelRpdx
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Re: The Three-Fund Portfolio

Post by MichaelRpdx » Mon Feb 12, 2018 8:02 pm

Taylor Larimore wrote:
Mon Feb 12, 2018 7:53 pm
"VTSAX is 100% equities. What about a balanced portfolio like a Three Fund investor would have?"
Michael:

My comparison, was between the stock "Fund of the Decade" and the stock fund in The Three-Fund Portfolio which should please Three-Fund investors. Nothing more.

Best wishes.
Taylor
Sure, I understand, fair enough.
But someone will object. I mean, besides me. And FAIRX, at least as of today is not a "stock" fund.
From Monrningstar: Image
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Feb 12, 2018 8:27 pm

And FAIRX, at least as of today is not a "stock" fund.
Michael:

Very interesting. Morningstar still puts FAIRX in its Large Value (stock fund) category:

http://portfolios.morningstar.com/fund/ ... ture=en-US

In any event, investors who invested in "The Fund of the Decade" badly trailed Vanguard Total Stock Market Index Fund in "The Three-Fund Portfolio."

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

jeroly
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Re: The Three-Fund Portfolio

Post by jeroly » Tue Feb 13, 2018 8:06 am

I apologize for not finding if this has already been discussed in the 42-page thread...

Why not have a fourth fund for international bonds in the portfolio?

dbr
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Re: The Three-Fund Portfolio

Post by dbr » Tue Feb 13, 2018 9:46 am

jeroly wrote:
Tue Feb 13, 2018 8:06 am
I apologize for not finding if this has already been discussed in the 42-page thread...

Why not have a fourth fund for international bonds in the portfolio?
1. There probably needs to be more evidence that it would be particularly helpful.
2. It adds some complexity also starting a "slippery slope" process for other changes and additions.
3. Why not, indeed. 3 fund can perfectly well be 4 fund without any big deal about it.

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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Tue Feb 13, 2018 12:04 pm

jeroly wrote:
Tue Feb 13, 2018 8:06 am
I apologize for not finding if this has already been discussed in the 42-page thread...

Why not have a fourth fund for international bonds in the portfolio?
jeroly:

This post on page 11 in the Three-Fund Portfolio thread answers your question:
Adding Total International Bond Index Fund?
Post by Taylor Larimore » Fri Oct 25, 2013 5:02 pm

Norske77 wrote:
What is Taylor's thinking on adding this fund and making four?
You ask a very good question and one that I carefully considered when Vanguard first offered their Total International Bond Fund (VTIBX and Admiral VTABX) on May 31, 2013, and later increased its allocation on May 26, 2015 to 30% of nominal fixed income exposure.

It is always tempting to add additional funds to The Three Fund Portfolio and overlook their additional costs, risk and complexity. International bonds represent a large asset class which Vanguard added to their Target and Life-Strategy funds so their new Total International Bond Fund deserves a look.

It is notable that a Target portfolio with a 20% bond allocation will have only 6% international bonds. This is almost meaningless. Adding a Total International Bond fund inside a single Target or Life-Strategy fund adds no complexity to the investor.

Vanguard's diversified Total Bond Market Index Fund has a proven record of providing safety in a portfolio. For example, during the 2008 bear market when Total Stock Market fell -37%, Total Bond market gained +5%.

Adding Total International Bond fund to The Three Fund Portfolio has several disadvantages: Political risk, higher expense ratios, longer duration, relatively week credit quality and more complexity.

Mr. Bogle said this in a Morningstar interview:
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.
Boglehead author and adviser, Bill Bernstein wrote this article: Don't Bother With International Bonds

During the 2015 Boglehead Conference, my expert co-author, Rick Ferri, told an interviewer: "Forget foreign bonds."

Morningstar article:Vanguard's Total International Bond exchange-traded fund is a poor investment today (8-01-14)

For the above reasons, I will not add Total International Bond Index to the very successful Three Fund Portfolio.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Taylor Larimore
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Re: The Three-Fund Portfolio Book Cover

Post by Taylor Larimore » Tue Feb 13, 2018 10:12 pm

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

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abuss368
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Re: The Three-Fund Portfolio Book Cover

Post by abuss368 » Tue Feb 13, 2018 10:26 pm

Taylor Larimore wrote:
Tue Feb 13, 2018 10:12 pm
Image
Best wishes.
Taylor
That is incredible! I can not wait to read this book!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Calygos
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Re: The Three-Fund Portfolio Book Cover

Post by Calygos » Fri Feb 16, 2018 9:38 pm

abuss368 wrote:
Tue Feb 13, 2018 10:26 pm
Taylor Larimore wrote:
Tue Feb 13, 2018 10:12 pm
Image
Best wishes.
Taylor
That is incredible! I can not wait to read this book!
Agreed, thank you, Taylor! I gave my copy of the first Bogleheads' Guide to a colleague (who's now at Vanguard!) and I'm stoked about thie one!

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