The Three-Fund Portfolio

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sun Oct 20, 2019 11:31 am

Dear 1789:

I am pleased to answer your two questions:

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

I am surprised to read this. However, after thinking about it, I realize that at the time we wrote the book, Pat and I owned the first Vanguard TIPS fund which is a managed fund. It was sold long ago. I am a strong believer in the three total market index funds. My last book, The Bogleheads' Guide to the Three-Fund Portfolio, explains why.

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

It is no accident that Vanguard's Retirement Date and LifeCycle Funds, designed by experts, do not offer 100% stocks. Someone in their 20's is unlikely to have suffered a real bear market. It is very unnerving to see all your hard-earned savings slowly disappear in a long bear market--especially when media "experts" and your friends, even your family, keep saying: "Sell now before you lose everything." In addition to lowering risk, I also think it is helpful for young investors to own a small percentage of bonds to help understand how they work. Bonds are very complex.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Our emotions cause us to plunge into stocks at their euphoric highs, and to bail out as they reach depressing lows."
Last edited by Taylor Larimore on Sun Oct 20, 2019 6:22 pm, edited 1 time in total.
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Re: The Three-Fund Portfolio

Post by 1789 » Sun Oct 20, 2019 1:24 pm

Dear Taylor

Thank you for replies. I know you are a strong advocate of passive index strategies as you pointed out in your books. Our family portfolio is all 90% TSM/S&P 500, with 10% tilt on SCV. I am going to re-evaluate getting rid of SCV to make things simpler. However your argument that it would be good to hold some bonds to see how they work makes sense to me and especially considering we haven't experienced any recession for the time we have been investing. We will start with 10% total bonds allocation and increase it as we get older. (We are 35 years old now). So we are going to start with 3 fund portfolio with

US TSM : 90%
US TBM: 10%
International: 0%

I will continue reading more on international and decide if we want/need - and/or percentage allocation of it.

Thank you for your guidance!
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: The Three-Fund Portfolio

Post by abuss368 » Sun Oct 20, 2019 1:45 pm

1789 wrote:
Sun Oct 20, 2019 1:24 pm
Dear Taylor

Thank you for replies. I know you are a strong advocate of passive index strategies as you pointed out in your books. Our family portfolio is all 90% TSM/S&P 500, with 10% tilt on SCV. I am going to re-evaluate getting rid of SCV to make things simpler. However your argument that it would be good to hold some bonds to see how they work makes sense to me and especially considering we haven't experienced any recession for the time we have been investing. We will start with 10% total bonds allocation and increase it as we get older. (We are 35 years old now). So we are going to start with 3 fund portfolio with

US TSM : 90%
US TBM: 10%
International: 0%

I will continue reading more on international and decide if we want/need - and/or percentage allocation of it.

Thank you for your guidance!
I think you are making a wise choice to simplify by removing small cap value and adding Total Bond.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by 1789 » Sun Oct 20, 2019 2:21 pm

abuss368 wrote:
Sun Oct 20, 2019 1:45 pm
1789 wrote:
Sun Oct 20, 2019 1:24 pm
Dear Taylor

Thank you for replies. I know you are a strong advocate of passive index strategies as you pointed out in your books. Our family portfolio is all 90% TSM/S&P 500, with 10% tilt on SCV. I am going to re-evaluate getting rid of SCV to make things simpler. However your argument that it would be good to hold some bonds to see how they work makes sense to me and especially considering we haven't experienced any recession for the time we have been investing. We will start with 10% total bonds allocation and increase it as we get older. (We are 35 years old now). So we are going to start with 3 fund portfolio with

US TSM : 90%
US TBM: 10%
International: 0%

I will continue reading more on international and decide if we want/need - and/or percentage allocation of it.

Thank you for your guidance!
I think you are making a wise choice to simplify by removing small cap value and adding Total Bond.
Thanks abuss368. I am convinced to hold some bonds even small amount to start with.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sun Oct 20, 2019 2:47 pm

I am going to re-evaluate getting rid of SCV to make things simpler.

1789:

I think you are making a wise decision to eliminate your Small Cap Value Fund for several reasons:

* Your Total Stock Market Index Fund ALREADY owns the market weight in Small Cap Value stocks.

* Lower cost.

* Lousy returns. Small Cap Value Funds now have the worst performance of all Morningstar styles:

http://news.morningstar.com/index/indexReturn.html

* If your SMC fund is in a taxable account, this is a good time to sell to minimize capital-gains.

* Exchanging to Total Stock Market will assure that you will never again worry about underperformance.

* SIMPLICITY Read my link below.

You can read my thoughts about international funds here.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Selecting funds that will significantly exceed market returns, a search in which hope springs eternal and in which past performance has proven of virtually no predictive value, is a loser’s game.”
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by lostdog » Sun Oct 20, 2019 4:12 pm

1789 wrote:
Sun Oct 20, 2019 1:24 pm
Dear Taylor

Thank you for replies. I know you are a strong advocate of passive index strategies as you pointed out in your books. Our family portfolio is all 90% TSM/S&P 500, with 10% tilt on SCV. I am going to re-evaluate getting rid of SCV to make things simpler. However your argument that it would be good to hold some bonds to see how they work makes sense to me and especially considering we haven't experienced any recession for the time we have been investing. We will start with 10% total bonds allocation and increase it as we get older. (We are 35 years old now). So we are going to start with 3 fund portfolio with

US TSM : 90%
US TBM: 10%
International: 0%

I will continue reading more on international and decide if we want/need - and/or percentage allocation of it.

Thank you for your guidance!
Great to choice to simplify. Can you stay the course if the U.S. lags international for decades? Behavior plays a big role even if it's simplified, good luck.
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by 1789 » Sun Oct 20, 2019 9:04 pm

Hi lostdog

Whatever i say as a response to your question will be a response on paper because i started investing 3 years ago and havent seen any bear market or a recession yet. So i really don't know if i would stay the course for decades of underperformance if US lags International. But thanks for reminding the key for financial success - Staying the course but making sure to be at the right course.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Re: The Three-Fund Portfolio

Post by abuss368 » Mon Oct 21, 2019 8:03 am

lostdog wrote:
Sun Oct 20, 2019 4:12 pm
1789 wrote:
Sun Oct 20, 2019 1:24 pm
Dear Taylor

Thank you for replies. I know you are a strong advocate of passive index strategies as you pointed out in your books. Our family portfolio is all 90% TSM/S&P 500, with 10% tilt on SCV. I am going to re-evaluate getting rid of SCV to make things simpler. However your argument that it would be good to hold some bonds to see how they work makes sense to me and especially considering we haven't experienced any recession for the time we have been investing. We will start with 10% total bonds allocation and increase it as we get older. (We are 35 years old now). So we are going to start with 3 fund portfolio with

US TSM : 90%
US TBM: 10%
International: 0%

I will continue reading more on international and decide if we want/need - and/or percentage allocation of it.

Thank you for your guidance!
Great to choice to simplify. Can you stay the course if the U.S. lags international for decades? Behavior plays a big role even if it's simplified, good luck.
The older I get the more I appreciate the impact of investor behavior and how all investors should talk about it more.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by jbdvm1988 » Mon Oct 21, 2019 6:48 pm

I’ve read books on the three fund portfolio and recently Rick Ferri’s asset allocation book. Originally I was going to invest my rollover IRA with the three fund approach but the Ferri book made a strong argument to add small cap and REITs. I understand small caps are not doing well but over several decades is there any objective data to suggest including or excluding specific small cap and REIT funds(vanguard)

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Oct 21, 2019 7:31 pm

jbdvm1988 wrote:
Mon Oct 21, 2019 6:48 pm
I’ve read books on the three fund portfolio and recently Rick Ferri’s asset allocation book. Originally I was going to invest my rollover IRA with the three fund approach but the Ferri book made a strong argument to add small cap and REITs. I understand small caps are not doing well but over several decades is there any objective data to suggest including or excluding specific small cap and REIT funds(vanguard)
jbdvm1988:

The Three Fund Portfolio ALREADY holds the market weight in Small Cap and REIT stocks. Strive for simplicity--not complexity.

Please read my "Simplicity" link below.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Selecting funds that will significantly exceed market returns, a search in which hope springs eternal and in which past performance has proven of virtually no predictive value, is a loser’s game.”
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by bertilak » Mon Oct 21, 2019 7:35 pm

jbdvm1988 wrote:
Mon Oct 21, 2019 6:48 pm
I’ve read books on the three fund portfolio and recently Rick Ferri’s asset allocation book. Originally I was going to invest my rollover IRA with the three fund approach but the Ferri book made a strong argument to add small cap and REITs. I understand small caps are not doing well but over several decades is there any objective data to suggest including or excluding specific small cap and REIT funds(vanguard)
Small Caps and REITs are contained in Total Market. By adding them you are overweighting them. Don't read "over-weighting" as necessarily negative: many people believe that those asset classes will outperform the rest of the market, but from a diversification point of view there is no need to overweight. Just be sure you understand what you are doing.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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Re: The Three-Fund Portfolio

Post by NearlyRetired » Fri Oct 25, 2019 11:20 am

Hi all

As a UK investor, I have been looking and reading with interest the philosophy of having a 3 fund portfolio. However when I look at the at the 3-funds portfolio wiki page, there is a big warning at the top that the page contains details specific to US investors.

Is that because the Vanguard funds articulated are for the US market, or is the general 3-funds investment philosophy only relevant for the US market itself (I can't believe that, but need to ask).

Assuming that the methodology is relevant regardless of investor location, which Vanguard investments are the equivalent for the UK market?

I can find the following which I think are the equivalent:

Total Stock Market Index Fund: FTSE Developed World ex-U.K. Equity Index Fund (citicode = FPC9 or FPD0)
Total International Stock Market Index Fund: FTSE U.K. All Share Index Unit Trust (citicode = HRP3 or KQX6L))
Total Bond Market Fund: I cant find an equivalent for this- any ideas?

Also, at retirement, do I look to use the income funds, or accumulator funds?

Thanks all
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Re: The Three-Fund Portfolio

Post by BrandonBogle » Fri Oct 25, 2019 5:12 pm

I just wanted to share that I've essentially been following the Boglehead principles for over a decade (and even investing broadly and simply even before opening a Vanguard account in 2005). It wasn't until years later that I found the Bogleheads and fine tuned things as it aligned well with my thoughts and any deviations made perfect sense in the Boglehead manner. I remember reading this thread way back in 2013 and following it actively for a while. Today, after a LONG hiatus of reading this thread, I clicked on "last unread" and saw I left off in September 2015. Reading a few pages from then and the last couple pages from now, I'm pleased to see that "Stay the course!" has been the mantra all along and "the more things change, they more they stay the same."

Taylor's advice here has been invaluable and even though different people are asking the questions now than in 2012, 2013, 2014, and 2015, the ethos remains the same and thus far, the outcome has too!

Three fund portfolio for life!!! :sharebeer

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Re: The Three-Fund Portfolio

Post by Barry Barnitz » Fri Oct 25, 2019 5:33 pm

NearlyRetired wrote:
Fri Oct 25, 2019 11:20 am
Hi all

As a UK investor, I have been looking and reading with interest the philosophy of having a 3 fund portfolio. However when I look at the at the 3-funds portfolio wiki page, there is a big warning at the top that the page contains details specific to US investors.

Is that because the Vanguard funds articulated are for the US market, or is the general 3-funds investment philosophy only relevant for the US market itself (I can't believe that, but need to ask).

Assuming that the methodology is relevant regardless of investor location, which Vanguard investments are the equivalent for the UK market?

I can find the following which I think are the equivalent:

Total Stock Market Index Fund: FTSE Developed World ex-U.K. Equity Index Fund (citicode = FPC9 or FPD0)
Total International Stock Market Index Fund: FTSE U.K. All Share Index Unit Trust (citicode = HRP3 or KQX6L))
Total Bond Market Fund: I cant find an equivalent for this- any ideas?

Also, at retirement, do I look to use the income funds, or accumulator funds?

Thanks all
Hi:
We have sections of the forum (the non-US forum) and the wiki devoted the specific issues confronting non-us and expatriate investors.

You might find this wiki page, UK investing to be more applicable to the investment options, tax and regulatory requirements, and other specifics important to the UK citizen.

regards,
Additional administrative tasks: Financial Page affiliate blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; Wiki Bogleheads® España.

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Re: The Three-Fund Portfolio

Post by LadyGeek » Fri Oct 25, 2019 5:57 pm

We also have a 3-fund portfolio wiki article for non-US investors. See: Simple non-US portfolios

Non-US members are encouraged to start a thread in the Non-US Investing forum and post their portfolio info using the My portfolio: seeking advice format.
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Re: The Three-Fund Portfolio

Post by NearlyRetired » Sat Oct 26, 2019 3:40 am

Thanks All

I hadn't seen those pages will read with interest
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Re: The Three-Fund Portfolio

Post by mcheeks1029 » Wed Oct 30, 2019 8:45 pm

Hi all 2 questions

1) whats everyones take on using Wellington + Total stock market as an adjustment to the 3 fund portfolio- given that Wellington has a 65/35 stock/bond split and has about 10% international in there. i am considering this combo in my i401k only because wellington has historically done well (i know history doesn't guarantee the future- but it maintained a good return in the 2008 bear market)...

2) Given the drop in bond returns- are you still using Total bond- or have you shifted to another source for fixed income/bonds in the interim

thanks!

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Re: The Three-Fund Portfolio

Post by bertilak » Thu Oct 31, 2019 6:22 am

mcheeks1029 wrote:
Wed Oct 30, 2019 8:45 pm
Hi all 2 questions

1) whats everyones take on using Wellington + Total stock market as an adjustment to the 3 fund portfolio- given that Wellington has a 65/35 stock/bond split and has about 10% international in there. i am considering this combo in my i401k only because wellington has historically done well (i know history doesn't guarantee the future- but it maintained a good return in the 2008 bear market)...

2) Given the drop in bond returns- are you still using Total bond- or have you shifted to another source for fixed income/bonds in the interim

thanks!
1) I used to use both Wellington and Wellesley but switched to the three-fund arrangement when I wanted to split stocks and bonds across tax deferred and taxable accounts.

2)TBM is just fine. I had TBM (VBTLX) but switched to intermediate bond (VBILX) as tax loss harvesting process. I'm happy with that as well.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Thu Oct 31, 2019 8:18 am

mcheeks1029 wrote:
Wed Oct 30, 2019 8:45 pm
Hi all 2 questions

1) whats everyones take on using Wellington + Total stock market as an adjustment to the 3 fund portfolio- given that Wellington has a 65/35 stock/bond split and has about 10% international in there. i am considering this combo in my i401k only because wellington has historically done well (i know history doesn't guarantee the future- but it maintained a good return in the 2008 bear market)...



2) Given the drop in bond returns- are you still using Total bond- or have you shifted to another source for fixed income/bonds in the interim

thanks!
mcheeks1029:

I will answer your two questions in blue:
1) whats everyones take on using Wellington + Total stock market as an adjustment to the 3 fund portfolio- given that Wellington has a 65/35 stock/bond split and has about 10% international in there. i am considering this combo in my i401k only because wellington has historically done well (i know history doesn't guarantee the future- but it maintained a good return in the 2008 bear market)...
Answer:

Wellington has been a fine fund but adding it to The Three-Fund Portfolio is nearly 100 overlap of your existing stocks and bonds. Why own 4 funds when three will do. Rebalancing will be a constant problem.

Wellington lost -23.3% in the 2008 bear market. Total Bond Market gained +5%.

2) Given the drop in bond returns- are you still using Total bond- or have you shifted to another source for fixed income/bonds in the interim?
Answer:

Highly diversified and low-cost Vanguard Total Bond Market Index remains my only bond fund. It does the job of providing much less volatility in my overall portfolio.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. market bond-market index portfolio."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by abuss368 » Fri Nov 01, 2019 8:16 am

mcheeks1029 wrote:
Wed Oct 30, 2019 8:45 pm
Hi all 2 questions

1) whats everyones take on using Wellington + Total stock market as an adjustment to the 3 fund portfolio- given that Wellington has a 65/35 stock/bond split and has about 10% international in there. i am considering this combo in my i401k only because wellington has historically done well (i know history doesn't guarantee the future- but it maintained a good return in the 2008 bear market)...

2) Given the drop in bond returns- are you still using Total bond- or have you shifted to another source for fixed income/bonds in the interim

thanks!
Welcome to the forum!

Many years ago we too had Wellington mixed with our total market index funds. On top of that it was in our taxable account.

We soon realized, that while the oldest fund in the country, and a respectable fund at that, it really did not have a place in our portfolio and increased complexity.

We removed it and simplified.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by mcheeks1029 » Sat Nov 02, 2019 2:45 pm

Hi Taylor
your personal portfolio is the 3 fund portfolio with your specific AA- that truly is an easy set it and forget it portfolio vs the endless options out there
I am sold and will set that up!
Thanks for responding!
James

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sat Nov 02, 2019 4:04 pm

mcheeks1029 wrote:
Sat Nov 02, 2019 2:45 pm
Hi Taylor
your personal portfolio is the 3 fund portfolio with your specific AA- that truly is an easy set it and forget it portfolio vs the endless options out there
I am sold and will set that up!
Thanks for responding!
James
James:

I am confident that you have made a good decision.

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

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Re: The Three-Fund Portfolio

Post by LadyGeek » Tue Nov 05, 2019 3:09 pm

Basel Hodge has a question, which I've to a new thread (along with the replies). See: [Help with my three-fund portfolio]
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Re: The Three-Fund Portfolio

Post by wiredaces80 » Tue Nov 12, 2019 2:26 pm

* Lousy returns. Small Cap Value Funds now have the worst performance of all Morningstar styles:

http://news.morningstar.com/index/indexReturn.html
Isn't this short term thinking though? Isn't it better to look at the long term and also consider reversion to the mean? If so, it would seem to me a great time to buy SCV (long term history indicates it severely outperforms the overall market)....also, based on this logic it would be better to hold an S&P index instead of a TSM index, wouldn't it?

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Tue Nov 12, 2019 3:05 pm

wiredaces80 wrote:
Tue Nov 12, 2019 2:26 pm
* Lousy returns. Small Cap Value Funds now have the worst performance of all Morningstar styles:

http://news.morningstar.com/index/indexReturn.html
Isn't this short term thinking though? Isn't it better to look at the long term and also consider reversion to the mean? If so, it would seem to me a great time to buy SCV (long term history indicates it severely outperforms the overall market)....also, based on this logic it would be better to hold an S&P index instead of a TSM index, wouldn't it?
wiredaces80:

Bogleheads do not attempt market-timing. Read what experts say here.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "My preferred index fund happens to be the total stock market which includes large, medium, and small stocks. -- Selecting funds that will significantly exceed market returns, a search in which hope springs eternal and in which past performance has proven of virtually no predictive value, is a loser’s game.”
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by wiredaces80 » Tue Nov 12, 2019 4:15 pm

Taylor Larimore wrote:
Tue Nov 12, 2019 3:05 pm
wiredaces80 wrote:
Tue Nov 12, 2019 2:26 pm
* Lousy returns. Small Cap Value Funds now have the worst performance of all Morningstar styles:

http://news.morningstar.com/index/indexReturn.html
Isn't this short term thinking though? Isn't it better to look at the long term and also consider reversion to the mean? If so, it would seem to me a great time to buy SCV (long term history indicates it severely outperforms the overall market)....also, based on this logic it would be better to hold an S&P index instead of a TSM index, wouldn't it?
wiredaces80:

Bogleheads do not attempt market-timing. Read what experts say here.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "My preferred index fund happens to be the total stock market which includes large, medium, and small stocks. -- Selecting funds that will significantly exceed market returns, a search in which hope springs eternal and in which past performance has proven of virtually no predictive value, is a loser’s game.”
Thank you Taylor, I understand that and respect your work immensely. However, I was mainly just questioning the idea of staying away from SCV because of recent performance, which does seem to me to also be a "market timing" decision in its own way. I guess my thought is that recent performance shouldn`t influence one`s decision; only long term performance should. By the same logic, I am sure you wouldnt advise a 22 year old to put most assets into bonds when coming out of a recession, just because the previous 5 years were "lousy returns" for stocks.

Thank you for all you do, and God bless.
Last edited by wiredaces80 on Tue Nov 12, 2019 6:35 pm, edited 2 times in total.

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Re: The Three-Fund Portfolio

Post by Triple digit golfer » Tue Nov 12, 2019 4:24 pm

I (we) have been using a three-fund portfolio (actually, more like 7, among different account types between my wife and me) for about 12 years now. We've been responsible, saved 20%+ of income and had salary increases along the way, and thankfully no periods of unemployment.

We are 34 years old and currently have a portfolio of 5.2x gross income. Taking out mortgage debt, it is 3.1x. In other words, we could own our house and still have 3.1x gross income saved at age 34. I believe the "experts" say 1x income at age 30 or 35, so I feel good.

I'd like to be able to retire at 50 or 55. Who knows if it'll happen? I'm not putting together projections and backing into what we need to save now; we're simply saving 20-25% of our gross income, living a modest, but good life, and enjoying our 2 year-old daughter. If I can retire at 50, great. If not, I'm sure with our savings rates and habits, that we'll end up in a good situation regardless, barring an unforeseen catastrophe.

I used to sweat the small stuff. You can probably even see some of my older posts where I got into a debate with livesoft about the cost of toiletries.

Now, a roof or HVAC replacement (both of which we've done in the last 18 months) don't make us lose any sleep. We budget for those things and have sufficient funds to pay for them.

That long-winded post is essentially me reflecting back and being so thankful for Taylor and all of the other Bogleheads who instill confidence in simplicity. Without this website, I am confident that I would have tinkered too much the last decade and not had the net worth that I do today.

There is nothing special about the three-fund portfolio or any Bogleheads principles, and that, ironically, is what makes it so special.

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Re: The Three-Fund Portfolio - is it for me?

Post by bclasen » Thu Nov 14, 2019 12:14 pm

New member here -someone suggested this forum so I started reading from the beginning. Been overwhelmed a bit so I thought I'd throw out a question before getting in too deep (or buying the book). I'm a couple of years from retiring, managing IRAs (with Vanguard) and sitting on about $500k of cash due to a recent event. Question - is the Three Fund Portfolio applicable to someone about to retire? So far the posts I've read seemed like younger folks (I wish I found this earlier!) were the most active. If it is applicable, I'm sure there will be more details on asset allocation but for now I'd just like to know if this approach is for me.

Thanks! :D

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Re: The Three-Fund Portfolio - is it for me?

Post by bertilak » Thu Nov 14, 2019 1:07 pm

bclasen wrote:
Thu Nov 14, 2019 12:14 pm
New member here -someone suggested this forum so I started reading from the beginning. Been overwhelmed a bit so I thought I'd throw out a question before getting in too deep (or buying the book). I'm a couple of years from retiring, managing IRAs (with Vanguard) and sitting on about $500k of cash due to a recent event. Question - is the Three Fund Portfolio applicable to someone about to retire? So far the posts I've read seemed like younger folks (I wish I found this earlier!) were the most active. If it is applicable, I'm sure there will be more details on asset allocation but for now I'd just like to know if this approach is for me.

Thanks! :D
The three-fund portfolio is absolutely applicable to retirees and about-to-be retirees. There is a lot of action here by both the young and the old(er). It is just a matter of chance whose posts are most prominent at the time you happen to look.

To balance the age scale ...

I have been retired 9 years and have essentially the three fund portfolio. I did add international bonds but continue to wonder if that did me any good. My rational at the time was based on a booklet by William Bernstein Deep Risk which recommended international diversification of both stocks and bonds. I currently wonder about international bonds but it would now cost me some capital gains to eliminate them (going to all domestic bonds) and I don't think they can hurt me so there is no downside to continue holding them (other than the added complexity of the portfolio) and, if Bernstein is right, there may be a upside. If I was starting over I might skip the international bonds.

I think it requires some well thought out and well understood justification to do anything other than the three (or four?) fund portfolio. You had better really believe in what you are doing.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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Re: The Three-Fund Portfolio - is it for me?

Post by ruralavalon » Thu Nov 14, 2019 1:41 pm

Welcome to the forum :) .

bclasen wrote:
Thu Nov 14, 2019 12:14 pm
New member here -someone suggested this forum so I started reading from the beginning. Been overwhelmed a bit so I thought I'd throw out a question before getting in too deep (or buying the book). I'm a couple of years from retiring, managing IRAs (with Vanguard) and sitting on about $500k of cash due to a recent event. Question - is the Three Fund Portfolio applicable to someone about to retire? So far the posts I've read seemed like younger folks (I wish I found this earlier!) were the most active. If it is applicable, I'm sure there will be more details on asset allocation but for now I'd just like to know if this approach is for me.

Thanks! :D
Yes, the simple three fund type portfolio is suitable for a retiree.

We are 74, retired 9 years, use a portfolio of just 4 funds, and plan to drop the fourth fund in order to simplify.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: The Three-Fund Portfolio - is it for me?

Post by Taylor Larimore » Thu Nov 14, 2019 2:27 pm

bclasen wrote:
Thu Nov 14, 2019 12:14 pm
New member here -someone suggested this forum so I started reading from the beginning. Been overwhelmed a bit so I thought I'd throw out a question before getting in too deep (or buying the book). I'm a couple of years from retiring, managing IRAs (with Vanguard) and sitting on about $500k of cash due to a recent event. Question - is the Three Fund Portfolio applicable to someone about to retire? So far the posts I've read seemed like younger folks (I wish I found this earlier!) were the most active. If it is applicable, I'm sure there will be more details on asset allocation but for now I'd just like to know if this approach is for me.

Thanks! :D
bclasen:

Welcome to the Bogleheads Forum!

The Three-Fund portfolio is ideal for retirees. In addition to its many benefits is its "simplicity" which make it easier to manage for the investor, caregivers, and heirs.

Buy the book. If not pleased, I will refund your price.

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

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Re: The Three-Fund Portfolio

Post by bclasen » Thu Nov 14, 2019 5:27 pm

Thanks Taylor - book on order! :D

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Thu Nov 14, 2019 6:08 pm

bclasen wrote:
Thu Nov 14, 2019 5:27 pm
Thanks Taylor - book on order! :D
bclasen:

It's a deal!

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

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Re: The Three-Fund Portfolio

Post by abuss368 » Thu Nov 14, 2019 7:12 pm

Triple digit golfer wrote:
Tue Nov 12, 2019 4:24 pm
I (we) have been using a three-fund portfolio (actually, more like 7, among different account types between my wife and me) for about 12 years now. We've been responsible, saved 20%+ of income and had salary increases along the way, and thankfully no periods of unemployment.

We are 34 years old and currently have a portfolio of 5.2x gross income. Taking out mortgage debt, it is 3.1x. In other words, we could own our house and still have 3.1x gross income saved at age 34. I believe the "experts" say 1x income at age 30 or 35, so I feel good.

I'd like to be able to retire at 50 or 55. Who knows if it'll happen? I'm not putting together projections and backing into what we need to save now; we're simply saving 20-25% of our gross income, living a modest, but good life, and enjoying our 2 year-old daughter. If I can retire at 50, great. If not, I'm sure with our savings rates and habits, that we'll end up in a good situation regardless, barring an unforeseen catastrophe.

I used to sweat the small stuff. You can probably even see some of my older posts where I got into a debate with livesoft about the cost of toiletries.

Now, a roof or HVAC replacement (both of which we've done in the last 18 months) don't make us lose any sleep. We budget for those things and have sufficient funds to pay for them.

That long-winded post is essentially me reflecting back and being so thankful for Taylor and all of the other Bogleheads who instill confidence in simplicity. Without this website, I am confident that I would have tinkered too much the last decade and not had the net worth that I do today.

There is nothing special about the three-fund portfolio or any Bogleheads principles, and that, ironically, is what makes it so special.
In my opinion, this post speaks volumes.

Keep investing simple.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by Mactheriverrat » Tue Nov 26, 2019 12:26 am

Am I getting this right in this Three-Fund Portfolio and that two fund portfolio. Hold index growth funds going into a recession when monthly unemployment rate starts going up.

Am I to just suffer pain of a recession / bear market / rising unemployment like most people do with their 401-k's.

Shouldn't growth / index funds be played in times of growth falling unemployment rate
and bond funds be played in times of rising unemployment /recession / bear market.

https://stockcharts.com/h-sc/ui?s=%24%2 ... 8309593584
Last edited by Mactheriverrat on Tue Nov 26, 2019 1:15 am, edited 1 time in total.
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Re: The Three-Fund Portfolio

Post by abuss368 » Tue Nov 26, 2019 6:52 am

Mactheriverrat wrote:
Tue Nov 26, 2019 12:26 am
Am I getting this right in this Three-Fund Portfolio and that two fund portfolio. Hold index growth funds going into a recession when monthly unemployment rate starts going up.

Am I to just suffer pain of a recession / bear market / rising unemployment like most people do with their 401-k's.

Shouldn't growth / index funds be played in times of growth falling unemployment rate
and bond funds be played in times of rising unemployment /recession / bear market.

https://stockcharts.com/h-sc/ui?s=%24%2 ... 8309593584
I am not following your post unfortunately. Hold index growth funds going into a recession? The Three Fund Portfolio holds three total market index funds at all times.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: The Three-Fund Portfolio

Post by Brianmcg321 » Tue Nov 26, 2019 7:21 am

Mactheriverrat wrote:
Tue Nov 26, 2019 12:26 am
Am I getting this right in this Three-Fund Portfolio and that two fund portfolio. Hold index growth funds going into a recession when monthly unemployment rate starts going up.

Am I to just suffer pain of a recession / bear market / rising unemployment like most people do with their 401-k's.

Shouldn't growth / index funds be played in times of growth falling unemployment rate
and bond funds be played in times of rising unemployment /recession / bear market.

https://stockcharts.com/h-sc/ui?s=%24%2 ... 8309593584
How do you "play" funds.

I'm an investor. I don't play. Stay the course.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

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Re: The Three-Fund Portfolio

Post by snailderby » Tue Nov 26, 2019 7:50 am

Mactheriverrat wrote:
Tue Nov 26, 2019 12:26 am
Shouldn't growth / index funds be played in times of growth falling unemployment rate
and bond funds be played in times of rising unemployment /recession / bear market.
If you're suggesting some sort of market timing approach based in part on the unemployment rate, you might be interested in willthrill's thread at viewtopic.php?f=10&t=270035. But that is not the three fund portfolio and most posters here do not support market timing. Many investors who try to time the market end up underperforming a simple buy and hold approach.

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Re: The Three-Fund Portfolio

Post by Mactheriverrat » Thu Nov 28, 2019 6:20 am

snailderby wrote:
Tue Nov 26, 2019 7:50 am
If you're suggesting some sort of market timing approach based in part on the unemployment rate, you might be interested in willthrill's thread at viewtopic.php?f=10&t=270035. But that is not the three fund portfolio and most posters here do not support market timing. Many investors who try to time the market end up underperforming a simple buy and hold approach.
[ quote fixed by admin LadyGeek]

Wilthrills article is good I think as he uses the umemployrate and 12 day moving . Just as the three fund portfolio in its own way. The idea that I've seen over the years is people hold growth funds through recessions and the pain that goes along with.

I did a research on a non-boglehead approach using 3 funds in my 401-k . Value starting with a portfolio starting $250,000 switching when the unemployment rate change downward from 12-2003 to 10 -2007

PMEGX - 48%
TRLGX - 48%
PTTRX - 4%
When the unemployment rate change upward from 11-2007 to 9-2010 give or take a month i switched to the below

PTTRX - 100%
TRLGX - 0%
PMEGX - 0%

and switch back when unemployment crossed downward from 08-2010 up to 11-2019

PMEGX - 48%
TRLGX - 48%
PTTRX - 4%

when the unemployment rate starts going down.

There was a big difference of over $600,000 of switching using the unemployment rather than just buy and hold for ever .

https://stockcharts.com/h-sc/ui?s=%24%2 ... =703150627

Things evolve.

Yes its non-boglehead approach alright.
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Re: The Three-Fund Portfolio

Post by Mactheriverrat » Thu Nov 28, 2019 6:52 am

Guess I need to post a non-boglehead approach thread.
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Re: The Three-Fund Portfolio

Post by RogerR » Sat Nov 30, 2019 4:48 am

My question concerns the tax efficiency of BND in the classic Three-Fund Portfolio. All my stocks and bonds are in a taxable account (no SS, etc. for me) and I reside in the highest tax bracket (8-digit total size). There is not much to dislike about BND but is it prudent for me to hold BND or preferable to switch to mix of low-cost munis and treasuries? What are the pros and con's of the various options? Thank you.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sat Nov 30, 2019 11:25 am

RogerR wrote:
Sat Nov 30, 2019 4:48 am
My question concerns the tax efficiency of BND in the classic Three-Fund Portfolio. All my stocks and bonds are in a taxable account (no SS, etc. for me) and I reside in the highest tax bracket (8-digit total size). There is not much to dislike about BND but is it prudent for me to hold BND or preferable to switch to mix of low-cost munis and treasuries? What are the pros and con's of the various options? Thank you.
RogerR:

Looking at your prior posts, it appears you are a retired couple, German citizens, living in Singapore with a $10M Three-Fund Portfolio. Sorry, I do not feel qualified to give you the professional advice you need and I doubt you will get it on a public forum.
Our Wiki contains advice here: Non-US investor's Guide to Navigating US Tax Traps.

In general, high-income investors should use a tax-exempt bond fund in the three fund portfolio.

I suggest you consider Vanguard's Personal Advisory Services (PAS). This is the link:

https://investor.vanguard.com/financial ... ial-advice

Best Wishes
Taylor
Jack Bogle's Words of Wisdom: "I do think investors can make a legitimate choice; if they want to do non-U.S., they should do it."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The Three-Fund Portfolio

Post by LadyGeek » Sat Nov 30, 2019 12:04 pm

RogerR wrote:
Sat Nov 30, 2019 4:48 am
My question concerns the tax efficiency of BND in the classic Three-Fund Portfolio. All my stocks and bonds are in a taxable account (no SS, etc. for me) and I reside in the highest tax bracket (8-digit total size). There is not much to dislike about BND but is it prudent for me to hold BND or preferable to switch to mix of low-cost munis and treasuries? What are the pros and con's of the various options? Thank you.
RogerR has asked a similar question in this thread: Portfolio and Taxes [Singapore], which is in the Non-US Investing forum.

Feel free to ask questions about the wiki article Non-US investor's Guide to Navigating US Tax Traps in that thread.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: The Three-Fund Portfolio

Post by RogerR » Sun Dec 01, 2019 5:03 am

Taylor Larimore wrote:
Sat Nov 30, 2019 11:25 am
RogerR wrote:
Sat Nov 30, 2019 4:48 am
My question concerns the tax efficiency of BND in the classic Three-Fund Portfolio. All my stocks and bonds are in a taxable account (no SS, etc. for me) and I reside in the highest tax bracket (8-digit total size). There is not much to dislike about BND but is it prudent for me to hold BND or preferable to switch to mix of low-cost munis and treasuries? What are the pros and con's of the various options? Thank you.
RogerR:

Looking at your prior posts, it appears you are a retired couple, German citizens, living in Singapore with a $10M Three-Fund Portfolio. Sorry, I do not feel qualified to give you the professional advice you need and I doubt you will get it on a public forum.
Our Wiki contains advice here: Non-US investor's Guide to Navigating US Tax Traps.

In general, high-income investors should use a tax-exempt bond fund in the three fund portfolio.

I suggest you consider Vanguard's Personal Advisory Services (PAS). This is the link:

https://investor.vanguard.com/financial ... ial-advice

Best Wishes
Taylor
Jack Bogle's Words of Wisdom: "I do think investors can make a legitimate choice; if they want to do non-U.S., they should do it."
Thank you for your kind response. We are getting ready to move back to the US next year after many years living abroad. The information for non-US investors was very helpful setting up my current Three-Fund Portfolio in a tax-optimised way. Vanguard offers a highly rated tax-exempt bond that may fit my requirements. I will approach Vanguard PAS in due time.

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Re: The Three-Fund Portfolio

Post by dave.m » Mon Dec 02, 2019 8:15 pm

Taylor Larimore wrote:
Sun Jan 01, 2012 6:02 pm
The Bogleheads' Guide to The Three-Fund Portfolio is now available in hardcover book, audio book and kindle. All royalties are donated directly to The John C. Bogle Center For Financial Literacy.
Bogleheads:

After a lifetime of investing since 1950 trying to "beat the market," I am convinced that a simple 3-fund (or ETF) portfolio of Total Stock Market, Total International, and Total Bond Market, properly allocated, is an ideal portfolio for most investors. The advantages are many (use blue links):

* Avoids wasted time, confusion and the possibility of mistakes trying to pick the best of thousands of mutual funds and ETFs.
* Very diversified with over 15,000 worldwide securities (lower risk).
* Very low expense ratios.
* Very low (hidden) turnover costs.
* Very tax-efficient.
* The many Advantages of Simplicity.
* Fewer but larger funds results in earlier eligibility for low-cost Admiral shares.
* No adviser risk.
* No fund manager risk.
* No style drift.
* No asset bloat.
* No tracking error to cause abandonment of the strategy.
* No fund overlap.
* No front-running that reduces sub-index returns.
* Automatic rebalancing within each fund.
* Less worry. Never under-performs the market.
* Easy to maintain for the owner, spouse, caregivers and heirs.
* More free time.
* Mathematically certain to out-perform most investors. This was Morningstar's 15-Year Category performance for each stock fund (return) and bond fund (risk) updated on January 01, 2019:

TOP 5% = Vanguard Total Stock Market (VTSMX)
TOP 4% = After tax.

TOP 21% = Vanguard Total International (VGTSX)
TOP 18% = After tax.

TOP 9% = Vanguard Total Bond Market (VBTLX) in last (2008) bear market.

GOLD Analyst Rating: Total Stock Market and Total International
SILVER Analyst Rating: Total Bond Market

Asset Allocation: Use this Investor Questionnaire to help you decide your very important stock/bond allocation. I suggest International stocks = 20% of equity.

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. Place Total Stock Market and Total International Stock Market in either a tax-advantaged account (best) or a taxable account.

______________________________________________________________________________________

What Nobel Laureate's say:

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."

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

Paul Samuelson: "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."

William Sharpe: "You may think your opinion is superior, but it pays to be humble, investing in the market rather than trying to beat it."

Robert Shiller: "A portfolio approximating the market may be the most important portfolio."
----------------------------------------------------------------------------------------------------------------------

What Other Experts Say:
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: "By buying total-market index funds--one for U.S. stocks, one for foreign stocks, and one for bonds--investors can gain exposure to a huge swath of securities in three highly economical packages."

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, Vanguard founder: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk." -- "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."

Warren Buffett, famed investor: “I’d rather be certain of a good return than hopeful of a great one. -- Most investors are better off putting their money in low-cost index funds."

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."

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.

John Cochrane, President American Finance Association: "The market in aggregate always gets the allocation of capital right."

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

Laura Dugu, Ambassador and 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 D. Ellis, author of The Index Revolution: "'Beating the market' is much harder than it used to be, and investors who continue to approach the market with that mindset populate the rolls of market losers time and time again."

Paul Farrell, author of The Lazy Person's Guide to Investing: "Where does Fama invest his retirement money? 'In index funds. Mostly the Wilshire 5000.' "

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, Director of the U.S. Economic Council: "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-market 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."

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

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, Northwestern College 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."

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: The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market."

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."

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

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."

Warren Buffett, famed investor: "There seems to be some perverse human characteristic that likes to make easy things difficult."
For further reading:

"A Boglehead Explains the Simplest Way to Manage Your Money"--MarketWatch

"The Bogleheads' Guide to The Three-Fund Portfolio" by Four Pillar Freedom

"The Bogleheads' Guide to the Three-Fund Portfolio" by Rick Van Ness

"The Arithmetic of Active Management" by William Sharpe, Nobel Laureate

"The BigLaw Investor Portfolio" by Joshua Hunt

"Efficient Investing with the Three Fund Portfolio" by Mr. Crazy Kicks

"From 28 Funds to 3: Simplifying to a Three-Fund Portfolio" by Physician On Fire

"How the Bogle (3-fund) Model Beats the Yale Model" by Ben Carlson

"He Has Read 250 Investing Books and Recommends the Three Fund Portfolio" by Physician on Fire

"How To Diversify With Just Three Mutual Funds" by Ambassador Laura Dogu, Forbes

"Most Investors Probably Won’t Outperform This Simple (three-fund) Portfolio" Morningstar

"The Only Three Vanguard Funds You Need to Build a Portfolio" by Kent Thune

"Investing Should Be Simple. A Three-Fund Portfolio Is All You Need." by Allan Roth, AARP

"Investing With A Three Fund Portfolio" by Financial Ramblings

"If You Can. How Millennials Can Get Rich Slowly" -- Free book by Wm. Bernstein

"Next to Nothing" by Jonathan Clements

"The Three Fund Portfolio: The Lazy Investing Strategy that Crushes the Pros" by The Money Wizard

"The Three-Fund Investment Portfolio: The Beauty of Simplicity" by Mama Fish Saves

"Three Fund Portfolio: Did Awesomeness Find Trinity?" by Portfolio Einstein

"Three Fund Portfolio – Investing Made Easy" by The Finance Twins

"3 Fund Portfolio Investment Strategy: The Only Time Lazy is Cool" by Dr Breathe Easy Investing

"The Three-Fund Portfolio" -- Boglehead wiki

"Three Mutual Funds That End The Guesswork" by Jonathan Burton MarketWatch

"How To Simplify Your Investing Using Only Three Funds" by Debt Free Doctor

"Simplify Your Investments With The 3-Fund Portfolio" by Alicia Adamczyk

"Why (3) Index Portfolios Win" by M.P. Dunleavey

Best wishes.

Taylor Larimore
THANK YOU!

I wanted this to be my first post.

I have read and followed this forum for a bit before joining. I invest in a 3 fund portfolio because of posts like this. I have read many of the links you shared in this one single post, so I wanted to start my journey on this forum with a proper Thank You Taylor!

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Taylor Larimore
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Location: Miami FL

Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Dec 02, 2019 9:33 pm

dave.m:

THANK YOU.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
"Simplicity is the master key to financial success." -- Jack Bogle

GaryA505
Posts: 309
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

Re: The Three-Fund Portfolio

Post by GaryA505 » Thu Dec 05, 2019 1:21 pm

I just want to point out a problem with the BH portfolio in retirement when you are in retirement, withdrawing for income and subject to the RMD on your IRA. Let's say you have a $500,000 IRA, all bond fund, and $500,000 in taxable, all stock fund, and your desired AA is 50/50:

IRA: Total Bond Market (VBTLX, BND, AGG, whatever)
Taxable: Total Stock Market (VTSAX, VT, VTI, whatever)

So, lets say the bond market takes a beating but stocks are doing well, so you'd rather take your withdrawal for income out of the taxable only. OK, but you still have an RMD that you have to take out of the IRA and lock in the bond losses so you're screwed!
Last edited by GaryA505 on Thu Dec 05, 2019 1:35 pm, edited 2 times in total.

ALinLI
Posts: 113
Joined: Thu Jun 02, 2011 9:04 am

Re: The Three-Fund Portfolio

Post by ALinLI » Thu Dec 05, 2019 1:30 pm

Hi Gary - You mentioned that the IRA is all bond funds so how are you locking in losses there for RMD? Also even if you do have stocks in an IRA and you sold more stocks than you wanted in IRA due to RMD , you can buy back that stock amount in your taxable account.

GaryA505
Posts: 309
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

Re: The Three-Fund Portfolio

Post by GaryA505 » Thu Dec 05, 2019 1:34 pm

ALinLI wrote:
Thu Dec 05, 2019 1:30 pm
Hi Gary - You mentioned that the IRA is all bond funds so how are you locking in losses there for RMD? Also even if you do have stocks in an IRA and you sold more stocks than you wanted in IRA due to RMD , you can buy back that stock amount in your taxable account.
Sorry, I wrote too fast - corrected now.

ALinLI
Posts: 113
Joined: Thu Jun 02, 2011 9:04 am

Re: The Three-Fund Portfolio

Post by ALinLI » Thu Dec 05, 2019 1:40 pm

Hi Gary,

Two things here i learned , money is fungible and its all 1 account meaning think of your IRA and taxable accounts as sub-accounts under your 1 main account.

So say you have stocks in your IRA and were forced to liquidate 100k in stocks due to an RMD but you really want to keep your asset allocation same. I would buy 100k in stocks in my taxable and then sell the 100k in bonds in my taxable. Net your total Stock position has not changed and have sold bonds as you wished.

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