Who uses the 3 fund portfolio ?

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dcabler
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Re: Who uses the 3 fund portfolio ?

Post by dcabler » Tue Jun 12, 2018 9:43 am

Count me among those who do not. But there is absolutely nothing wrong with it. It's simple, it's easy to maintain, and it is good enough for many people and it's what I'm recommending to my daughter as she gets started investing. I wouldn't be presumptuous enough to say it's "good enough" for everybody - that's for each individual to decide.

As for me, I tend to concentrate in the lower lefthand 4 boxes in the M* box for stocks and Intermediate Treasuries for bonds with some TIPs/Ibonds. It's kinda Larry-ish but not all the way either in the stocks/bond ratio nor do I have the full concentration on SCV. And I include some EM and some Int'l small in my mix as well, but not in huge doses. It historically has outperformed with only short periods of underperformance. Will that continue? Who knows. But I'm reasonably convinced that even if it underperforms, it most likely won't be by a lot. In other words, it will probably help and if it hurts, it won't hurt much.

I enjoy reading BH and have learned a ton since I joined, including putting the nail on the coffin of investing in anything but index funds, interesting ideas on withdrawal methods, rebalancing, etc. and if I have interest in an idea, I always check it out myself before I'm convinced. And I'm equally convinced that there are some subjects brought up over and over again here on the forum for which there will never be consensus. But, as the man says "there are many roads to Dublin". I have chosen mine.

guyesmith
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Re: Who uses the 3 fund portfolio ?

Post by guyesmith » Tue Jun 12, 2018 10:46 am

One fund right now for me. VTSAX. I still go back and forth on adding VTIAX or going all in for Total World, but at the moment I'm all Total US.

Except...da da da...I do have an SEP IRA from an ex-employer that sits alone and is all PRIMECAP. Can't feed that IRA anymore so figure on leaving it sit forever.

My real IRAs are like these though.

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Taylor Larimore
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Re: Who uses the 3 fund portfolio ?

Post by Taylor Larimore » Tue Jun 12, 2018 11:51 am

guyesmith wrote:
Tue Jun 12, 2018 10:46 am
One fund right now for me. VTSAX. I still go back and forth on adding VTIAX or going all in for Total World, but at the moment I'm all Total US.
guyesmith:

You picked a very good fund. VTSAX (Vanguard Total Stock Market Index Fund) is currently in the top 11% of all funds in its Morningstar category (large blend) for 15 year returns. It's in the top 5% for after-tax returns. VTSAX has never had a below average annual return.

Congratulations and best wishes.

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

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dumbbunny
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Re: Who uses the 3 fund portfolio ?

Post by dumbbunny » Tue Jun 12, 2018 1:44 pm

I have had the Three Fund Portfolio since 2006 when I unfortunately sold my last individual stock holding - AAPL - to be all in. At 50/50, I thought it would be a SWAN portfolio but the thought of what could have been with my AAPL shares sometimes keeps me up at night.
“It’s the curse of old men to realize that in the end we control nothing." "Homeland" episode, "Gerontion"

ThrustVectoring
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Re: Who uses the 3 fund portfolio ?

Post by ThrustVectoring » Tue Jun 12, 2018 2:38 pm

guyesmith wrote:
Tue Jun 12, 2018 10:46 am
One fund right now for me. VTSAX. I still go back and forth on adding VTIAX or going all in for Total World, but at the moment I'm all Total US.

Except...da da da...I do have an SEP IRA from an ex-employer that sits alone and is all PRIMECAP. Can't feed that IRA anymore so figure on leaving it sit forever.

My real IRAs are like these though.
You should be able to roll the SEP IRA into your traditional IRA, tax-free, with a trustee-to-trustee transfer. Ask your IRA provider (probably Vanguard?) how to do this.

bikechuck
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Re: Who uses the 3 fund portfolio ?

Post by bikechuck » Tue Jun 12, 2018 2:50 pm

I use a modified three fund portfolio.

I say modified because through historical accident I have TIAA Traditional paying a guaranteed minimum of 4.0% and a Fixed Annuity with an insurance co. (not annuitized) that I purchased approx 35 years ago that pays a guaranteed minimum 4.5%. Currently I think that these are slightly better than Vanguard's Total Bond Fund so I add enough Vanguard total bond fund to these two investments to meet my desired Fixed Income space.

I have some other cats and dogs from prior employers but I have been gradually consolidating/simplifying those to move in the direction of three fund for most of my holdings.

Hillview
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Re: Who uses the 3 fund portfolio ?

Post by Hillview » Tue Jun 12, 2018 2:54 pm

Classic 3 funder here (new this year) soon to become 4 when I participate in a new ESPP ....

Wait I lied -- I have a 4th fund for TLH in a taxable account but it is VERY close (although clearly not identical) to Vanguard Total Market

guyesmith
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Re: Who uses the 3 fund portfolio ?

Post by guyesmith » Tue Jun 12, 2018 3:10 pm

ThrustVectoring wrote:
Tue Jun 12, 2018 2:38 pm
guyesmith wrote:
Tue Jun 12, 2018 10:46 am
One fund right now for me. VTSAX. I still go back and forth on adding VTIAX or going all in for Total World, but at the moment I'm all Total US.

Except...da da da...I do have an SEP IRA from an ex-employer that sits alone and is all PRIMECAP. Can't feed that IRA anymore so figure on leaving it sit forever.

My real IRAs are like these though.
You should be able to roll the SEP IRA into your traditional IRA, tax-free, with a trustee-to-trustee transfer. Ask your IRA provider (probably Vanguard?) how to do this.
I rolled the SEP IRA to Vanguard from American Funds thinking it would become a traditional IRA. But it maintained the SEP label. I think if I ever have my own self-employed income I can use it then without effecting my $5,500 limit. The traditional IRA would slow down my Roth. Just figured on leaving it sit for now. Plus i really like the PRIMECAP fund I'm in POGRX.

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Earl Lemongrab
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Re: Who uses the 3 fund portfolio ?

Post by Earl Lemongrab » Tue Jun 12, 2018 3:18 pm

guyesmith wrote:
Tue Jun 12, 2018 3:10 pm
ThrustVectoring wrote:
Tue Jun 12, 2018 2:38 pm

You should be able to roll the SEP IRA into your traditional IRA, tax-free, with a trustee-to-trustee transfer. Ask your IRA provider (probably Vanguard?) how to do this.
I rolled the SEP IRA to Vanguard from American Funds thinking it would become a traditional IRA. But it maintained the SEP label. I think if I ever have my own self-employed income I can use it then without effecting my $5,500 limit. The traditional IRA would slow down my Roth. Just figured on leaving it sit for now. Plus i really like the PRIMECAP fund I'm in POGRX.
I'm not sure what you mean here. How would it "slow down" the Roth? When it comes to backdoor, for instance, SEP is just another TIRA.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

PhilosophyAndrew
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Re: Who uses the 3 fund portfolio ?

Post by PhilosophyAndrew » Tue Jun 12, 2018 3:58 pm

I now use a three-fund portfolio after several decades investing in a one-fund portfolio consisting of VTSAX.

Andy.

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Re: Who uses the 3 fund portfolio ?

Post by alfaspider » Tue Jun 12, 2018 4:05 pm

I'm close, but it's not the 100% perfect 3-fund. The following departures:

1) Although most funds are in VTI/VTSAX, I can't just pick any fund in 401k, so I'm mostly in the Fidelity 500 fund there.
2) I use tax exempt bonds in my taxable account and taxable bonds in the 401k
3) I have a small EM allocation, but am not using a broad international fund.
4) I have a significant amount of RSUs. I dollar cost average over a period of time when they vest, so I hold my company stock for some period in my taxable.

new2bogle
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Re: Who uses the 3 fund portfolio ?

Post by new2bogle » Tue Jun 12, 2018 4:38 pm

Hillview wrote:
Tue Jun 12, 2018 2:54 pm
Classic 3 funder here (new this year) soon to become 4 when I participate in a new ESPP ....

Wait I lied -- I have a 4th fund for TLH in a taxable account but it is VERY close (although clearly not identical) to Vanguard Total Market
I don't consider my ESPP stock to be part of my overall portfolio. I immediately sell my ESPP when it becomes available (every 6 months) and invest/spend the proceeds. Though maybe I should be considering this as part of my portfolio.

guyesmith
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Re: Who uses the 3 fund portfolio ?

Post by guyesmith » Tue Jun 12, 2018 8:20 pm

Earl Lemongrab wrote:
Tue Jun 12, 2018 3:18 pm
guyesmith wrote:
Tue Jun 12, 2018 3:10 pm
ThrustVectoring wrote:
Tue Jun 12, 2018 2:38 pm

You should be able to roll the SEP IRA into your traditional IRA, tax-free, with a trustee-to-trustee transfer. Ask your IRA provider (probably Vanguard?) how to do this.
I rolled the SEP IRA to Vanguard from American Funds thinking it would become a traditional IRA. But it maintained the SEP label. I think if I ever have my own self-employed income I can use it then without effecting my $5,500 limit. The traditional IRA would slow down my Roth. Just figured on leaving it sit for now. Plus i really like the PRIMECAP fund I'm in POGRX.
I'm not sure what you mean here. How would it "slow down" the Roth? When it comes to backdoor, for instance, SEP is just another TIRA.
I meant that I can’t put $5500/yr in both IRAs. The SEP was contributed pretax by an employer.

aaja
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Re: Who uses the 3 fund portfolio ?

Post by aaja » Tue Jun 12, 2018 8:31 pm

Independent George wrote:
Mon Jun 11, 2018 9:11 pm
I'm on the 4-fund portfolio in my IRA, because I bought into the REIT index fund a long time ago, when they were the hot investment, and prefer to ride it out instead of selling. I don't plan on buying any more of it, so it should become more and more like a 3-fund portfolio as time goes on.

I suppose my 401k is really just a different 4-fund portfolio - I'm 100% invested in the Vanguard Target Retirement 2050 fund. I'd prefer not to be invested in international bonds, but that was my best choice available in my 401k.
aaja wrote:
Thu Apr 05, 2018 11:32 pm
I currently have a 4 fund portfolio Total US Stock, Total Intl Stock, Total Bond market and Megacorp. Megacorp is 60% of my current portfolio and I am working on slowly transitioning these over to the 3 fund portfolio. I am maxing out my tax-advantaged accounts and happy that I have a well-defined plan for retirement.
Is Megacorp your employer, received via stock awards?
Yes it is. I am on a path to get this down to zero.

aaja
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Re: Who uses the 3 fund portfolio ?

Post by aaja » Tue Jun 12, 2018 8:35 pm

dumbbunny wrote:
Tue Jun 12, 2018 1:44 pm
I have had the Three Fund Portfolio since 2006 when I unfortunately sold my last individual stock holding - AAPL - to be all in. At 50/50, I thought it would be a SWAN portfolio but the thought of what could have been with my AAPL shares sometimes keeps me up at night.
This exact thought is the hardest part to deal with as I reduce my megacorp holdings. I know it makes sense and is the best strategy but the current market does NOT help.

indexonlyplease
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Re: Who uses the 3 fund portfolio ?

Post by indexonlyplease » Tue Jun 12, 2018 8:55 pm

3 Fund here since 2015. Schwab Total Stock and Total International Stock. Stable Value(3%) for bonds. All in my taxed deferred plan.

I am going with the idea to keep this for the long term. Rebalance in January every year. My plan that I will stay with.

guyesmith
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Re: Who uses the 3 fund portfolio ?

Post by guyesmith » Wed Jun 13, 2018 10:17 am

PhilosophyAndrew wrote:
Tue Jun 12, 2018 3:58 pm
I now use a three-fund portfolio after several decades investing in a one-fund portfolio consisting of VTSAX.
Why the transition?

PhilosophyAndrew
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Re: Who uses the 3 fund portfolio ?

Post by PhilosophyAndrew » Wed Jun 13, 2018 1:12 pm

guyesmith wrote:
Wed Jun 13, 2018 10:17 am
PhilosophyAndrew wrote:
Tue Jun 12, 2018 3:58 pm
I now use a three-fund portfolio after several decades investing in a one-fund portfolio consisting of VTSAX.
Why the transition?
Reading the massive Three Fund Portfolio thread convinced me me that — as I entered my 50s — there was value in diversifying my holdings with bonds and international equities.

My former one-fund portfolio served me well, and VTSAX is a great fund. I understand why some prefer to stick with 100% US equities.

Andy.

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Re: Who uses the 3 fund portfolio ?

Post by arf30 » Wed Jun 13, 2018 1:24 pm

I've got total stock market and total international in a 70/30 split, prime money market for "bonds", and target funds in retirement accounts. That's as close as I could get to the 3 fund portfolio.

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Taylor Larimore
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Re: Who uses the 3 fund portfolio ?

Post by Taylor Larimore » Wed Jun 13, 2018 2:02 pm

Bogleheads ask:
Who uses the 3 fund portfolio?
Answer: Investing experts use The Three-Fund Portfolio or total market index funds:
American Association of Individual Investors: "It should come as no surprise that behavioral finance research makes a strong case for buying and holding low-cost, broadly diversified index funds."

Mark Balasa, CPA, CFP: "That three-pronged approach is going to beat the vast majority of the individual stock and bond portfolio that most people have at brokerage firms. There is a certain elegance in the simplicity of it."

Christine Benz, Morningstar Director of Personal Finance: "The Bogleheads' Three-Fund Portfolio is the ultimate in elegant minimalism."

Bill Bernstein, author of The Four Pillars of Investing: "Does this (three fund) portfolio seem overly simplistic, even amateurish? Get over it. Over the next few decades, the overwhelming majority of all professional investors will not be able to beat it."

Jack Bogle, "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."

Scott Burns, financial columnist: "The odd are really, really poor than any of us will do better than a low-cost broad index fund."

Jonathan Burton, MarketWatch: "There are plenty of ways to complicate investing, and plenty of people who stand to make money from you as a result. So just think of a three-fund strategy as something you won't have to think about too much."

Ben Carlson, author of A Wealth of Common Sense: "A large majority of what the financial industry calls financial advice is really just glorified product sales."

Andrew Clarke, co-author of Wealth of Experience: "If your stock portfolio looks very different from the broad stock market, you're assuming additional risk that may, or may not, pay off."

Jonathan Clements, author and Wall Street Journal columnist: "Using broad-based index funds to match the market is, I believe, brilliant in its simplicity." -- "You can build a great portfolio with just three index funds: a U.S. total stock market fund, an international fund that buys both developed and emerging stock markets, and a high-quality U.S. bond fund.

Consumer Reports Money Book: "Simply buy the market as a whole."

Aswarth Damodaran, NYU Professor and author of 20+ finance books: "Beating the market is never easy and anyone who argues otherwise is fighting history and ignoring the evidence."

Laura Dugu, co-author of The Bogleheads' Guide to Retirement Planning: "With only these three funds in your investment portfolio you can benefit from low costs and broad diversification and still have a portfolio that is easy to manage."

Charles Ellis, author of Winning the Loser's Game: "The stock market is clearly too efficient for most of us to do better."

Nobel Laureate, Eugene Fama: "Whether you decide to tilt toward value depends on whether you are willing to bear the associated risk...The market portfolio is always efficient...For most people, the market portfolio is the most sensible decision."


Rick Ferri, Forbes columnist and author of six investment books: "The older I get, the more I believe the 3-fund portfolio is an excellent choice for most people. It's simple, cheap, easy to maintain, and has no tracking error that would cause emotional abandonment to the strategy."

Graham/Zweig, authors of The Intelligent Investor: "The single best choice for a lifelong holding is a total stock-market index fund."

Alan Greenspan, former Chairman of the Federal Reserve: "Prices in the marketplace are by definition the right price."

Mark Hebner, author of Index Funds: “A diversified portfolio which captures the right blend of market indexes reaps the benefit of carrying the systematic risk of the entire market while minimizing exposure to the unsystematic and concentrated risk associated with individual stocks and bonds, countries, industries, or sectors.”

Hulbert Financial Digest: "Buying and holding a broad-market index fund remains the best course of action for most investors."

Sheldon Jacobs, author of No-Load Fund Investing: "The best index fund for almost everyone is the Total Stock Market Index Fund.--The fund can only go wrong if the market goes down and never comes back again, which is not going to happen."

Kiplinger's Retirement Report: "You'll beat most investors with just three funds that cover the vast majority of global stock and bond markets: Vanguard Total Stock Market; Vanguard Total International Stock Index and Vanguard Total Bond Market Index."

Lawrence Kudlow, CNBC: "I like the concept of the Wilshire 5000, which essentially gives you a piece of the rock of all actively traded companies."

Prof. Burton Malkiel, author of Random Walk Down Wall Street: "I recommend a total-maket index fund--one that follows the entire U.S. stock market. And I recommend the same approach for the U.S. bond market and international stocks."

Harry Markowitz, Nobel Laureate: "A foolish attempt to beat the market and get rich quickly will make one's broker rich and oneself much less so."

Bill Miller, famed fund manager: "With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me."

Money 101: "If you don’t want to leave your stock and bond allocations up to someone else, you can build a low cost portfolio that own most of the global market with just three funds. A “total stock market” index fund will hold over 3000 stocks, ranging from small companies to established corporate giants. Round that out with an international index fund to cover foreign holdings, and bond index fund."

E.F.Moody, author of No Nonsense Finance: "I am increasingly convinced that the best investment advice for both individual and institutional equity investors is to buy a low-cost broad-based index fund that holds all the stocks comprising the market portfolio."

Motley Fools: "Invest your long-term moolah in index mutual funds that are designed to track the performance of a broad market index."

John Norstad, academic: "For total-market investors, the three disciplines of history, arithmetic, and reason all say that they will succeed in the end."

Suzy Orman: "One of my favorite index funds, Vanguard Total Stock Market (VTSAX), has a total expense ratio of 0.06%"

Anna Pryor Wall Street Journal writer: "A simple portfolio of 3 funds. It may sound counter-intuitive, but for the average individual investor, less is actually more."

Jane Bryant Quinn, syndicated columnist and author of Making the Most of Your Money: "The dependable great investment returns come from index funds which invest in the stock market as a whole."

Pat Regnier, former Morningstar Analyst: "We should just forget about choosing fund managers and settle for index funds to mimic the market."

Ron Ross, author of The Unbeatable Market: "Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind."

Allan Roth, CPA, CFP, AARP columnist, adviser and author of "How a Second Grader Beat Wall Street": "The beauty of a 3-fund portfolio is that it automatically builds the global portfolio without having to worry about standard deviations, correlations, Sharpe ratios, and the like. -- Over the years, I’ve benchmarked hundreds of portfolios against the equivalent weighted three-fund portfolio and can count on one hand the number of portfolios I’ve seen that bested this benchmark."

Paul Samuelson, Nobel Laureate: "The most efficient way to diversify a stock portfolio is with a low-fee index fund. Statistically, a broadly based stock index fund will outperform most actively managed equity portfolios."

Gus Sauter, former Vanguard Chief Investment Officer: "I think a very good way to gain exposure to the stock market is through the Total Stock Market Portfolio on the domestic side."

Bill Schultheis, author of The Coffee House Investor: "You don't need to have eight funds. You can do it with two or three and have a great portfolio."

Charles Schwab: "Only about one out of every four equity funds outperforms the stock market. That's why I'm a firm believer in the power of indexing."

Chandan Sengupta, author of The Only Proven Road to Investment Success: "Use a low-cost, broad-based index fund to passively invest in a little bit of a large number of stocks."

Prof. Jeremy Siegel, author of Stocks For The Long Run: "For most of us, trying to beat the market leads to disastrous results."

Dan Solin, author of The Smartest Portfolio You'll Ever Own: "You can get as simple or as complicated as you'd like. You can keep it very simple by owning just three mutual funds that invests in domestic stocks, foreign stocks, and bonds. That's precisely what I recommend in my model portfolios."

William Spitz, author of Get Rich Slowly: "Few are able to beat a simple strategy of buying and holding the securities that comprise the market."

Prof. Meir Statman, author of What Investors Really Want: "It makes sense to have those three funds. What makes it hard is that it seems too simple to actually be a winner."

Stein & DeMuth, authors of The Affluent Investor: "Buying and holding a few broad market index funds is perhaps the most important move ordinary investors can make to supercharge their portfolios."

"Robert Stovall, investment manager: It's just not true that you can't beat the market. Every year about one-third do it. Of course, each year it is a different group."

David Swensen, Yale's chief investment officer and author of Unconventional Success: The fact remains that long odds face the investor who hopes to beat the market."

Peter D. Teresa, Morningstar Sr. Analyst: My recommendation: "A fund that indexes the entire market, such as Vanguard Total Stock Market Index."

Kent Thune, CFP, editor of The Financial Philosopher: "In keeping with the virtues of passive investing, combined with Bogle’s haystack philosophy, we can capture the entire market of securities with Vanguard index funds, investing in just three broad categories: U.S. stocks, foreign stocks and bonds."

"The Wall Street Physician": am a huge advocate of low-cost index funds. The best portfolio for most investors is a three-fund portfolio."

Walter Updegrave, author and senior editor of Money magazine: "Simply invest in the following three funds (or their ETF equivalents): a total U.S. stock market fund, a total international stock market fund and a total U.S bond market fund. Do that, and you'll gain exposure to virtually every type of publicly traded stock in the world (large and small, growth and value, domestic and foreign, all industries and sectors), as well as the entire U.S. investment-grade taxable bond market (short- to long-term maturities, corporates, Treasuries and mortgage-backed issues)."

Wilshire Research: "The market portfolio offers the best ratio of return to risk."

John Woerth, Vanguard Director of Public Relations: "We would agree that this three-fund approach offers most investors a prudent, well-balanced, diversified portfolio at a low cost."

Jason Zweig, Wall Street Journal columnist and author of Your Money and Your Brain: "I think a total stock market index fund is not only the simplest, but the very best core investment for most people."
"Simplicity is the master key to financial success." -- Jack Bogle

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cfs
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Re: Who uses the 3 fund portfolio ?

Post by cfs » Wed Jun 13, 2018 2:34 pm

Andy said "I understand why some prefer to stick with 100% US equities." True. And I know of several retirees, including forum members (names withheld to protect the innocent) with a 100% equity portfolio (not a big issue for those with social security and pensions, don't try this at home). Your money, your portfolio, your decision. Gracias por leer ~cfs~

p.s. And now we resume our normal programming with "Who uses the 3 fund portfolio"
~ Member of the Active Retired Force since 2014 ~

momopi
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Re: Who uses the 3 fund portfolio ?

Post by momopi » Wed Jun 13, 2018 2:59 pm

dumbbunny wrote:
Tue Jun 12, 2018 1:44 pm
I have had the Three Fund Portfolio since 2006 when I unfortunately sold my last individual stock holding - AAPL - to be all in. At 50/50, I thought it would be a SWAN portfolio but the thought of what could have been with my AAPL shares sometimes keeps me up at night.
You can't think like that with investments -- could have been, should have been, etc. What if I bought bitcoins years ago?

What's important is what you'll do from this point onward.

sman09
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Re: Who uses the 3 fund portfolio ?

Post by sman09 » Wed Jun 13, 2018 3:16 pm

arf30 wrote:
Wed Jun 13, 2018 1:24 pm
I've got total stock market and total international in a 70/30 split, prime money market for "bonds", and target funds in retirement accounts. That's as close as I could get to the 3 fund portfolio.
so "total stock market and total international in a 70/30 split" these are not in a retirement account?

also, i remember getting the advice not to have target date fund along with other funds in 401k as it makes it hard to rebalance - from what you say, it appears that you are already doing it. How do you go about rebalancing?

arf30
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Re: Who uses the 3 fund portfolio ?

Post by arf30 » Wed Jun 13, 2018 3:29 pm

sman09 wrote:
Wed Jun 13, 2018 3:16 pm
so "total stock market and total international in a 70/30 split" these are not in a retirement account?

also, i remember getting the advice not to have target date fund along with other funds in 401k as it makes it hard to rebalance - from what you say, it appears that you are already doing it. How do you go about rebalancing?
The total stock funds are in taxable, target funds are in retirement accounts. Rebalance in taxable by buying more of whichever fund is below the ratio, rebalance in 401k by switching target funds (ie. swap target 2045 to target 2030 if you need more bonds). I don't worry much about rebalancing, once a year at most.

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Sandtrap
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Re: Who uses the 3 fund portfolio ?

Post by Sandtrap » Wed Jun 13, 2018 3:37 pm

Hybrid 3 fund, LMP.
Includes Wellesley, Balanced Index, CD Ladder.
j

2015
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Re: Who uses the 3 fund portfolio ?

Post by 2015 » Wed Jun 13, 2018 10:14 pm

goblue100 wrote:
Sat Apr 07, 2018 8:14 am
Taylor Larimore wrote:
Fri Apr 06, 2018 9:48 pm

The "evolutionary path " for most investors is towards simplicity.

Taylor
I agree with this. A lot of people start with a potpourri of selections either just pulled from the air, or possibly through an adviser. As we gain knowledge, we start parring our redundant or nonsensical selections. I am not 3 fund but at least I know why I own the funds beyond the three, and I have been simplifying.
Absolutely. AFAICT, the benefits of an evolutionary path towards Simplicity in most things in life cannot be overestimated. If the 3 Fund PF is for beginners, then please, do call me a beginner, a beginner who learned true wisdom.

Stewpac14
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Re: Who uses the 3 fund portfolio ?

Post by Stewpac14 » Mon Jul 02, 2018 7:44 pm

Taylor Larimore wrote:
Mon Jun 11, 2018 6:14 pm
Stewpac14 wrote:
Mon Jun 11, 2018 2:38 pm
I do! I am about 30 years old and VTI, VXUS and BND make up my portfolio. At the moment, I am about 90% stock allocation and 10% bonds. I follow vanguards 2060 retirement funds allocation to match mine up, give or take a few percents.
Stewpac14:

Welcome to the Bogleheads Forum!

In my opinion, you are on the road to investment success.

Stay the course.

Best wishes.
Taylor
Thanks you for the kind words. You guys have been extremely helpful!

zengolf2011
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Re: Who uses the 3 fund portfolio ?

Post by zengolf2011 » Tue Jul 03, 2018 4:22 pm

I have been a 3-funder for more than 20 yrs. Before that, I tried many different investments, but am convinced I would have done at least as well with 3 funds all along. I think a sometimes overlooked advantage is that it builds investor confidence to resist the latest fad. I used to jump from fund to fund based on the last thing I had read, usually to regret it the next day when I read something else. I don't think you can go wrong with the 3-fund portfolio!

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Re: Who uses the 3 fund portfolio ?

Post by FrugalInvestor » Tue Jul 03, 2018 4:29 pm

zengolf2011 wrote:
Tue Jul 03, 2018 4:22 pm
I think a sometimes overlooked advantage is that it builds investor confidence to resist the latest fad.
This is a HUGE advantage. Emotional investing is the worst kind but easily and very commonly succumbed to. Good investing is boring investing...3-fund is boring, but beautiful!
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

DeadPoets
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Re: Who uses the 3 fund portfolio ?

Post by DeadPoets » Wed Aug 15, 2018 4:41 pm

eye.surgeon wrote:
Thu Apr 05, 2018 11:39 pm
I use a 3 fund portfolio. Not too simple, not too complex, and relatively easy to maintain among my 401k, IRAs, and taxable accounts.
People who use 3 fund portfolios will split them among tax advantage and taxable accounts?

Can you give me an example of what someone’s portfolio might look like?

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ruralavalon
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Re: Who uses the 3 fund portfolio ?

Post by ruralavalon » Wed Aug 15, 2018 4:58 pm

DeadPoets wrote:
Wed Aug 15, 2018 4:41 pm
eye.surgeon wrote:
Thu Apr 05, 2018 11:39 pm
I use a 3 fund portfolio. Not too simple, not too complex, and relatively easy to maintain among my 401k, IRAs, and taxable accounts.
People who use 3 fund portfolios will split them among tax advantage and taxable accounts?

Can you give me an example of what someone’s portfolio might look like?
You coordinate investments among all accounts to achieve the desired asset allocation. Work-based plans (401k, 403b, 457, TSP, etc.) have limited choices, so you work around what is offered in a 401k.

Here is an example portfolio for an asset allocation of 20% bonds, 20% international stocks and 60% domestic stocks.

taxable account @ Vanguard (10% of total portfolio)
10%, Vanguard Total International Stock Index Fund

401k (70% of total portfolio)
50%, generic off-brand S&P 500 index fund
20%, actively managed intermediate-term bond fund (like PIMCO Total Return Institutional or Metropolitan West Total Return Institutional or Dodge & Cox Income Fund)

IRA @ Vanguard (20% of total portfolio)
10%, Vanguard Total Stock Market Index Fund
10%, Vanguard Total International Stock Index Fund

Please see the wiki article "Tax-efficient Fund Placement".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

DeadPoets
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Re: Who uses the 3 fund portfolio ?

Post by DeadPoets » Wed Aug 15, 2018 5:42 pm

ruralavalon wrote:
Wed Aug 15, 2018 4:58 pm
DeadPoets wrote:
Wed Aug 15, 2018 4:41 pm
eye.surgeon wrote:
Thu Apr 05, 2018 11:39 pm
I use a 3 fund portfolio. Not too simple, not too complex, and relatively easy to maintain among my 401k, IRAs, and taxable accounts.
People who use 3 fund portfolios will split them among tax advantage and taxable accounts?

Can you give me an example of what someone’s portfolio might look like?
You coordinate investments among all accounts to achieve the desired asset allocation. Work-based plans (401k, 403b, 457, TSP, etc.) have limited choices, so you work around what is offered in a 401k.

Here is an example portfolio for an asset allocation of 20% bonds, 20% international stocks and 60% domestic stocks.

taxable account @ Vanguard (10% of total portfolio)
10%, Vanguard Total International Stock Index Fund

401k (70% of total portfolio)
50%, generic off-brand S&P 500 index fund
20%, actively managed intermediate-term bond fund (like PIMCO Total Return Institutional or Metropolitan West Total Return Institutional or Dodge & Cox Income Fund)

IRA @ Vanguard (20% of total portfolio)
10%, Vanguard Total Stock Market Index Fund
10%, Vanguard Total International Stock Index Fund

Please see the wiki article "Tax-efficient Fund Placement".
Thanks

2015
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Re: Who uses the 3 fund portfolio ?

Post by 2015 » Wed Aug 15, 2018 7:41 pm

FrugalInvestor wrote:
Tue Jul 03, 2018 4:29 pm
zengolf2011 wrote:
Tue Jul 03, 2018 4:22 pm
I think a sometimes overlooked advantage is that it builds investor confidence to resist the latest fad.
This is a HUGE advantage. Emotional investing is the worst kind but easily and very commonly succumbed to. Good investing is boring investing...3-fund is boring, but beautiful!
I couldn't agree more. The beauty found in the simplicity of a 3 fund PF is it reduces occasions to take actions not in our own best interest. It also greatly reduces the amount of precious life we would otherwise waste succumbing to click bait.

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abuss368
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Re: Who uses the 3 fund portfolio ?

Post by abuss368 » Wed Aug 15, 2018 8:16 pm

Bogleheads -

In my opinion the Three Fund Portfolio is very sophisticated and effective strategy. I believe many Bogleheads have this portfolio.

Keep investing simple.

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

sillysaver
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Re: Who uses the 3 fund portfolio ?

Post by sillysaver » Wed Aug 15, 2018 8:18 pm

I am using 3 funds, since I'm with Schwab. The "International" fund is developed markets. There is a 4th fund for emerging markets.

EDIT: I meant to say I'm using 4 funds, but I think my meaning here was clear.
Last edited by sillysaver on Thu Aug 16, 2018 7:31 am, edited 1 time in total.

Dottie57
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Re: Who uses the 3 fund portfolio ?

Post by Dottie57 » Wed Aug 15, 2018 8:44 pm

I use three funds in all but 401k. I have to emulate 3 fund because there isn’t a total market fund.

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ruralavalon
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Re: Who uses the 3 fund portfolio ?

Post by ruralavalon » Wed Aug 15, 2018 8:54 pm

sillysaver wrote:
Wed Aug 15, 2018 8:18 pm
I am using 3 funds, since I'm with Schwab. The "International" fund is developed markets. There is a 4th fund for emerging markets.
Dottie57 wrote:
Wed Aug 15, 2018 8:44 pm
I use three funds in all but 401k. I have to emulate 3 fund because there isn’t a total market fund.
In my opinion, both are totally acceptable ways to implement the three-fund strategy.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

HEDGEFUNDIE
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Re: Who uses the 3 fund portfolio ?

Post by HEDGEFUNDIE » Wed Aug 15, 2018 9:08 pm

I used to be a three fund purist, but I recently reallocated into eight funds to capture factor premia (e.g. size, value, momentum, quality). Portfolio backtesting indicates ~1% annual outperformance at lower volatility over past few years as compared to VTSAX + VTIAX.

But I’m not so arrogant as to think my custom portfolio will always beat the three funds. I am still a BH at heart, making sure that my eight funds are diversified across the nine box M* grid, and that fees are low (only 0.15 weighted average expense ratio). In the worst case I believe I will only slightly underperform the three funds, and I’m ok with that.

RIMDBogle
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Re: Who uses the 3 fund portfolio ?

Post by RIMDBogle » Wed Aug 15, 2018 9:23 pm

Good see this topic.
HEDGEFUNDIE wrote:
Wed Aug 15, 2018 9:08 pm
I used to be a three fund purist, but I recently reallocated into eight funds to capture factor premia (e.g. size, value, momentum, quality). Portfolio backtesting indicates ~1% annual outperformance at lower volatility over past few years as compared to VTSAX + VTIAX.

But I’m not so arrogant as to think my custom portfolio will always beat the three funds. I am still a BH at heart, making sure that my eight funds are diversified across the nine box M* grid, and that fees are low (only 0.15 weighted average expense ratio). In the worst case I believe I will only slightly underperform the three funds, and I’m ok with that.
It is interesting.

How is your eight funds & AA look like across multiple accounts?

What is the boglehead norm to split/slice 20% foreign equity into Developed Market, Emerging market?

Will it help to add small cap piece to 20% foreign equity ?

If yes, how do we split this 20% foreign equity ?

What are the benchmark index/funds to monitor/compare as proxy(Ticker) to this portfolio?

Thanks for sharing.

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Re: Who uses the 3 fund portfolio ?

Post by HEDGEFUNDIE » Wed Aug 15, 2018 9:32 pm

RIMDBogle wrote:
Wed Aug 15, 2018 9:23 pm
Good see this topic.

What is the boglehead norm to split/slice 20% foreign equity into Developed Market, Emerging market?

Will it help to add small cap piece to 20% foreign equity ?

If yes, how do we split this 20% foreign equity ?

What are the benchmark index/funds to monitor/compare as proxy(Ticker) to this portfolio?

Thanks for sharing.
Morningstar “Portfolio” tab is your friend. If you look at VTIAX the developed/emerging split is around 80/20. Small caps are only 6% of the total.

I personally tilt towards more small cap but not more emerging. I also hold a hedged currency international stock ETF to smooth out some of the currency-driven volatility.

RIMDBogle
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Re: Who uses the 3 fund portfolio ?

Post by RIMDBogle » Wed Aug 15, 2018 10:30 pm

Thanks.

It is interesting.

How is your eight funds & AA look like across multiple accounts?

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Earl Lemongrab
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Re: Who uses the 3 fund portfolio ?

Post by Earl Lemongrab » Wed Aug 15, 2018 11:29 pm

2015 wrote:
Wed Aug 15, 2018 7:41 pm
FrugalInvestor wrote:
Tue Jul 03, 2018 4:29 pm
zengolf2011 wrote:
Tue Jul 03, 2018 4:22 pm
I think a sometimes overlooked advantage is that it builds investor confidence to resist the latest fad.
This is a HUGE advantage. Emotional investing is the worst kind but easily and very commonly succumbed to. Good investing is boring investing...3-fund is boring, but beautiful!
I couldn't agree more. The beauty found in the simplicity of a 3 fund PF is it reduces occasions to take actions not in our own best interest. It also greatly reduces the amount of precious life we would otherwise waste succumbing to click bait.
I have a more complex portfolio, but that hasn't lead to any temptaion. I think it's a myth that the three fund somehow insulates you. I mean, people SAY it often but I have never seen much proof that Bogleheads with more slices it their allocations are prone to making changes.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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permport
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Re: Who uses the 3 fund portfolio ?

Post by permport » Wed Aug 15, 2018 11:42 pm

Hehe nope. I've always been against the grain in these forums in regards to the Three Fund Portfolio.

More specifically: I need me some international cash/bonds, buddy! :beer :moneybag :greedy

Spearheading the Four Fund Revolution -- one dissident post at a time. :twisted: :D
Buy right and hold tight.

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Re: Who uses the 3 fund portfolio ?

Post by indexonlyplease » Thu Aug 16, 2018 6:50 am

Hillview wrote:
Fri Apr 06, 2018 11:14 am
well, sort of.
3 funds except:
1) 401k is in a Vanguard 2035 fund (which is a 4 fund product with a bond split btwn Bond II fund and an int't bond fund)
2) taxable is in VLCA Vanguard Large Cap Index Fund Admiral Shares for Tax Loss Harvesting purposes
Hi, can you explain more about #2. I own the Total Stock Market in my taxable. Just wonder how and why this is for tlh.

lostdog
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Re: Who uses the 3 fund portfolio ?

Post by lostdog » Thu Aug 16, 2018 7:00 am

One fund for now. Vanguard Total World. I do not see U.S. and International indexes as separate asset classes.

I'll add Vangaurd Total World Bond Index when I get older.

sillysaver
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Re: Who uses the 3 fund portfolio ?

Post by sillysaver » Thu Aug 16, 2018 7:38 am

I've thought about adding some "alts" to the 3 fund (4 for me). Here are some I've considered:

Precious Metals & Mining (GDX, Vanguard Precious Metals)
Managed Futures
REIT's

I haven't added commodities of any kind because, although they add negative correlation, over the long run you would expect very low returns from this asset class, thus lowering the expected returns of the overall portfolio. Managed futures have had a particularly lousy past few years. However, with interest rates going up, they might return more from carry. Mining just seems like such a narrow sector bet and a lousy business to own in general.

However, part of me thinks there will come a time like the 70's - with high inflation and low real returns - when commodities and metals will help. For this reason, I might also look into TIP's at some point.

Maybe one day if the portfolio is larger I might feel the need to diversify further.

I don't add REIT's because I'm already overly concentrated in real estate, through my own home, directly owned real estate and syndication deals.

2015
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Re: Who uses the 3 fund portfolio ?

Post by 2015 » Thu Aug 16, 2018 11:39 am

Earl Lemongrab wrote:
Wed Aug 15, 2018 11:29 pm
2015 wrote:
Wed Aug 15, 2018 7:41 pm
FrugalInvestor wrote:
Tue Jul 03, 2018 4:29 pm
zengolf2011 wrote:
Tue Jul 03, 2018 4:22 pm
I think a sometimes overlooked advantage is that it builds investor confidence to resist the latest fad.
This is a HUGE advantage. Emotional investing is the worst kind but easily and very commonly succumbed to. Good investing is boring investing...3-fund is boring, but beautiful!
I couldn't agree more. The beauty found in the simplicity of a 3 fund PF is it reduces occasions to take actions not in our own best interest. It also greatly reduces the amount of precious life we would otherwise waste succumbing to click bait.
I have a more complex portfolio, but that hasn't lead to any temptaion. I think it's a myth that the three fund somehow insulates you. I mean, people SAY it often but I have never seen much proof that Bogleheads with more slices it their allocations are prone to making changes.
Actually, virtually nothing insulates us from behavioral bias and vastly flawed human decision-making (ask Daniel Kahneman). Complexity, of any sort, however, only exacerbates these tendencies. The myth lies in the narratives we form naturally as human beings. The most cleverly designed portfolio is no match for the frailties that lie between human ears and within the vagus nerve. I recommend reading The Hour Between Dog and Wolf, by John Coates.
Last edited by 2015 on Thu Aug 16, 2018 11:43 am, edited 2 times in total.

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Earl Lemongrab
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Re: Who uses the 3 fund portfolio ?

Post by Earl Lemongrab » Thu Aug 16, 2018 11:42 am

2015 wrote:
Thu Aug 16, 2018 11:39 am
Actually, virtually nothing insulates us from behavioral bias and vastly flawed human decision-making (ask Daniel Kahneman). Complexity, of any sort, however, only exacerbates those tendencies. The myth lies in the narratives we form naturally as human beings.
Where is the evidence that complexity does that?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

RIMDBogle
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Re: Who uses the 3 fund portfolio ?

Post by RIMDBogle » Thu Aug 16, 2018 3:55 pm

Thanks for your reply. I did find in another thread,

pkcrafter wrote: ↑

Small value and REIT are pretty common additions to the 3-fund. The long term bonds are OK in an endowment, but they won't reduce volatility in an individual investor's portfolio. Replace long term bond with total bond and you've got a moderate slice/dice Boglehead portfolio.
where can I research the appropriate REIT/Small value allocation for portfolio?

What are the impact to 3 Fund portfolios by adding REIT/Small value ?

Thanks for sharing.

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Re: Who uses the 3 fund portfolio ?

Post by MotoTrojan » Thu Aug 16, 2018 4:15 pm

zzebie wrote:
Fri Apr 06, 2018 12:08 pm
I don't have a 401(k). In my taxable account I have the below four ETFs:

VTI(Total Stock Market);
VXUS(Total International Stock);
VB(Small cap);
VSS(All world Ex-US small cap)

I am some who understood the discipline of regular investing or even investing very late in my life. Courtesy Bogleheads, I have started investing in the above 4 ETFS.
Got any tax advantaged accounts? VB is not very tax-efficient. Not certain but I’d guess same to VSS.

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