The Three-Fund Portfolio

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GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

ALinLI wrote: Thu Dec 05, 2019 12:40 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.
This is why that doesn't work well. Let's say my IRA is all bonds, and taxable is all index stocks (the most tax-efficient placement). Now, let's say bonds are taking a beating (or just flat) but stocks are up, and my AA is already off target. I have to take the RMD from the IRA (let's call the amount of the RMD X). OK, so I sell X of bonds in the IRA so I can take the RMD (I have no choice on this). I sell the same amount X of stocks in the taxable and buy X of bonds in taxable. Now my AA is about the same as before I took the RMD. So I this has the following problems:

1. I don't want bonds in taxable as it's not tax-efficient.

2. Since in this scenario stocks are up, selling stocks and buying bonds in taxable will result in a taxable event, even if don't take a withdrawal. Any tax-efficiency advantage that I may have had by having the IRA in all bonds and the taxable in all stock is probably small compared to the amount of this taxable event.

3. Selling X of stocks in the taxable and buying X of bonds in taxable doesn't take the AA more off target, but it doesn't bring it back on target either. To get it back on target I'd have sell even more stock in taxable resulting in an even larger taxable event.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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abuss368
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Re: The Three-Fund Portfolio

Post by abuss368 »

GaryA505 wrote: Thu Dec 05, 2019 12:21 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!
You have Jack Bogle's Two Fund Portfolio of Total Stock and Total Bond. It is important to look at the overall portfolio when determining asset allocation.
John C. Bogle: “Simplicity is the master key to financial success."
Triple digit golfer
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Re: The Three-Fund Portfolio

Post by Triple digit golfer »

GaryA505 wrote: Thu Dec 05, 2019 1:24 pm
ALinLI wrote: Thu Dec 05, 2019 12:40 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.
This is why that doesn't work well. Let's say my IRA is all bonds, and taxable is all index stocks (the most tax-efficient placement). Now, let's say bonds are taking a beating (or just flat) but stocks are up, and my AA is already off target. I have to take the RMD from the IRA (let's call the amount of the RMD X). OK, so I sell X of bonds in the IRA so I can take the RMD (I have no choice on this). I sell the same amount X of stocks in the taxable and buy X of bonds in taxable. Now my AA is about the same as before I took the RMD. So I this has the following problems:

1. I don't want bonds in taxable as it's not tax-efficient.

2. Since in this scenario stocks are up, selling stocks and buying bonds in taxable will result in a taxable event, even if don't take a withdrawal. Any tax-efficiency advantage that I may have had by having the IRA in all bonds and the taxable in all stock is probably small compared to the amount of this taxable event.

3. Selling X of stocks in the taxable and buying X of bonds in taxable doesn't take the AA more off target, but it doesn't bring it back on target either. To get it back on target I'd have sell even more stock in taxable resulting in an even larger taxable event.
How is this a Boglehead portfolio problem? What's a better alternative? I see your concern, but what's the best way to invest your $500k in each account while maintaining 50/50 AA and avoiding this potential issue?

It seems unlikely anybody would be in this situation. All equities in one account, all bonds in another. In most cases there is an overlap of some asset type.
rossington
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Re: The Three-Fund Portfolio

Post by rossington »

GaryA505 wrote: Thu Dec 05, 2019 12:21 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!
You won't get "screwed". Backtest VBTLX since its inception in 2001 and you will see. Also don't forget the only taxes you will owe on selling VTSAX in taxable are capital gains...and you can pick your share lots to minimize this.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Re: The Three-Fund Portfolio

Post by abuss368 »

rossington wrote: Thu Dec 05, 2019 8:00 pm
GaryA505 wrote: Thu Dec 05, 2019 12:21 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!
You won't get "screwed". Backtest VBTLX since its inception in 2001 and you will see. Also don't forget the only taxes you will owe on selling VTSAX in taxable are capital gains...and you can pick your share lots to minimize this.
Simplicity at its best.
John C. Bogle: “Simplicity is the master key to financial success."
GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

Triple digit golfer wrote: Thu Dec 05, 2019 7:39 pm
GaryA505 wrote: Thu Dec 05, 2019 1:24 pm
ALinLI wrote: Thu Dec 05, 2019 12:40 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.
This is why that doesn't work well. Let's say my IRA is all bonds, and taxable is all index stocks (the most tax-efficient placement). Now, let's say bonds are taking a beating (or just flat) but stocks are up, and my AA is already off target. I have to take the RMD from the IRA (let's call the amount of the RMD X). OK, so I sell X of bonds in the IRA so I can take the RMD (I have no choice on this). I sell the same amount X of stocks in the taxable and buy X of bonds in taxable. Now my AA is about the same as before I took the RMD. So I this has the following problems:

1. I don't want bonds in taxable as it's not tax-efficient.

2. Since in this scenario stocks are up, selling stocks and buying bonds in taxable will result in a taxable event, even if don't take a withdrawal. Any tax-efficiency advantage that I may have had by having the IRA in all bonds and the taxable in all stock is probably small compared to the amount of this taxable event.

3. Selling X of stocks in the taxable and buying X of bonds in taxable doesn't take the AA more off target, but it doesn't bring it back on target either. To get it back on target I'd have sell even more stock in taxable resulting in an even larger taxable event.
How is this a Boglehead portfolio problem? What's a better alternative? I see your concern, but what's the best way to invest your $500k in each account while maintaining 50/50 AA and avoiding this potential issue?

It seems unlikely anybody would be in this situation. All equities in one account, all bonds in another. In most cases there is an overlap of some asset type.
The text I bolded in your post is exactly the question.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
OffGridder
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Re: The Three-Fund Portfolio

Post by OffGridder »

ALinLI wrote: Thu Dec 05, 2019 12:40 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.
Everyone's specific situation is different. I am a simple 3 funder. My taxable account is all in equities. My traditional IRA is all in bonds. My Roth is a mix of both equities and bonds. All rebalancing is done in my Roth account.
"Goodness is the only investment that never fails." | H.D. Thoreau
GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

OffGridder wrote: Tue Dec 10, 2019 11:20 am
ALinLI wrote: Thu Dec 05, 2019 12:40 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.
Everyone's specific situation is different. I am a simple 3 funder. My taxable account is all in equities. My traditional IRA is all in bonds. My Roth is a mix of both equities and bonds. All rebalancing is done in my Roth account.
OK, but what happens when you're taking RMDs from the IRA (all bonds) and bonds are in a down year because interest rates increased?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Taylor Larimore
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The Three-Fund Portfolio bond allocation?

Post by Taylor Larimore »

OK, but what happens when you're taking RMDs from the IRA (all bonds) and bonds are in a down year because interest rates increased?
Gary:

This is a very unlikely event. Vanguard Total Bond Market Index Fund's worst annual loss was -2.66% in 1994 (it gained +16% in 1995). If bonds fill your IRA, and you need additional bonds to meet your desired asset-allocation, add taxable or tax-exempt bonds (depending on your tax-bracket) to your taxable account.

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. bond-market index portfolio."
"Simplicity is the master key to financial success." -- Jack Bogle
GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

1. I believe that the largest 12-month loss for bonds was -13.9% in 1974.
2. Vanguard calculated that the 1-yr loss in the event of a 3% increase in rates would be -12.9%.
3. Past performance should not be used to predict future performance.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: The Three-Fund Portfolio

Post by abuss368 »

GaryA505 wrote: Tue Dec 10, 2019 1:41 pm 1. I believe that the largest 12-month loss for bonds was -13.9% in 1974.
2. Vanguard calculated that the 1-yr loss in the event of a 3% increase in rates would be -12.9%.
3. Past performance should not be used to predict future performance.
If that unlikely event occurred I would stay the course and rebalance by investing more!
John C. Bogle: “Simplicity is the master key to financial success."
GaryA505
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Re: The Three-Fund Portfolio

Post by GaryA505 »

abuss368 wrote: Tue Dec 10, 2019 2:16 pm
GaryA505 wrote: Tue Dec 10, 2019 1:41 pm 1. I believe that the largest 12-month loss for bonds was -13.9% in 1974.
2. Vanguard calculated that the 1-yr loss in the event of a 3% increase in rates would be -12.9%.
3. Past performance should not be used to predict future performance.
If that unlikely event occurred I would stay the course and rebalance by investing more!
When you're taking an RMD from the IRA?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
skywalker_ca84
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Re: The Three-Fund Portfolio

Post by skywalker_ca84 »

Just came across this thread. I don't understand why should one invest in Total International Stock ETF (VXUS). Since inception, it has underperformed even BND, while the risk profile is much much higher than BND. Currently I am 90% VTI (have been since 2013) and reaped the benefits, but would like to rebalance. Wife and I are both 35, plan to retire by 55. Currently maxing both our 401k, Roth IRA, HSA and left over goes to a taxable account. I am thinking of making after-tax contributions to my 401k and convert to Roth -- my employer offers in-plan conversion.

I am thinking 15% Total Bond (BND), 15% Total International (VXUS) and 70% VTI, but given how poorly Total International has performed, wondering if I should just do 20% BND and 80% VTI. Thoughts?
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Re: The Three-Fund Portfolio

Post by donaldfair71 »

skywalker_ca84 wrote: Fri Dec 13, 2019 9:55 am Just came across this thread. I don't understand why should one invest in Total International Stock ETF (VXUS). Since inception, it has underperformed even BND, while the risk profile is much much higher than BND. Currently I am 90% VTI (have been since 2013) and reaped the benefits, but would like to rebalance. Wife and I are both 35, plan to retire by 55. Currently maxing both our 401k, Roth IRA, HSA and left over goes to a taxable account. I am thinking of making after-tax contributions to my 401k and convert to Roth -- my employer offers in-plan conversion.

I am thinking 15% Total Bond (BND), 15% Total International (VXUS) and 70% VTI, but given how poorly Total International has performed, wondering if I should just do 20% BND and 80% VTI. Thoughts?
Owning no VXUS is fine. Just don't do it because it's not performing. Do it because of a belief in American companies, American work ethic, etc. If/when VXUS performs better than VTI for an extended period, and it will at some point, you can't then jump in, as the gains to be had from owning it will have been likely already been gained.
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Taylor Larimore
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Total International Fund

Post by Taylor Larimore »

skywalker_ca84:

You can read my thoughts about why Total International should represent about 20% (of equity) in The Three-Fund Portfolio here:

viewtopic.php?t=196956

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: International isn't necessary, but if you must, limit yourself to no more than 20%."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by ruralavalon »

It's good to see that you are making the maximum annual contributions to your tax-advantaged accounts.

skywalker_ca84 wrote: Fri Dec 13, 2019 9:55 am Just came across this thread. I don't understand why should one invest in Total International Stock ETF (VXUS). Since inception, it has underperformed even BND, while the risk profile is much much higher than BND. Currently I am 90% VTI (have been since 2013) and reaped the benefits, but would like to rebalance. Wife and I are both 35, plan to retire by 55. Currently maxing both our 401k, Roth IRA, HSA and left over goes to a taxable account. I am thinking of making after-tax contributions to my 401k and convert to Roth -- my employer offers in-plan conversion.

I am thinking 15% Total Bond (BND), 15% Total International (VXUS) and 70% VTI, but given how poorly Total International has performed, wondering if I should just do 20% BND and 80% VTI. Thoughts?
Vanguard Total International Stock Index Fund (VTIAX) or ETF (VXUS) is included for better diversification. During some periods international stocks have outperformed U.S. stocks.

At age 35 I suggest around 20% in bonds or other fixed income. In my opinion around 20-30% of stocks in international stocks is reasonable.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
sidneyinplanning
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Re: The Three-Fund Portfolio

Post by sidneyinplanning »

skywalker_ca84 wrote: Fri Dec 13, 2019 9:55 am Just came across this thread. I don't understand why should one invest in Total International Stock ETF (VXUS). Since inception, it has underperformed even BND, while the risk profile is much much higher than BND. Currently I am 90% VTI (have been since 2013) and reaped the benefits, but would like to rebalance. Wife and I are both 35, plan to retire by 55. Currently maxing both our 401k, Roth IRA, HSA and left over goes to a taxable account. I am thinking of making after-tax contributions to my 401k and convert to Roth -- my employer offers in-plan conversion.

I am thinking 15% Total Bond (BND), 15% Total International (VXUS) and 70% VTI, but given how poorly Total International has performed, wondering if I should just do 20% BND and 80% VTI. Thoughts?
Isn't it cheap to buy? After say 20 years, it has to reverse. Any comments?
sidneyinplanning
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Re: The Three-Fund Portfolio

Post by sidneyinplanning »

OffGridder wrote: Tue Dec 10, 2019 11:20 am
ALinLI wrote: Thu Dec 05, 2019 12:40 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.
Everyone's specific situation is different. I am a simple 3 funder. My taxable account is all in equities. My traditional IRA is all in bonds. My Roth is a mix of both equities and bonds. All rebalancing is done in my Roth account.
I makes sense. Thx.
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Re: The Three-Fund Portfolio

Post by ruralavalon »

sidneyinplanning wrote: Fri Dec 20, 2019 1:59 pm
skywalker_ca84 wrote: Fri Dec 13, 2019 9:55 am Just came across this thread. I don't understand why should one invest in Total International Stock ETF (VXUS). Since inception, it has underperformed even BND, while the risk profile is much much higher than BND. Currently I am 90% VTI (have been since 2013) and reaped the benefits, but would like to rebalance. Wife and I are both 35, plan to retire by 55. Currently maxing both our 401k, Roth IRA, HSA and left over goes to a taxable account. I am thinking of making after-tax contributions to my 401k and convert to Roth -- my employer offers in-plan conversion.

I am thinking 15% Total Bond (BND), 15% Total International (VXUS) and 70% VTI, but given how poorly Total International has performed, wondering if I should just do 20% BND and 80% VTI. Thoughts?
Isn't it cheap to buy? After say 20 years, it has to reverse. Any comments?
Vanguard Total International does not have to reverse.

But Vanguard Total International hasn't always underperformed as is claimed.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: The Three-Fund Portfolio

Post by oldcomputerguy »

[New member GRaTePHuLDoL has some questions regarding portfolio allocation, I split his question off into a separate thread here. -- mod oldcomputerguy]
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dl777
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Re: The Three-Fund Portfolio - is it for me?

Post by dl777 »

Taylor Larimore wrote: Thu Nov 14, 2019 1:27 pm
bclasen wrote: Thu Nov 14, 2019 11:14 am 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
Being close to retirement and being new to this forum I was wondering if this two or three fund strategy is outside of the total portfolio discussion. Does this only apply to funds that one is willing wait a long period of time to redeem during retirement. If the market goes down 40% in a year and interest rates rises 3-4% during the same time I would not want to sell anything and would wait 3-5 years for it to come back. Shouldn't there also be a component that is either TIPS or CDs or Money markets that would cover 3-5 years worth of living expenses? I did not read all 54 pages of this thread but of those 5-6 pages that I did read no one mentioned this. I remember having terrible angst when we had large stock market declines and rising interest rates (early 80s). Thanks!
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Re: The Three-Fund Portfolio - is it for me?

Post by bertilak »

dl777 wrote: Sat Jan 04, 2020 3:10 pm Being close to retirement and being new to this forum I was wondering if this two or three fund strategy is outside of the total portfolio discussion. Does this only apply to funds that one is willing wait a long period of time to redeem during retirement. If the market goes down 40% in a year and interest rates rises 3-4% during the same time I would not want to sell anything and would wait 3-5 years for it to come back. Shouldn't there also be a component that is either TIPS or CDs or Money markets that would cover 3-5 years worth of living expenses? I did not read all 54 pages of this thread but of those 5-6 pages that I did read no one mentioned this. I remember having terrible angst when we had large stock market declines and rising interest rates (early 80s). Thanks!
Some points:
  1. The three fund portfolio is appropriate for all stages of investing. What is likely to change over time is the ratio of stocks to bonds, more bonds giving less volatile performance. That is appropriate for the time you are no longer contributing to your portfolio, or are approaching that time, so can no longer count on those contributions making up for any poor performance.
  2. Many people do have an emergency fund that they do not consider part of their investment portfolio. I personally do not do this, probably because of the next item...
  3. If you have a large enough portfolio then larger swings in value become less important, although they are still bothersome -- see number 1!
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Re: The Three-Fund Portfolio

Post by Razasharpz »

VTIAX or VTMGX (15%), VTSAX (75%), VBTLX (10%) for Ages 30-50.

Set it and forget it. Enjoy being rich.
Age 31: | 70% VTSAX | 20% VTIAX | 10% VBTLX
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Re: The Three-Fund Portfolio

Post by 4nursebee »

I've not read the full 54 pages so chastisement might be in order...

Just set up to roll a retirees 401K into an IRA. My questions that I might have missed are:
1. Are there reasons to do 3 fund portfolio as mutual funds rather than ETFs or vice versa?
2. What are the ETF equivalents? editing because I see the answers here now:
https://www.bogleheads.org/wiki/Three-fund_portfolio

If it matters we are at Fidelity and want to implement 3 fund or similar when the money rolls over.
Thank you.
I'd still like the first question answered
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Re: The Three-Fund Portfolio

Post by ruralavalon »

4nursebee wrote: Fri Jan 10, 2020 4:49 pm I've not read the full 54 pages so chastisement might be in order...

Just set up to roll a retirees 401K into an IRA. My questions that I might have missed are:
1. Are there reasons to do 3 fund portfolio as mutual funds rather than ETFs or vice versa?
2. What are the ETF equivalents? editing because I see the answers here now:
https://www.bogleheads.org/wiki/Three-fund_portfolio

If it matters we are at Fidelity and want to implement 3 fund or similar when the money rolls over.
Thank you.
I'd still like the first question answered
In a rollover IRA, which you are asking about, either traditional mutual funds or Exchange Traded Funds (ETFs) should work well.

My general preference is traditional mutual funds, because somewhat easier to use when you are regularly contributing new money as in an active 401k.

But in a rollover IRA ETFs should be fine. At Fidelity there is a large variety of ETFs offered commission free, like Vanguard ETFs and BlackRock iShares ETFs. This is a much larger variety than using Fidelity's traditional mutual funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Razasharpz
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Re: The Three-Fund Portfolio

Post by Razasharpz »

Fired my financial adviser and am now rocking the 3 funds in my sig. All admiral ^__^
Age 31: | 70% VTSAX | 20% VTIAX | 10% VBTLX
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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

Razasharpz wrote: Mon Jan 13, 2020 7:00 pm Fired my financial adviser and am now rocking the 3 funds in my sig. All admiral ^__^
Razasharpz:

Congratulations and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by abuss368 »

Razasharpz wrote: Mon Jan 13, 2020 7:00 pm Fired my financial adviser and am now rocking the 3 funds in my sig. All admiral ^__^
In my opinion you have a very good portfolio.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by 1789 »

Razasharpz wrote: Mon Jan 13, 2020 7:00 pm Fired my financial adviser and am now rocking the 3 funds in my sig. All admiral ^__^
Congrats on implementing 3 fund portfolio. Now you can sleep like a baby :happy
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Re: The Three-Fund Portfolio

Post by abuss368 »

1789 wrote: Tue Jan 14, 2020 6:47 pm
Razasharpz wrote: Mon Jan 13, 2020 7:00 pm Fired my financial adviser and am now rocking the 3 funds in my sig. All admiral ^__^
Congrats on implementing 3 fund portfolio. Now you can sleep like a baby :happy
Agreed. A very reasonable portfolio. Buy Taylor's book "The Bogleheads Guide to the Three Fund Portfolio" for additional insight and education. Taylor donates all proceeds to the John C. Bogle Center for Financial Literacy.

https://boglecenter.net
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by geeser »

1yr, 3yr, 5yr, 10 yr results for 3 fund portfolio through 2019?

Are these readily available for several different asset allocations?

Thanks.
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Re: The Three-Fund Portfolio

Post by Triple digit golfer »

martiniii wrote: Sat Jan 18, 2020 9:19 am 1yr, 3yr, 5yr, 10 yr results for 3 fund portfolio through 2019?

Are these readily available for several different asset allocations?

Thanks.
https://www.marketwatch.com/lazyportfolio

Use www.portfoliovisualizer.com to put in any allocations you wish.
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Re: The Three-Fund Portfolio

Post by ruralavalon »

Welcome to the forum :) .

martiniii wrote: Sat Jan 18, 2020 9:19 am 1yr, 3yr, 5yr, 10 yr results for 3 fund portfolio through 2019?

Are these readily available for several different asset allocations?

Thanks.
You can use Portfolio Visualizer to look at total returns (with dividends reinvested) of any allocation of the three-fund portfolio over any time period.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: The Three-Fund Portfolio

Post by geeser »

Thanks. Great tool.
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

Martinelli
martinelli wrote: Are these (returns) readily available for several different asset allocations?
Martinelli:

Yes, the returns for different 3-Fund Portfolio allocations are available on the Financial Page blog:

Three-Fund Portfolio 2019 Update

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: The Three-Fund Portfolio

Post by abuss368 »

Taylor Larimore wrote: Sat Jan 18, 2020 1:18 pm Martinelli
martinelli wrote: Are these (returns) readily available for several different asset allocations?
Martinelli:

Yes, the returns for different 3-Fund Portfolio allocations are available on the Financial Page blog:

Three-Fund Portfolio 2019 Update

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thanks Taylor for sharing this. The Three Fund Portfolio is a winner hands down. Investors will never be below average.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by geeser »

Thanks Taylor,
Very helpful, concise information.
Just what I was looking for.
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Re: The Three-Fund Portfolio

Post by abuss368 »

martiniii wrote: Sat Jan 18, 2020 3:52 pm Thanks Taylor,
Very helpful, concise information.
Just what I was looking for.
martiniii
Do you invest in the Three Fund Portfolio?
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by geeser »

Getting ready to leave a long time friend/advisor who is with a brokerage house and has me in
7 actively managed funds. Results overall far worse than what Taylor has demonstrated.
I’m looking for simplicity and I no longer want to pay the fees I’ve been paying.
martiniii
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Re: The Three-Fund Portfolio

Post by abuss368 »

martiniii wrote: Sat Jan 18, 2020 4:38 pm Getting ready to leave a long time friend/advisor who is with a brokerage house and has me in
7 actively managed funds. Results overall far worse than what Taylor has demonstrated.
I’m looking for simplicity and I no longer want to pay the fees I’ve been paying.
martiniii
Welcome to the forum and the Three Fund Portfolio. That is incredible but unfortunately belivable. We recently moved to the Two Fund Portfolio by Jack Bogle. The Three Fund Portfolio is an excellent choice. Either is a win win strategy. You will be much better off than an advisor who has you in 7 recommended funds.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by geeser »

Yes, thanks. This forum is a wonderful resource.
I will get more detailed in the personal investment threads and see what people think.
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Re: The Three-Fund Portfolio

Post by papahurls1 »

dbr wrote: Fri Mar 23, 2018 8:30 am
Taylor Larimore wrote: Thu Mar 22, 2018 10:19 pm
papahurls1 wrote: Wed Mar 21, 2018 10:23 pm Taylor and all,
I have a quick question of you.
Despite the obvious fee difference, what is your opinion of using the Vanguard ETF's as opposed to the TIF's?
I guess that I am confused when Jack says that he doesn't like ETF's. Does he mean ones other than the Vanguard ones?
Sorry, for what might be a stupid question.


VBFMX vs. BND
VTSMX vs. VTI
VGTSX vs. VXUS
papahurls1:

Welcome to the Bogleheads Forum!

Whether to use Traditional Mutual Funds or ETFs is not a "stupid" question. There is usually little difference which makes it hard to reach a decision. Fortunately, it is way down on the list of what's important.

I agree with Mr. Bogle who wrote in "The Little Book of Common Sense Investing": "There is nothing wrong with investing in those indexed ETFs that track the broad stock market, just so long as you don't trade them."

Best wishes.
Taylor
I would add, by the way, that I don't really understand why having an ETF leads the investor to become a trader any more than he might be with a mutual fund. I thought the trading issue had to do with speculators trading by the minute all day long or even intraday. Jack doesn't want that happening on the market but it has nothing at all to do with what an investor here would do. The objection simply does not apply. I do understand that Jack might be concerned that a person not get caught up in some sort of distorted market moves in thinly traded concentrated ETFs, but that also should not apply to ETF share classes of diversified index funds as we hold here. It is a case of taking soundbites and ending up with distorted ideas of what the advice is.
Taylor,
I haven't had the opportunity to send thanks your way, but I did transfer my companies distribution to about 85% VTI and 15% VXUS back in March of 2018 after I retired. I already had a small amount in BND and did not add to it. Well, the overall returns have been phenomenal and have remained untouched. I adjusted my IRA's to reflect the 3 fund portfolio as well. I am sleeping very well at night. My wife is wondering why her accounts are doing so well, as well. Thanks again for the book and for what you do on this forum. Pat
Papahurls1 - Everyday is Saturday!
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Re: The Three-Fund Portfolio

Post by oldzey »

Happy Birthday, Taylor!

The overview of Three-Fund Portfolio as listed in the first post of this thread is incredible. You've done a superb job keeping it updated!

Best,
oldzey
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Re: The Three-Fund Portfolio

Post by Taylor Larimore »

oldzey wrote: Sat Jan 25, 2020 1:30 pm Happy Birthday, Taylor!

The overview of Three-Fund Portfolio as listed in the first post of this thread is incredible. You've done a superb job keeping it updated!

Best,
oldzey
oldzey:

I made the original post in this thread 8-years ago. It has stood the test-of-time which makes "updating" easy.

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

Post by abuss368 »

oldzey wrote: Sat Jan 25, 2020 1:30 pm Happy Birthday, Taylor!

The overview of Three-Fund Portfolio as listed in the first post of this thread is incredible. You've done a superb job keeping it updated!

Best,
oldzey
Hi oldzey -

The Three Fund Portfolio is an excellent strategy that will never be below average.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: The Three-Fund Portfolio

Post by BirdsE »

EXCELLENT Presentation!!! All investors should read this whole reply .
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Re: The Three-Fund Portfolio

Post by fortyofforty »

As efficient as the Total Stock Market and Total International Stock Market funds are, I don't think anyone can argue with a straight face (and clear conscience) that there is any reason for a large cap, blend, actively managed equity fund in your portfolio. Unless you are specifically targeting a market segment, such as value, or tech, or small cap value, choosing the entire market is the wisest default position. Bravo to Taylor Larimore for advocating this approach so effectively (and a tip of the cap to Dr. William Bernstein for his "If You Can" paper).
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Re: The Three-Fund Portfolio

Post by Diver4242 »

In implementing the 2 or 3 fund portfolio, does it matter if they're in separate IRA accounts or all within one?

What about a scenario where someone is just retiring and has 5 years of expenses in VMMXX (Vanguard Prime Money Market), 5 years worth in VBTLX, and everything else (10 years and out) in VTSAX? I guess that's a bucket approach, where there is rebalancing to feed each bucket every so often. Is that a viable approach to protect against a long recession or other market swings? Can those all be within one IRA?
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Re: The Three-Fund Portfolio

Post by Triple digit golfer »

Diver4242 wrote: Sat Feb 01, 2020 12:18 pm In implementing the 2 or 3 fund portfolio, does it matter if they're in separate IRA accounts or all within one?

What about a scenario where someone is just retiring and has 5 years of expenses in VMMXX (Vanguard Prime Money Market), 5 years worth in VBTLX, and everything else (10 years and out) in VTSAX? I guess that's a bucket approach, where there is rebalancing to feed each bucket every so often. Is that a viable approach to protect against a long recession or other market swings? Can those all be within one IRA?
Separate is fine. Doesn't make a difference if all have the same tax treatment, such as all traditional or all Roth IRAs.

If you have a taxable account, then you should consider tax efficiency.

We are in the accumulation phase and have traditional, Roth, and taxable accounts. We hold bonds only in traditional accounts, and equities in all three account types. We have a couple months of expenses in a regular cash savings account for simplicity.
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Re: The Three-Fund Portfolio

Post by abuss368 »

Diver4242 wrote: Sat Feb 01, 2020 12:18 pm In implementing the 2 or 3 fund portfolio, does it matter if they're in separate IRA accounts or all within one?

What about a scenario where someone is just retiring and has 5 years of expenses in VMMXX (Vanguard Prime Money Market), 5 years worth in VBTLX, and everything else (10 years and out) in VTSAX? I guess that's a bucket approach, where there is rebalancing to feed each bucket every so often. Is that a viable approach to protect against a long recession or other market swings? Can those all be within one IRA?
You can place Total Stock in any account as it very low tax cost. Total Bond is best in a tax advantaged account such as an IRA. If bonds are needed in taxable, perhaps Intermediate Tax Exempt (based on personal tax situation).
John C. Bogle: “Simplicity is the master key to financial success."
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