The Three-Fund Portfolio

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ScooterBob
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Re: The Three-Fund Portfolio or a Target Fund?

Post by ScooterBob » Wed May 09, 2018 7:42 pm

Taylor Larimore wrote:
Wed May 09, 2018 8:19 am
This is probably a very rookie question (and if it's misplaced, apologies in advance) - but what is the advantage of going with a three-fund portfolio (US equity/non-US equity/fixed income) vs. a single target fund?
shorekat14:

It is not a "rookie" question because the Three-Fund and a low-cost Target Fund are both excellent portfolios.

The primary advantage of The Three-Fund Portfolio is that it is a more tax-efficient portfolio if the investor has both tax-advantaged accounts (IRA, 401k, etc.) and taxable accounts. The Three-Fund Portfolio allows the investor to place the two tax-efficient funds (Total Stock Market and Total International) in the taxable account (or tax-advantaged account) and place the tax inefficient fund (Total Bond Market) in a tax-advantaged account.

The primary advantage of the Target Fund is its one-fund simplicity and its increased diversification. If all accounts are tax-advantaged, I recommend a simple low-cost target fund designed by company experts.

There is more than one road to Dublin.


Best wishes
Taylor
Taylor- would you also consider VBIAX to fit into the "target fund" scenario? I know it only has U.S. stocks and bonds vs. most target date funds which add international stocks and bonds.

Thanks!

Bob

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Re: The Three-Fund Portfolio or a Target Fund?

Post by Taylor Larimore » Wed May 09, 2018 7:51 pm

ScooterBob wrote:
Wed May 09, 2018 7:42 pm
Taylor Larimore wrote:
Wed May 09, 2018 8:19 am
This is probably a very rookie question (and if it's misplaced, apologies in advance) - but what is the advantage of going with a three-fund portfolio (US equity/non-US equity/fixed income) vs. a single target fund?
shorekat14:

It is not a "rookie" question because the Three-Fund and a low-cost Target Fund are both excellent portfolios.

The primary advantage of The Three-Fund Portfolio is that it is a more tax-efficient portfolio if the investor has both tax-advantaged accounts (IRA, 401k, etc.) and taxable accounts. The Three-Fund Portfolio allows the investor to place the two tax-efficient funds (Total Stock Market and Total International) in the taxable account (or tax-advantaged account) and place the tax inefficient fund (Total Bond Market) in a tax-advantaged account.

The primary advantage of the Target Fund is its one-fund simplicity and its increased diversification. If all accounts are tax-advantaged, I recommend a simple low-cost target fund designed by company experts.

There is more than one road to Dublin.


Best wishes
Taylor
Taylor- would you also consider VBIAX to fit into the "target fund" scenario? I know it only has U.S. stocks and bonds vs. most target date funds which add international stocks and bonds.

Thanks!

Bob
Bob:

VBIAX (Vanguard Balanced Index Adm) is a balanced (stock & bond) fund not suitable for a taxable account because it contains tax-inefficient taxable bonds.

Target funds are designed as simple stand-alone funds. Don't complicate your portfolio with additional overlapping funds. Read my "Simplicity" link below.

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

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ScooterBob
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Re: The Three-Fund Portfolio or a Target Fund?

Post by ScooterBob » Wed May 09, 2018 8:26 pm

Taylor Larimore wrote:
Wed May 09, 2018 7:51 pm
ScooterBob wrote:
Wed May 09, 2018 7:42 pm
Taylor Larimore wrote:
Wed May 09, 2018 8:19 am
This is probably a very rookie question (and if it's misplaced, apologies in advance) - but what is the advantage of going with a three-fund portfolio (US equity/non-US equity/fixed income) vs. a single target fund?
shorekat14:

It is not a "rookie" question because the Three-Fund and a low-cost Target Fund are both excellent portfolios.

The primary advantage of The Three-Fund Portfolio is that it is a more tax-efficient portfolio if the investor has both tax-advantaged accounts (IRA, 401k, etc.) and taxable accounts. The Three-Fund Portfolio allows the investor to place the two tax-efficient funds (Total Stock Market and Total International) in the taxable account (or tax-advantaged account) and place the tax inefficient fund (Total Bond Market) in a tax-advantaged account.

The primary advantage of the Target Fund is its one-fund simplicity and its increased diversification. If all accounts are tax-advantaged, I recommend a simple low-cost target fund designed by company experts.

There is more than one road to Dublin.


Best wishes
Taylor
Taylor- would you also consider VBIAX to fit into the "target fund" scenario? I know it only has U.S. stocks and bonds vs. most target date funds which add international stocks and bonds.

Thanks!

Bob
Bob:

VBIAX (Vanguard Balanced Index Adm) is a balanced (stock & bond) fund not suitable for a taxable account because it contains tax-inefficient taxable bonds.

Target funds are designed as simple stand-alone funds. Don't complicate your portfolio with additional overlapping funds. Read my "Simplicity" link below.

Best wishes.
Taylor

Taylor- Simplicity is exactly what I am after!! I should have been more clear with my question/thought. VBIAX is what I am using for my entire tax advantaged account. The 60/40 mix of it, along with my very efficient taxable account, are taking me exactly where I want to be allocation-wise overall. My thought of using the balanced fund is precisely for it's simplicity. The ER, as you know, is .07 and it keeps ME from getting in there and screwing things up in the future. I guess I was asking if you think VBIAX is sort of a "2 fund portfolio" that is acceptable. I don't see too many others using or touting this simple fund. Is it because it is "managed" in the sense that it balanced daily?? I like the fact that I get 60% of the entire U.S. stock market and 40% or the entire U.S. bond market... I fall in the category (right or wrong) of not using international at this time in my life. Will that change at some point? Maybe.

Bob

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Re: The Three-Fund Portfolio

Post by Kennyt7 » Thu May 10, 2018 7:36 pm

you should include small caps and or small cap and large cap value along with reits
small caps historically have done 2% better yearly

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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Thu May 10, 2018 9:05 pm

Kennyt7 wrote:
Thu May 10, 2018 7:36 pm
you should include small caps and or small cap and large cap value along with reits
small caps historically have done 2% better yearly
Kennyt7:

The Three-Fund Portfolio already contains the market weight in small-caps, large-cap value and REITs.

Past performance does not forecast future performance.

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

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Re: The Three-Fund Portfolio

Post by Cruncher » Thu May 10, 2018 11:29 pm

Taylor,

Great thread!

Thanks,

Cruncher

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Re: The Three-Fund Portfolio

Post by LadyGeek » Sat May 12, 2018 8:07 am

New member Houston and 6th has a question which I've moved into a new thread: [Three-fund portfolio in taxable account (New York City)]
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Re: The Three-Fund Portfolio

Post by abuss368 » Sun May 13, 2018 8:35 am

Kennyt7 wrote:
Thu May 10, 2018 7:36 pm
you should include small caps and or small cap and large cap value along with reits
small caps historically have done 2% better yearly
Hi Kennyt7 -

One of the many advantages of the Three Fund Portfolio is that it includes the market capitalization weight of all asset classes including small caps, large cap value, and REITs.

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

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Re: The Three-Fund Portfolio

Post by dbr » Sun May 13, 2018 9:26 am

abuss368 wrote:
Sun May 13, 2018 8:35 am
Kennyt7 wrote:
Thu May 10, 2018 7:36 pm
you should include small caps and or small cap and large cap value along with reits
small caps historically have done 2% better yearly
Hi Kennyt7 -

One of the many advantages of the Three Fund Portfolio is that it includes the market capitalization weight of all asset classes including small caps, large cap value, and REITs.

Best.
I would reinforce that because it a confusion that seems to persist. It is often missed that adding small cap, value, or REITS is for the purpose of tilting the asset allocation to concentrate in those assets. There is a reasoning behind that, but one should not be confused as to what is being discussed.

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Re: The Three-Fund Portfolio

Post by 2015 » Sun May 13, 2018 1:37 pm

dbr wrote:
Sun May 13, 2018 9:26 am
abuss368 wrote:
Sun May 13, 2018 8:35 am
Kennyt7 wrote:
Thu May 10, 2018 7:36 pm
you should include small caps and or small cap and large cap value along with reits
small caps historically have done 2% better yearly
Hi Kennyt7 -

One of the many advantages of the Three Fund Portfolio is that it includes the market capitalization weight of all asset classes including small caps, large cap value, and REITs.

Best.
I would reinforce that because it a confusion that seems to persist. It is often missed that adding small cap, value, or REITS is for the purpose of tilting the asset allocation to concentrate in those assets. There is a reasoning behind that, but one should not be confused as to what is being discussed.
I agree. I've probably expressed my gratitude before but I am so thankful to Taylor for emphasizing the 3 fund PF. The simplicity in this approach has extended much further than PF management, to include estate planning, tax planning, ACA planning, and much more. Personally, I couldn't be paid to engage in tilting. For the past six months, I've known someone dying slowly from cancer and they haven't said a single thing about wishing they'd been more clever with their finances or PF.

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"Simplicity Vs. Schwab’s Robo Portfolio"

Post by Taylor Larimore » Wed Jun 06, 2018 2:34 pm

Bogleheads:

Nearly three years ago, Schwab launched its free robo 16 fund "Intelligent Portfolio". Boglehead advisor Allan Roth compared the performance of the "Intelligent Portfolio" with the equivalent Vanguard Three-Fund Portfolio. The result:
"Since March 27, 2015, the date I bought it, my Schwab statement indicates a very handsome 7.7% annualized return. However, the equivalent three-fund broad index portfolio returned an even more handsome 9.4%
Past performance does not forecast future performance.

Simplicity Vs. Schwab’s Robo Portfolio

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

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Re: The Three-Fund Portfolio

Post by tmcc » Sun Jun 17, 2018 6:46 pm

I'm a 4 fund portfolio right now. Total US and developed international are fine. Emerging is a total dog. I suppose a portfolio cant always be up on everything. Still.

75 - Total stock
10 - Int Total stock
5 - Emerging stock
10 - Bond

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Taylor Larimore
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Adding Emerging Markets ?

Post by Taylor Larimore » Sun Jun 17, 2018 8:12 pm

tmcc:

Are you aware that Vanguard Total International Index Fund contains 21% Emerging Market stocks.

Consider merging Emerging Markets Index Fund into Total International Index Fund for two primary reasons: 1) Simplification and 2) Eliminates overlap.

Please read my "Simplicity" link below.

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

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Re: The Three-Fund Portfolio

Post by LadyGeek » Thu Jun 21, 2018 3:41 pm

bg5 has a question which I've moved into a new thread. See: [100% stock, uncomfortable with international]
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Re: The Three-Fund Portfolio

Post by MichaelRpdx » Thu Jun 21, 2018 8:20 pm

Amazon alerted me to expect my copy of the book on June 29. Yay!

Any of you get alerts?
Be Appropriate && Follow Your Curiosity

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Re: The Three-Fund Portfolio

Post by TheQuietMan » Thu Jun 21, 2018 10:12 pm

Yes, Amazon mentioned it would be arriving around June 26th. Looking forward to it...

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Re: The Three-Fund Portfolio

Post by longinvest » Fri Jun 22, 2018 6:29 am

I bought the electronic version of Taylor Larimore's new book The Bogleheads' Guide to the Three-Fund Portfolio yesterday.

Thank you, Taylor!

I highly recommend this book to readers of this thread!
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

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Taylor Larimore
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Your Three-Fund Portfolio Comments

Post by Taylor Larimore » Fri Jun 22, 2018 8:30 pm

Bogleheads:

When editing The Bogleheads Guide to the Three-Fund Portfolio the editors decided to use many of your testimonials in this lengthy thread. What you wrote is highlighted in boxes under the title, "Bogleheads Speak Out." Your comments are very convincing and identified with username initials.

I want to thank each of you who took the time to write your favorable comment.

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

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Re: The Three-Fund Portfolio

Post by JonM » Mon Jun 25, 2018 3:24 am

Just got. Can't wait to read it :)

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Re: The Three-Fund Portfolio

Post by Leesbro63 » Mon Jun 25, 2018 6:55 am

I ordered the book and look forward to it. I wonder how tax-free bonds are treated/suggested. The Three Fund Portfolio, as often referred to here, seems to ignore large taxable portfolios. These, I think, would probably be better served by a tax-free muni bond fund rather than Vanguard Total Bond Market (taxable).

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Re: The Three-Fund Portfolio

Post by PhilosophyAndrew » Mon Jun 25, 2018 7:22 am

Leesbro63 wrote:
Mon Jun 25, 2018 6:55 am
I ordered the book and look forward to it. I wonder how tax-free bonds are treated/suggested. The Three Fund Portfolio, as often referred to here, seems to ignore large taxable portfolios. These, I think, would probably be better served by a tax-free muni bond fund rather than Vanguard Total Bond Market (taxable).
Doesn’t this depend on which of these two options provides a better affer-tax return?

I use an AMT-exempt national muni bond fund for part of my bond allocation because that gives me a better after-tax return than Total Bond would, but if my tax rate were low enough I would have been better off with Total Bond.

Andy.

Leesbro63
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Re: The Three-Fund Portfolio

Post by Leesbro63 » Mon Jun 25, 2018 7:40 am

PhilosophyAndrew wrote:
Mon Jun 25, 2018 7:22 am
Doesn’t this depend on which of these two options provides a better affer-tax return?
Yes. That’s why I mentioned “large” taxable portfolios. Implying higher tax brackets.

longinvest
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Re: The Three-Fund Portfolio

Post by longinvest » Mon Jun 25, 2018 8:23 am

Leesbro63 wrote:
Mon Jun 25, 2018 6:55 am
I ordered the book and look forward to it. I wonder how tax-free bonds are treated/suggested. The Three Fund Portfolio, as often referred to here, seems to ignore large taxable portfolios. These, I think, would probably be better served by a tax-free muni bond fund rather than Vanguard Total Bond Market (taxable).
The issue of bonds in a taxable account is covered, but as U.S. tax issues are irrelevant for me, I didn't read the details.

While Taylor convincingly promotes his Three-Fund Portfolio of total-market index funds or ETFs, he's very practical about it. He discusses situations where one only has access to separate funds to cover a market, like separate S&P 500 and completion index funds, for example. He even opens the door for a fourth fund, with a warning about the complexity an additional fund adds to a portfolio. That's nice, because many Bogleheads who have a high allocation to bonds like to include a total-market TIPS index fund or ETF, which has no overlap with the total nominal bond market, as part of their bond allocation.

For a typical investor with an 80/20 or a 60/40 allocation, the pure Three-Fund Portfolio seems like a perfect fit. Bonds should fit nicely within tax-advantaged accounts, and stocks would fill the remaining tax-advantaged space and possibly spill into taxable accounts.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

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Re: The Three-Fund Portfolio

Post by abuss368 » Mon Jun 25, 2018 9:18 am

Leesbro63 wrote:
Mon Jun 25, 2018 6:55 am
I ordered the book and look forward to it. I wonder how tax-free bonds are treated/suggested. The Three Fund Portfolio, as often referred to here, seems to ignore large taxable portfolios. These, I think, would probably be better served by a tax-free muni bond fund rather than Vanguard Total Bond Market (taxable).
Hi Leesbro63 -

I do not believe that the Three Fund Portfolio "ignores" large taxable investment accounts. Assuming the tax advantage accounts are small or nonexistent, simply select Total Stock and Total International for the stock component of the account. Both of these equity funds are total market and very tax efficient. Allocate the bond portion to a tax exempt or Total Bond depending on the tax situation.

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

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Re: The Three-Fund Portfolio

Post by abuss368 » Mon Jun 25, 2018 9:19 am

JonM wrote:
Mon Jun 25, 2018 3:24 am
Just got. Can't wait to read it :)
That is great! I am excited as well to read the 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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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Jun 25, 2018 10:13 am

Leesbro63 wrote:
Mon Jun 25, 2018 6:55 am
I ordered the book and look forward to it. I wonder how tax-free bonds are treated/suggested. The Three Fund Portfolio, as often referred to here, seems to ignore large taxable portfolios. These, I think, would probably be better served by a tax-free muni bond fund rather than Vanguard Total Bond Market (taxable).
Leesbro63:

Please read my Opening Post.

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

Leesbro63
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Re: The Three-Fund Portfolio

Post by Leesbro63 » Mon Jun 25, 2018 2:14 pm

Taylor Larimore wrote:
Mon Jun 25, 2018 10:13 am
Leesbro63 wrote:
Mon Jun 25, 2018 6:55 am
I ordered the book and look forward to it. I wonder how tax-free bonds are treated/suggested. The Three Fund Portfolio, as often referred to here, seems to ignore large taxable portfolios. These, I think, would probably be better served by a tax-free muni bond fund rather than Vanguard Total Bond Market (taxable).
Leesbro63:

Please read my Opening Post.

Best wishes
Taylor
Thank you, Taylor. This has become a 44 page post, so I guess your original post sort of got lost on me. Here is what you said, regarding bond fund:

"Fund Placement For Maximum Tax-Efficiency: Place Total Bond Market in tax-advantaged account(s). If full, use a tax-exempt bond fund in a taxable account."

While I admit that I've already been buying tax free bond funds (Vanguard) for years, I'm curious if you think there is an "equivalent" tax-exempt fund to the taxable "Total Bond Market" fund. In other words, what would you say is the "go to" tax-free fund? Maybe Vanguard Tax-Exempt Bond Index (investor shares or Admiral shares (VTEBX/VTEAX)?

I guess under the thinking of simplicity, if someone with a large taxable portfolio asked me "what are the 3 Funds for the 3 Fund Portfolio?", I'm not sure I ever had thought about the specific answer for the tax-exempt bond fund.

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Re: The Three-Fund Portfolio

Post by yardarm » Mon Jun 25, 2018 2:24 pm

To this day, I still struggle (maybe too strong a word; change that to concern) with all the sage wisdom about simplicity in investing. So I went back and read the simplicity post again. The last of the words of wisdom, " Warren Buffett: "There seems to be some perverse human characteristic that likes to make easy things difficult." seems to define my concern to the T. We have been reluctant to make the switch to the 3 Fund Portfolio as a result; we think that our age (70+) and time horizon (read life expectancy) make it moot. We do not rely on our investments for our retirement living, (we use our pensions) but they are there for the unexpected emergency. We think we are being safe by using funds such as the Vanguard Wellesley instead since the stated allocation seems reasonable. Oh well, we usually look at our holdings in July with an eye to rebalancing so we will give it some more thought. Thanks for letting me ramble on with this post. Have a good day.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Jun 25, 2018 2:28 pm

Leesbro63:

VTEBX/VTEAX (Tax-Exempt Bond Index) charges a 0.25% load on non-ETF shares. I'd probably go for VWITX (Intermediate-Term Tax-Exempt) or possibly a State Tax-Exempt Fund. We're dancing on the head of a pin.

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

Leesbro63
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Re: The Three-Fund Portfolio

Post by Leesbro63 » Mon Jun 25, 2018 3:05 pm

Taylor Larimore wrote:
Mon Jun 25, 2018 2:28 pm
Leesbro63:

VTEBX/VTEAX (Tax-Exempt Bond Index) charges a 0.25% load on non-ETF shares. I'd probably go for VWITX (Intermediate-Term Tax-Exempt) or possibly a State Tax-Exempt Fund. We're dancing on the head of a pin.

Best wishes.
Taylor
Wow. I learned something new. I wonder why they charge a load? And I wonder if there's any way around that (big purchase? long time invested?).

Agreed that we're splitting hairs here. Anyway, I look forward to your book arriving. I ordered it in print form so I can give it to one of my kids. Maybe I'll order another copy for the other kid too.

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Re: The Three-Fund Portfolio

Post by Miriam2 » Tue Jun 26, 2018 4:08 pm

South Florida Bogleheads are fortunate to have Taylor in our South Florida Local Chapter. We would like to invite all Bogleheads to our next local chapter meeting on Sunday, July 1, 2018, in Hollywood, Florida, honoring Taylor and his new book.

We plan for a nice book signing with Taylor and a discussion of the Three Fund Portfolio. We are delighted we received extra copies of Taylor's book from the publisher for those at our meeting.

Taylor graciously provides sandwiches for everyone who comes :D

Please see our South Florida Local Chapter link for directions and updates on this meeting.

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Re: The Three-Fund Portfolio

Post by Leesbro63 » Wed Jun 27, 2018 2:42 pm

For what it's worth, my book arrived from Amazon today. I look forward to reading it. Thank you, Taylor Larimore!

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The Benefit of Amazon Review

Post by Taylor Larimore » Wed Jun 27, 2018 6:12 pm

Leesbro63 wrote:
Wed Jun 27, 2018 2:42 pm
For what it's worth, my book arrived from Amazon today. I look forward to reading it. Thank you, Taylor Larimore!
Leesbro63:

I hope you are not disappointed.

I will appreciate it if you will post a review on Amazon. Each book purchase will, in part, go directly to support The John C. Bogle Center for Financial Literacy.

Thank you and best wishes.

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

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Re: The Three-Fund Portfolio

Post by 1210sda » Wed Jun 27, 2018 6:33 pm

Taylor Larimore wrote:
Mon Jun 25, 2018 2:28 pm
Leesbro63:

VTEBX/VTEAX (Tax-Exempt Bond Index) charges a 0.25% load on non-ETF shares. I'd probably go for VWITX (Intermediate-Term Tax-Exempt) or possibly a State Tax-Exempt Fund. We're dancing on the head of a pin.

Best wishes.
Taylor
Is there anything wrong with using the ETF on this?

1210

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Re: The Three-Fund Portfolio

Post by LaurieAnnaT » Wed Jun 27, 2018 6:37 pm

I'm writing this with tears in my eyes.

My dear Boglehead husband passed away very unexpectedly on April 17 at age 63.

When I took the trash out this afternoon, I saw a package on the ground from Amazon... addressed to my husband! Ok... something back ordered?

My husband had ordered Taylor Larimore's The Bogleheads' Guide to the Three-Find Portfolio on January 15. It was delivered today.

That was just typical of my sweetie.

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Re: The Three-Fund Portfolio

Post by AlwaysWannaLearn » Wed Jun 27, 2018 6:43 pm

.....
Last edited by AlwaysWannaLearn on Thu Jul 19, 2018 6:09 pm, edited 1 time in total.

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Re: The Three-Fund Portfolio

Post by RobLIC » Wed Jun 27, 2018 6:59 pm

I was delighted to download my copy of Taylor’s book over the weekend — and also, startled when I looked back on some old posts from Laura, who helped me figure out some intelligent taxable account placement issues re: index funds... and then I happened to discover she is also the U.S. Ambassador to Nicaragua. (NOT a political comment by a long shot — just impressed.) Amazing to consider the breadth of knowledge in these pages. Rob

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Re: The Three-Fund Portfolio

Post by abuss368 » Wed Jun 27, 2018 7:41 pm

LaurieAnnaT wrote:
Wed Jun 27, 2018 6:37 pm
I'm writing this with tears in my eyes.

My dear Boglehead husband passed away very unexpectedly on April 17 at age 63.

When I took the trash out this afternoon, I saw a package on the ground from Amazon... addressed to my husband! Ok... something back ordered?

My husband had ordered Taylor Larimore's The Bogleheads' Guide to the Three-Find Portfolio on January 15. It was delivered today.

That was just typical of my sweetie.
Hi LaurieAnnaT -

Thank you for sharing. God bless you and your family.

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

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Wed Jun 27, 2018 8:04 pm

1210sda wrote:
Wed Jun 27, 2018 6:33 pm
Taylor Larimore wrote:
Mon Jun 25, 2018 2:28 pm
Leesbro63:

VTEBX/VTEAX (Tax-Exempt Bond Index) charges a 0.25% load on non-ETF shares. I'd probably go for VWITX (Intermediate-Term Tax-Exempt) or possibly a State Tax-Exempt Fund. We're dancing on the head of a pin.

Best wishes.
Taylor
Is there anything wrong with using the ETF on this?
1210:

Nothing wrong. Funds and ETFs are virtually interchangeable.

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

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Taylor Larimore
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"The Simple Three-Fund Portfolio at Vanguard"

Post by Taylor Larimore » Thu Jun 28, 2018 2:07 pm

Bogleheads:

"The Simple Three-Fund Portfolio at Vanguard" article in the Early Retirement Guide Website has been updated:

If you have not read Adam's article, it is a different approach to implementation of The Three-Fund Portfolio.

The Simple Three-Fund Portfolio at Vanguard

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

grandpadan
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Re: The Three-Fund Portfolio

Post by grandpadan » Fri Jun 29, 2018 12:02 pm

Hi, I am a newbie. Just want to know if this 3-fund portfolio still applies in today's market in general? I also want to know when is the best time purchased these funds? With the market high, should i wait till the market goes down first before purchasing these mutual funds?

dbr
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Re: The Three-Fund Portfolio

Post by dbr » Fri Jun 29, 2018 12:20 pm

grandpadan wrote:
Fri Jun 29, 2018 12:02 pm
Hi, I am a newbie. Just want to know if this 3-fund portfolio still applies in today's market in general? I also want to know when is the best time purchased these funds? With the market high, should i wait till the market goes down first before purchasing these mutual funds?
It certainly applies and the time to buy is when you have money to invest.

grandpadan
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Re: The Three-Fund Portfolio

Post by grandpadan » Fri Jun 29, 2018 12:37 pm

dbr wrote:
Fri Jun 29, 2018 12:20 pm
grandpadan wrote:
Fri Jun 29, 2018 12:02 pm
Hi, I am a newbie. Just want to know if this 3-fund portfolio still applies in today's market in general? I also want to know when is the best time purchased these funds? With the market high, should i wait till the market goes down first before purchasing these mutual funds?
It certainly applies and the time to buy is when you have money to invest.
I do have about $50,000 to put in. But should i hold buying until market drops a bit first?

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matjen
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Re: The Three-Fund Portfolio

Post by matjen » Fri Jun 29, 2018 12:40 pm

grandpadan wrote:
Fri Jun 29, 2018 12:37 pm

I do have about $50,000 to put in. But should i hold buying until market drops a bit first?

Here is a well known Boglehead statement that addresses your concern.
"It's Time in the Market, Not Timing the Market."
A man is rich in proportion to the number of things he can afford to let alone.

dbr
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Re: The Three-Fund Portfolio

Post by dbr » Fri Jun 29, 2018 12:44 pm

grandpadan wrote:
Fri Jun 29, 2018 12:37 pm
dbr wrote:
Fri Jun 29, 2018 12:20 pm
grandpadan wrote:
Fri Jun 29, 2018 12:02 pm
Hi, I am a newbie. Just want to know if this 3-fund portfolio still applies in today's market in general? I also want to know when is the best time purchased these funds? With the market high, should i wait till the market goes down first before purchasing these mutual funds?
It certainly applies and the time to buy is when you have money to invest.
I do have about $50,000 to put in. But should i hold buying until market drops a bit first?
No, unless the real issue is that you shouldn't be in the market at all, or at least that not all the money should be invested in the market. I am convinced that almost everyone asking things like when they should invest in the market really should be thinking hard about whether they should invest.

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CABob
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Re: The Three-Fund Portfolio

Post by CABob » Fri Jun 29, 2018 1:07 pm

grandpadan wrote:
Fri Jun 29, 2018 12:37 pm
dbr wrote:
Fri Jun 29, 2018 12:20 pm
grandpadan wrote:
Fri Jun 29, 2018 12:02 pm
Hi, I am a newbie. Just want to know if this 3-fund portfolio still applies in today's market in general? I also want to know when is the best time purchased these funds? With the market high, should i wait till the market goes down first before purchasing these mutual funds?
It certainly applies and the time to buy is when you have money to invest.
I do have about $50,000 to put in. But should i hold buying until market drops a bit first?
The problem is identifying how much of a drop should occur before investing, and what to do if the market continues to go up while you are waiting.
If you are uncomfortable putting it all into the market at this time you might consider putting $10K in now and another $10K every 2 months or a similar schedule. This is referred to as dollar cost averaging. Mathematically it is usually not as good as a lump sum investment but if it makes you more comfortable go for it.
This does bring up another question, however. Where is the $50K now? If it is currently invested in some other manner or allocation it may be even more a reason to lump sum.
Bob

livesoft
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Re: The Three-Fund Portfolio

Post by livesoft » Fri Jun 29, 2018 2:14 pm

grandpadan wrote:
Fri Jun 29, 2018 12:37 pm
I do have about $50,000 to put in. But should i hold buying until market drops a bit first?
The funny thing to me is that the market just dropped a bit in the past few weeks, so the wait is already over.
Wiki This signature message sponsored by sscritic: Learn to fish.

longinvest
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Re: The Three-Fund Portfolio

Post by longinvest » Fri Jun 29, 2018 6:48 pm

Grandpadan,
grandpadan wrote:
Fri Jun 29, 2018 12:02 pm
Hi, I am a newbie. Just want to know if this 3-fund portfolio still applies in today's market in general? I also want to know when is the best time purchased these funds? With the market high, should i wait till the market goes down first before purchasing these mutual funds?
Welcome to the forum!

Usually, when people are afraid to invest new money into their portfolio, it's because their target asset allocation is wrong.

The target stock allocation should be planned assuming that stocks can always lose 50% of their value in the upcoming days/weeks/months at any point in time.

If I had $50,000 to invest, I would think about the biggest short-term loss that would be tolerable to me. Let's say it's $15,000, then I wouldn't invest more than double this amount into stocks ($30,000); that's a 60% target allocation to stocks. I would put the rest of my money into bonds. If my worst tolerable short-term loss had been $10,000, I would have gone with a 40% target allocation to stocks. And so on.

Bogleheads always stay invested into their portfolio and they invest new money as soon as it's available, trying to bring back their portfolio towards its chosen target (e.g. if stocks are below target, new money goes into stocks; if bonds are below target, new money goes into bonds). Bogleheads never try to time their entry into the market.

The idea of the Three-Fund Portfolio is to spread the money across stocks and bonds, and to divide stocks investments between domestic and international. This way, the money will never all be invested into the worst performing asset.

By staying fully invested into a three-fund portfolio, one won't miss out on the fantastic returns of stock markets that tend to happen at the least expected moment.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

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SWBoarder
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Re: The Three-Fund Portfolio

Post by SWBoarder » Thu Jul 05, 2018 10:19 am

With retirement and too many fun things to do, I got religion and implemented a 4 fund portfolio.

I bought and read the book and plan to use it as I spread the gospel. I was disappointed it did not have a comprehensive historic return grid for a Vanguard 3 fund portfolio at 10%, 20%, & 30% stock/bond split for Vanguard shares. Page 61 contained some return info but it wasn't footnoted so I had to look up the source article to know it was 80/20 stock/bond split. Is my desired grid posted on Bogleheads somewhere or do I need to produce?

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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Thu Jul 05, 2018 12:55 pm

I was disappointed it did not have a comprehensive historic return grid for a Vanguard 3 fund portfolio at 10%, 20%, & 30% stock/bond split for Vanguard shares.
SWBoarder:

I do not like using past returns because past performance does not forecast future performance. Nevertheless, you can see past returns of The Three-Fund Portfolio, using different stock/bond splits, HERE.

The Three Fund Portfolio on page 61 was 40% Total Stock Market; 20% Total International and 40% Total Bond Market.
Jack Bogle: "The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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