Jack Bogle - Two Fund Portfolio

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anon_investor
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Re: Jack Bogle - Two Fund Portfolio

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jco wrote: Fri Jan 31, 2020 9:51 pm
abuss368 wrote: Fri Jan 31, 2020 9:35 pm I am always surprised (and have written about this many times) at how folks get hung up on Warren Buffett's asset allocation of 90% S&P 500 and 10% Bonds. To me, that is irrelevant. The HUGE thing is considering all the investment possibilities on the planet, he recommends a Two Fund Portfolio of S&P 500 and Bonds.
Why did Warren Buffett recommend the S&P 500 over a Total U.S. Market fund like VTSAX? Or another large-cap blend like VLCAX?
The performance of those 3 index funds are all substantially similar. I would feel comfortable tax loss harvesting using any combo of those 3 funds.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

anon_investor wrote: Fri Jan 31, 2020 11:25 pm
jco wrote: Fri Jan 31, 2020 9:51 pm
abuss368 wrote: Fri Jan 31, 2020 9:35 pm I am always surprised (and have written about this many times) at how folks get hung up on Warren Buffett's asset allocation of 90% S&P 500 and 10% Bonds. To me, that is irrelevant. The HUGE thing is considering all the investment possibilities on the planet, he recommends a Two Fund Portfolio of S&P 500 and Bonds.
Why did Warren Buffett recommend the S&P 500 over a Total U.S. Market fund like VTSAX? Or another large-cap blend like VLCAX?
The performance of those 3 index funds are all substantially similar. I would feel comfortable tax loss harvesting using any combo of those 3 funds.
I would agree.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two and Three Fund Simple Portfolios

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Taylor Larimore wrote: Fri Jan 31, 2020 7:42 pm Abuss368:

Every investor should read your post, above. I remember making the same mistakes you made: Thinking that I could beat the market with individual stocks and learning the hard way that the professional's on the other side of my stock trades were a lot smarter than I am.

We moved to Vanguard in 1986, the first thing I did was buy 15 low-cost funds thinking we were more diversified. It took me awhile to understand that 2 or 3 total market index funds were more diversified, safer and much cheaper than my potpourri of 15 funds (some managed, ouch).

I wonder how many other Bogleheads learned the hard way -- as we did.

Best Wishes.
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success. -- We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity."
I started out with 100% individual stocks :oops: , selected by my full service broker at a well known national brokerage firm.

Big mistake. That was definitely the hard way.

Now we use a few Vanguard index funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: Jack Bogle - Two and Three Fund Simple Portfolios

Post by abuss368 »

ruralavalon wrote: Sat Feb 01, 2020 9:42 am
I started out with 100% individual stocks :oops: , selected by my full service broker at a well known national brokerage firm.

Big mistake. That was definitely the hard way.

Now we use a few Vanguard index funds.
Been there. Done that. 100% individual stocks. What is a bond again?

Moved to Vanguard and invested in 15 - 18 mutual funds both index and active as noted in my opening post. Moved to a few over time.

Now simply the Two Fund Portfolio by Jack Bogle.

What a journey!
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Jack Bogle's Words of Wisdom (2010):
"But those who believe--as I do--that fundamentals such as earning and dividends matter, and that, in the fullness of time, some semblance of historic norms will prevail, should consider at least some modest leaning against the powerful wind that is driving the higher returns in this great bull market."
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

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abuss368 wrote: Wed Feb 05, 2020 11:11 am Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
I believe this is a good quote but some can interpret that haystack is the "whole world market" and not just the "US"
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

1789 wrote: Fri Feb 07, 2020 2:17 pm
abuss368 wrote: Wed Feb 05, 2020 11:11 am Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
I believe this is a good quote but some can interpret that haystack is the "whole world market" and not just the "US"
I can see your point.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by columbia »

1789 wrote: Fri Feb 07, 2020 2:17 pm
abuss368 wrote: Wed Feb 05, 2020 11:11 am Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
I believe this is a good quote but some can interpret that haystack is the "whole world market" and not just the "US"
Absolutely. How one defines the haystack is a matter of personal preference. There’s no predictable destiny associated with any of the choices on that continuum, so choose a mix of US and international (if desired) at low costs and stick with it.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

columbia wrote: Fri Feb 07, 2020 7:42 pm
1789 wrote: Fri Feb 07, 2020 2:17 pm
abuss368 wrote: Wed Feb 05, 2020 11:11 am Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
I believe this is a good quote but some can interpret that haystack is the "whole world market" and not just the "US"
Absolutely. How one defines the haystack is a matter of personal preference. There’s no predictable destiny associated with any of the choices on that continuum, so choose a mix of US and international (if desired) at low costs and stick with it.
Indeed. Do you invest in the Two Fund or Three Fund Portfolio?
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

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abuss368 wrote: Fri Feb 07, 2020 7:44 pm
columbia wrote: Fri Feb 07, 2020 7:42 pm
1789 wrote: Fri Feb 07, 2020 2:17 pm
abuss368 wrote: Wed Feb 05, 2020 11:11 am Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
I believe this is a good quote but some can interpret that haystack is the "whole world market" and not just the "US"
Absolutely. How one defines the haystack is a matter of personal preference. There’s no predictable destiny associated with any of the choices on that continuum, so choose a mix of US and international (if desired) at low costs and stick with it.
Indeed. Do you invest in the Two Fund or Three Fund Portfolio?
No international for me.
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Re: Jack Bogle - Two Fund Portfolio

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What do you guys think of Inflation protected index fund? How about splitting bond allocation say half in Total Bond Index, half in Short Term Bond Index - to lower duration. Or am I just complicating things
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Re: Jack Bogle - Two Fund Portfolio

Post by PickitPaul »

I have a close to a Two Fund Port. in same funds in IRA & Taxable accounts. What makes it close to a two fund port. is an extra bond index - a short term treasury ETF in addition to the Total Bond Market Index. (50/50 in each) I guess they are called mirrored between IRA & Taxable accounts.

If tIRA has Total Stock Market & Total Bond Market Index funds, and Taxable regular account has same Two Fund Portfolio in same exact funds, if I were to sell TSM in the IRA to buy Total Bond Index in IRA - then in Taxable account sell Total Bond Index & buy TStock Index in exact same fund indexes. Would this be a wash sale? Just buy the Short Term Treasury ETF to avoid wash sale?
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Re: Jack Bogle - Two Fund Portfolio

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PickitPaul wrote: Sat Feb 08, 2020 1:02 am What do you guys think of Inflation protected index fund? How about splitting bond allocation say half in Total Bond Index, half in Short Term Bond Index - to lower duration. Or am I just complicating things
I think having TIPS is fine. But remember that total bonds includes bonds at various durations, so I don't think a separate bond fund for short term is needed. If you have only tax advantaged accounts, total stock market and total bond would be enough.If you have a taxable account and need to allocate some bonds there, something tax efficient needed ---> like tax exempt intermediate term treasury fund.
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Re: Jack Bogle - Two Fund Portfolio

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1789 wrote: Sat Feb 08, 2020 1:56 am
PickitPaul wrote: Sat Feb 08, 2020 1:02 am What do you guys think of Inflation protected index fund? How about splitting bond allocation say half in Total Bond Index, half in Short Term Bond Index - to lower duration. Or am I just complicating things
I think having TIPS is fine. But remember that total bonds includes bonds at various durations, so I don't think a separate bond fund for short term is needed. If you have only tax advantaged accounts, total stock market and total bond would be enough.If you have a taxable account and need to allocate some bonds there, something tax efficient needed ---> like tax exempt intermediate term treasury municipal fund.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

PickitPaul wrote: Sat Feb 08, 2020 1:31 am I have a close to a Two Fund Port. in same funds in IRA & Taxable accounts. What makes it close to a two fund port. is an extra bond index - a short term treasury ETF in addition to the Total Bond Market Index. (50/50 in each) I guess they are called mirrored between IRA & Taxable accounts.

If tIRA has Total Stock Market & Total Bond Market Index funds, and Taxable regular account has same Two Fund Portfolio in same exact funds, if I were to sell TSM in the IRA to buy Total Bond Index in IRA - then in Taxable account sell Total Bond Index & buy TStock Index in exact same fund indexes. Would this be a wash sale? Just buy the Short Term Treasury ETF to avoid wash sale?
Total Bond Index includes the market weight of Treasury bonds. You could consider simplifying even more and consolidating the bond funds.

Jack Bogle reminds us "Simplicity is the master key to financial success."
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

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I am going to combine short term into total bond index - makes sense if the total index has it covered.

Could someone comment on the second question about mirrored funds in tIRA & Taxable accounts - if sell in one & buy same funds will this be wash sale? If so, how do you "tax loss harvest" with 2 funds?
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Re: Jack Bogle - Two Fund Portfolio

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PickitPaul wrote: Sat Feb 08, 2020 2:44 pm I am going to combine short term into total bond index - makes sense if the total index has it covered.

Could someone comment on the second question about mirrored funds in tIRA & Taxable accounts - if sell in one & buy same funds will this be wash sale? If so, how do you "tax loss harvest" with 2 funds?
It could be a wash sale. Selling at a loss in a taxable account and buying in a tax advantaged in 30 days would be a wash sale. You could hold Total Stock and Total Bond in tax advantage and Total Stock and Intermediate Term Tax Exempt in taxable (depending in individual tax situation).

I would simply wait 30 days. Over the long term will have no impact. You do need to watch if you are close to a dividend payout that auto magically reinvests in those 30 days.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by PickitPaul »

Thank you for the reply. I have the dividends sent to checking acct., turned off auto dividend re-investment in taxable, but left it on in tIRA.

As for the bond fund in Taxable - i'm in the 22% Federal & about (I think 4%) NY. So I don't think in a high enough bracket to make a difference if not a tax free bond fund, probably keep the Total Bond Index in taxable.
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Re: Jack Bogle - Two Fund Portfolio

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Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
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Re: Jack Bogle - Two Fund Portfolio

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fortyofforty wrote: Sun Feb 09, 2020 9:05 am Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
Agreed, 5% international bond is not going to make a substantial difference. I would agree with this great fund selection if the reason to hold it is simplicity. What I don’t like is just 32% international stocks when VTSAX covers 48% of total allocation, but that’s again personal preference. I like pure three fund portfolio and it’s 20% allocation to international stocks and if I were to to include international I would use that one to trim international exposure a bit down.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

1789 wrote: Sun Feb 09, 2020 1:16 pm
fortyofforty wrote: Sun Feb 09, 2020 9:05 am Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
Agreed, 5% international bond is not going to make a substantial difference. I would agree with this great fund selection if the reason to hold it is simplicity. What I don’t like is just 32% international stocks when VTSAX covers 48% of total allocation, but that’s again personal preference. I like pure three fund portfolio and it’s 20% allocation to international stocks and if I were to to include international I would use that one to trim international exposure a bit down.
Vanguard is using an allocation of 40% of stocks to Total International.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by fortyofforty »

abuss368 wrote: Sun Feb 09, 2020 7:40 pm
1789 wrote: Sun Feb 09, 2020 1:16 pm
fortyofforty wrote: Sun Feb 09, 2020 9:05 am Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
Agreed, 5% international bond is not going to make a substantial difference. I would agree with this great fund selection if the reason to hold it is simplicity. What I don’t like is just 32% international stocks when VTSAX covers 48% of total allocation, but that’s again personal preference. I like pure three fund portfolio and it’s 20% allocation to international stocks and if I were to to include international I would use that one to trim international exposure a bit down.
Vanguard is using an allocation of 40% of stocks to Total International.
Yes, they are quite adamant about that higher (than before) allocation. I would rather it be around 20% (as Jack and Taylor suggested) but Vanguard pays a lot of smart people to make those decisions, so I will trust their judgement.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

fortyofforty wrote: Sun Feb 09, 2020 8:10 pm
abuss368 wrote: Sun Feb 09, 2020 7:40 pm
1789 wrote: Sun Feb 09, 2020 1:16 pm
fortyofforty wrote: Sun Feb 09, 2020 9:05 am Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
Agreed, 5% international bond is not going to make a substantial difference. I would agree with this great fund selection if the reason to hold it is simplicity. What I don’t like is just 32% international stocks when VTSAX covers 48% of total allocation, but that’s again personal preference. I like pure three fund portfolio and it’s 20% allocation to international stocks and if I were to to include international I would use that one to trim international exposure a bit down.
Vanguard is using an allocation of 40% of stocks to Total International.
Yes, they are quite adamant about that higher (than before) allocation. I would rather it be around 20% (as Jack and Taylor suggested) but Vanguard pays a lot of smart people to make those decisions, so I will trust their judgement.
Jack Bogle has always said international is not needed. He has been consistent in that message. He also said for those so inclined he would say no more than 20% of stocks in an index fund.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by 1789 »

abuss368 wrote: Sun Feb 09, 2020 7:40 pm
1789 wrote: Sun Feb 09, 2020 1:16 pm
fortyofforty wrote: Sun Feb 09, 2020 9:05 am Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
Agreed, 5% international bond is not going to make a substantial difference. I would agree with this great fund selection if the reason to hold it is simplicity. What I don’t like is just 32% international stocks when VTSAX covers 48% of total allocation, but that’s again personal preference. I like pure three fund portfolio and it’s 20% allocation to international stocks and if I were to to include international I would use that one to trim international exposure a bit down.
Vanguard is using an allocation of 40% of stocks to Total International.
Sounds good. That matches to my numbers above (40/100)*80 = 32%. It is too much,imo
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

1789 wrote: Sun Feb 09, 2020 8:18 pm
abuss368 wrote: Sun Feb 09, 2020 7:40 pm
1789 wrote: Sun Feb 09, 2020 1:16 pm
fortyofforty wrote: Sun Feb 09, 2020 9:05 am Really simplifying into LifeStrategy Growth. Closer and closer. I hope the large portion of international equities doesn't hurt me too badly. I'm not worried at all about the international bonds.
Agreed, 5% international bond is not going to make a substantial difference. I would agree with this great fund selection if the reason to hold it is simplicity. What I don’t like is just 32% international stocks when VTSAX covers 48% of total allocation, but that’s again personal preference. I like pure three fund portfolio and it’s 20% allocation to international stocks and if I were to to include international I would use that one to trim international exposure a bit down.
Vanguard is using an allocation of 40% of stocks to Total International.
Sounds good. That matches to my numbers above (40/100)*80 = 32%. It is too much,imo
I agree. Jack's Bogle's calculation that since 1994 or so international has returned a cumulative 280% while US has returned over 700% (as of a few years ago - so it is probably higher and a wider performance gap now) is hard to wrap your head around!
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

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Clive wrote: Thu May 26, 2016 12:08 pm
Quark wrote:Standard advice is to focus on total return, not yield. Standard advice is also to rebalance. Rebalancing to 90/10 is not easy if stocks halve in value.

After five years of selling bonds in order to avoid selling stocks, you'd have no bonds left. 100% equities is rather aggressive. If a downturn continued, you'd have to sell stocks at depressed prices.
Buffett suggest enough in cash/bonds to feel comfortable and the rest in stocks.

If your comfort level is 20 years of living expenses and that's 40% of the total (2% withdrawal rate) then you start with 60/40 stock/bonds and spend 2%/year to drawdown bonds to zero over 20 years leaving 100% stock. Average 80/20 stock/bond. No rebalancing involved. Prospects for growth from stocks over 20 years are reasonable especially when reinvesting dividends. If 1% x 20 years is enough then start with 80/20, end at 100/0, average 90/10 which is the camp Buffett is in.
It should be added that Buffett likely was thinking cash and near-cash assets. Intermediate and long term bonds have a significant level of volatility. He likely targets short term bonds because they behave like cash, but have just enough interest to fight inflation. Peter Bernstein suggested a 75/25 stock/cash alternative to the 60/40 stock/bond portfolio because cash has lower volatility than stocks.

If in general the average bear market lasts about half a decade, then a 5% withdraw rate would require 25% cash. A 4% withdraw rate would move one towards 20% in cash. A 3% withdraw rate would move the cash allocation towards 15%. If you were so incredibly wealthy that you could live on a 2% withdraw from your portfolio annually, then the amount that would be needed would be 10% in cash and 90% in stocks.
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Re: Jack Bogle - Two Fund Portfolio

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I actually like 10% cash and 90% stocks but cash cant be re balanced. Anyway i still don't like bonds and will hold on to cash a while. I guess having both cash and bonds would be better.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Benjamin Buffett wrote: Tue Feb 11, 2020 6:11 pm
Clive wrote: Thu May 26, 2016 12:08 pm
Quark wrote:Standard advice is to focus on total return, not yield. Standard advice is also to rebalance. Rebalancing to 90/10 is not easy if stocks halve in value.

After five years of selling bonds in order to avoid selling stocks, you'd have no bonds left. 100% equities is rather aggressive. If a downturn continued, you'd have to sell stocks at depressed prices.
Buffett suggest enough in cash/bonds to feel comfortable and the rest in stocks.

If your comfort level is 20 years of living expenses and that's 40% of the total (2% withdrawal rate) then you start with 60/40 stock/bonds and spend 2%/year to drawdown bonds to zero over 20 years leaving 100% stock. Average 80/20 stock/bond. No rebalancing involved. Prospects for growth from stocks over 20 years are reasonable especially when reinvesting dividends. If 1% x 20 years is enough then start with 80/20, end at 100/0, average 90/10 which is the camp Buffett is in.
It should be added that Buffett likely was thinking cash and near-cash assets. Intermediate and long term bonds have a significant level of volatility. He likely targets short term bonds because they behave like cash, but have just enough interest to fight inflation. Peter Bernstein suggested a 75/25 stock/cash alternative to the 60/40 stock/bond portfolio because cash has lower volatility than stocks.

If in general the average bear market lasts about half a decade, then a 5% withdraw rate would require 25% cash. A 4% withdraw rate would move one towards 20% in cash. A 3% withdraw rate would move the cash allocation towards 15%. If you were so incredibly wealthy that you could live on a 2% withdraw from your portfolio annually, then the amount that would be needed would be 10% in cash and 90% in stocks.
I believe that is correct in terms of cash or short term bonds. I am not aware Mr. Buffett has recommended intermediate or long term bonds.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Jack Bogle reminds us:
"I favor the all-market index index fund as the best choice for most investors."
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

abuss368 wrote: Tue Feb 11, 2020 8:03 pm
Benjamin Buffett wrote: Tue Feb 11, 2020 6:11 pm
Clive wrote: Thu May 26, 2016 12:08 pm
Quark wrote:Standard advice is to focus on total return, not yield. Standard advice is also to rebalance. Rebalancing to 90/10 is not easy if stocks halve in value.

After five years of selling bonds in order to avoid selling stocks, you'd have no bonds left. 100% equities is rather aggressive. If a downturn continued, you'd have to sell stocks at depressed prices.
Buffett suggest enough in cash/bonds to feel comfortable and the rest in stocks.

If your comfort level is 20 years of living expenses and that's 40% of the total (2% withdrawal rate) then you start with 60/40 stock/bonds and spend 2%/year to drawdown bonds to zero over 20 years leaving 100% stock. Average 80/20 stock/bond. No rebalancing involved. Prospects for growth from stocks over 20 years are reasonable especially when reinvesting dividends. If 1% x 20 years is enough then start with 80/20, end at 100/0, average 90/10 which is the camp Buffett is in.
It should be added that Buffett likely was thinking cash and near-cash assets. Intermediate and long term bonds have a significant level of volatility. He likely targets short term bonds because they behave like cash, but have just enough interest to fight inflation. Peter Bernstein suggested a 75/25 stock/cash alternative to the 60/40 stock/bond portfolio because cash has lower volatility than stocks.

If in general the average bear market lasts about half a decade, then a 5% withdraw rate would require 25% cash. A 4% withdraw rate would move one towards 20% in cash. A 3% withdraw rate would move the cash allocation towards 15%. If you were so incredibly wealthy that you could live on a 2% withdraw from your portfolio annually, then the amount that would be needed would be 10% in cash and 90% in stocks.
I believe that is correct in terms of cash or short term bonds. I am not aware Mr. Buffett has recommended intermediate or long term bonds.
There is a youtube video of Warren Buffet saying in a shareholder meeting that long term bonds are a terrible investment.
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Re: Jack Bogle - Two Fund Portfolio

Post by hagridshut »

Is the ultimate "total haystack" portfolio VT + BNDW?
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Re: Jack Bogle - Two Fund Portfolio

Post by columbia »

anon_investor wrote: Tue Feb 11, 2020 9:30 pm
abuss368 wrote: Tue Feb 11, 2020 8:03 pm
Benjamin Buffett wrote: Tue Feb 11, 2020 6:11 pm
Clive wrote: Thu May 26, 2016 12:08 pm
Quark wrote:Standard advice is to focus on total return, not yield. Standard advice is also to rebalance. Rebalancing to 90/10 is not easy if stocks halve in value.

After five years of selling bonds in order to avoid selling stocks, you'd have no bonds left. 100% equities is rather aggressive. If a downturn continued, you'd have to sell stocks at depressed prices.
Buffett suggest enough in cash/bonds to feel comfortable and the rest in stocks.

If your comfort level is 20 years of living expenses and that's 40% of the total (2% withdrawal rate) then you start with 60/40 stock/bonds and spend 2%/year to drawdown bonds to zero over 20 years leaving 100% stock. Average 80/20 stock/bond. No rebalancing involved. Prospects for growth from stocks over 20 years are reasonable especially when reinvesting dividends. If 1% x 20 years is enough then start with 80/20, end at 100/0, average 90/10 which is the camp Buffett is in.
It should be added that Buffett likely was thinking cash and near-cash assets. Intermediate and long term bonds have a significant level of volatility. He likely targets short term bonds because they behave like cash, but have just enough interest to fight inflation. Peter Bernstein suggested a 75/25 stock/cash alternative to the 60/40 stock/bond portfolio because cash has lower volatility than stocks.

If in general the average bear market lasts about half a decade, then a 5% withdraw rate would require 25% cash. A 4% withdraw rate would move one towards 20% in cash. A 3% withdraw rate would move the cash allocation towards 15%. If you were so incredibly wealthy that you could live on a 2% withdraw from your portfolio annually, then the amount that would be needed would be 10% in cash and 90% in stocks.
I believe that is correct in terms of cash or short term bonds. I am not aware Mr. Buffett has recommended intermediate or long term bonds.
There is a youtube video of Warren Buffet saying in a shareholder meeting that long term bonds are a terrible investment.
I think we can guess his view on STRIPS. :)
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Excellent video interview with Jack Bogle describing the risks of investing in emerging markets:

https://www.morningstar.com/articles/67 ... r-a-reason
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Re: Jack Bogle - Two Fund Portfolio

Post by Benjamin Buffett »

1789 wrote: Tue Feb 11, 2020 6:18 pm I actually like 10% cash and 90% stocks but cash cant be re balanced. Anyway i still don't like bonds and will hold on to cash a while. I guess having both cash and bonds would be better.
Cash, just like any other asset, can be re-balanced. Whenever the cash portion of the portfolio falls in value to below its target percentage, or rises above(or conversely one could look at it as the stocks that are really the ones doing the changing in value) one simply adjusts their contributions(or withdraws) or buys/sells assets to bring them back in alignment with their target percentages.

Example portfolio:
%20k Cash
$80k Vanguard Total Stock Market.................Lets say this appreciates in value to $85k. To rebalance one moves more from stocks into cash to bring both assets back in alignment.

$20K Cash
$80 Vanguard Total Stock Market...................Lets say this falls in value by about half. To rebalance we buy more stocks with the cash and return the asset to its target portfolio percentage. So stocks become $48K(instead of 40K) and cash becomes, after rebalancing, $12K.


There are plenty of good reasons to decide to have intermediate or long term bonds in a portfolio, but one does not need bonds to rebalance a portfolio. Rebalancing can take place in any portfolio of any two different assets. I could, if I wanted, have a portfolio of direct real estate and 20% gold(or silver, or tulips or bitcoin or anything else of my preference) and still rebalance it as it fluctuates with market values, no bonds required.

The advantages of a bondless barbell portfolio are that it can be higher in equities, because cash, while it wont grow much, it also wont fall that much either, so you can stabilize a portfolio with less of them than one would with bonds.

The advantages of a portfolio with bonds is that it may have higher returns should stocks and bonds be moving in the same direction. Some market forces put powerful tailwinds that help push both stocks and bonds to higher valuations(consistently falling interest rates). Consistently and strongly growing interest rates would make existing bonds worth less than the next year's bonds issued at a higher interest rate, and higher interest rates can, when high enough make the more risky stocks less appealing.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Benjamin Buffett wrote: Wed Feb 12, 2020 3:15 pm
1789 wrote: Tue Feb 11, 2020 6:18 pm I actually like 10% cash and 90% stocks but cash cant be re balanced. Anyway i still don't like bonds and will hold on to cash a while. I guess having both cash and bonds would be better.
Cash, just like any other asset, can be re-balanced. Whenever the cash portion of the portfolio falls in value to below its target percentage, or rises above(or conversely one could look at it as the stocks that are really the ones doing the changing in value) one simply adjusts their contributions(or withdraws) or buys/sells assets to bring them back in alignment with their target percentages.

Example portfolio:
%20k Cash
$80k Vanguard Total Stock Market.................Lets say this appreciates in value to $85k. To rebalance one moves more from stocks into cash to bring both assets back in alignment.

$20K Cash
$80 Vanguard Total Stock Market...................Lets say this falls in value by about half. To rebalance we buy more stocks with the cash and return the asset to its target portfolio percentage. So stocks become $48K(instead of 40K) and cash becomes, after rebalancing, $12K.


There are plenty of good reasons to decide to have intermediate or long term bonds in a portfolio, but one does not need bonds to rebalance a portfolio. Rebalancing can take place in any portfolio of any two different assets. I could, if I wanted, have a portfolio of direct real estate and 20% gold(or silver, or tulips or bitcoin or anything else of my preference) and still rebalance it as it fluctuates with market values, no bonds required.

The advantages of a bondless barbell portfolio are that it can be higher in equities, because cash, while it wont grow much, it also wont fall that much either, so you can stabilize a portfolio with less of them than one would with bonds.

The advantages of a portfolio with bonds is that it may have higher returns should stocks and bonds be moving in the same direction. Some market forces put powerful tailwinds that help push both stocks and bonds to higher valuations(consistently falling interest rates). Consistently and strongly growing interest rates would make existing bonds worth less than the next year's bonds issued at a higher interest rate, and higher interest rates can, when high enough make the more risky stocks less appealing.
So a VTSAX/VMMXX portfolio?
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Re: Jack Bogle - Two Fund Portfolio

Post by steve roy »

abuss368 wrote: Fri Feb 07, 2020 6:59 pm
1789 wrote: Fri Feb 07, 2020 2:17 pm
abuss368 wrote: Wed Feb 05, 2020 11:11 am Jack Bogle's Words of Wisdom:

"Don't look for the needle. Buy the haystack."
I believe this is a good quote but some can interpret that haystack is the "whole world market" and not just the "US"
I can see your point.
Both total word or total domestic will work.
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Re: Jack Bogle - Two Fund Portfolio

Post by 1789 »

Benjamin Buffett wrote: Wed Feb 12, 2020 3:15 pm
1789 wrote: Tue Feb 11, 2020 6:18 pm I actually like 10% cash and 90% stocks but cash cant be re balanced. Anyway i still don't like bonds and will hold on to cash a while. I guess having both cash and bonds would be better.
Cash, just like any other asset, can be re-balanced. Whenever the cash portion of the portfolio falls in value to below its target percentage, or rises above(or conversely one could look at it as the stocks that are really the ones doing the changing in value) one simply adjusts their contributions(or withdraws) or buys/sells assets to bring them back in alignment with their target percentages.

Example portfolio:
%20k Cash
$80k Vanguard Total Stock Market.................Lets say this appreciates in value to $85k. To rebalance one moves more from stocks into cash to bring both assets back in alignment.

$20K Cash
$80 Vanguard Total Stock Market...................Lets say this falls in value by about half. To rebalance we buy more stocks with the cash and return the asset to its target portfolio percentage. So stocks become $48K(instead of 40K) and cash becomes, after rebalancing, $12K.


There are plenty of good reasons to decide to have intermediate or long term bonds in a portfolio, but one does not need bonds to rebalance a portfolio. Rebalancing can take place in any portfolio of any two different assets. I could, if I wanted, have a portfolio of direct real estate and 20% gold(or silver, or tulips or bitcoin or anything else of my preference) and still rebalance it as it fluctuates with market values, no bonds required.

The advantages of a bondless barbell portfolio are that it can be higher in equities, because cash, while it wont grow much, it also wont fall that much either, so you can stabilize a portfolio with less of them than one would with bonds.

The advantages of a portfolio with bonds is that it may have higher returns should stocks and bonds be moving in the same direction. Some market forces put powerful tailwinds that help push both stocks and bonds to higher valuations(consistently falling interest rates). Consistently and strongly growing interest rates would make existing bonds worth less than the next year's bonds issued at a higher interest rate, and higher interest rates can, when high enough make the more risky stocks less appealing.
Interesting approach. Thank you for your comments
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Re: Jack Bogle - Two Fund Portfolio

Post by 1789 »

anon_investor wrote: Wed Feb 12, 2020 3:17 pm
Benjamin Buffett wrote: Wed Feb 12, 2020 3:15 pm
1789 wrote: Tue Feb 11, 2020 6:18 pm I actually like 10% cash and 90% stocks but cash cant be re balanced. Anyway i still don't like bonds and will hold on to cash a while. I guess having both cash and bonds would be better.
Cash, just like any other asset, can be re-balanced. Whenever the cash portion of the portfolio falls in value to below its target percentage, or rises above(or conversely one could look at it as the stocks that are really the ones doing the changing in value) one simply adjusts their contributions(or withdraws) or buys/sells assets to bring them back in alignment with their target percentages.

Example portfolio:
%20k Cash
$80k Vanguard Total Stock Market.................Lets say this appreciates in value to $85k. To rebalance one moves more from stocks into cash to bring both assets back in alignment.

$20K Cash
$80 Vanguard Total Stock Market...................Lets say this falls in value by about half. To rebalance we buy more stocks with the cash and return the asset to its target portfolio percentage. So stocks become $48K(instead of 40K) and cash becomes, after rebalancing, $12K.


There are plenty of good reasons to decide to have intermediate or long term bonds in a portfolio, but one does not need bonds to rebalance a portfolio. Rebalancing can take place in any portfolio of any two different assets. I could, if I wanted, have a portfolio of direct real estate and 20% gold(or silver, or tulips or bitcoin or anything else of my preference) and still rebalance it as it fluctuates with market values, no bonds required.

The advantages of a bondless barbell portfolio are that it can be higher in equities, because cash, while it wont grow much, it also wont fall that much either, so you can stabilize a portfolio with less of them than one would with bonds.

The advantages of a portfolio with bonds is that it may have higher returns should stocks and bonds be moving in the same direction. Some market forces put powerful tailwinds that help push both stocks and bonds to higher valuations(consistently falling interest rates). Consistently and strongly growing interest rates would make existing bonds worth less than the next year's bonds issued at a higher interest rate, and higher interest rates can, when high enough make the more risky stocks less appealing.
So a VTSAX/VMMXX portfolio?
anon_investor

Yes thats exactly what we have.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Jack Bogle wrote in his Little Book of Common Sense Investing (page 200, Second Edition):
"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."
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Jack Bogle's Words of Wisdom:
“This business is all about simplicity and low cost. I’m not into all these market strategies and theories and cost-benefit analyses — all the bureaucracy that goes with business. In investing, strip all the baloney out of it, and give people what you promise.”
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by pennsylvania211 »

What a great discussion :sharebeer

I’ve been lurking here for a while. Learning from everyone. I started out unsure whether or not international should be owned? After listening to great points from both sides (minus some snarky comments), here’s what I’ve learned:

In favor of owning international equities, there’s bogle’s own “buy the whole haystack” argument because no one can consistently pick the winners. That’s the core foundation of indexing after all.

In favor of owning US equities only, there’s bogle‘s own argument that while you can’t pick the winner when it comes to companies, you can pick the winner when it comes to the country and the winner is US. His argument about laws and governance (cleanest shirt in the business) rings true. His argument about US having the largest liquid capital markets is still true although the lead keeps shrinking slowly. His argument about currency risk rings true for any investor investing in their domestic equity market. His argument about American entrepreneurial spirit being the best is no longer true as the Chinese continue to demonstrate themselves as equal or near equal competitors.

The argument of ‘poor past track record of international equities predicting poor future performance’ doesn’t carry water, if past performance of any duration could predict future then did then we wouldn’t need to index anymore. Just pick your favorite stock/fund with last X years of stellar performance

Conversely, the opposite argument to above: ‘poor past track record of international equities must mean future great performance due to reversion to the mean’ doesn’t carry water either. If reversion to the mean could predict future performance then just pick your favorite stock/fund with last X years of poor performance.

The argument that ‘Jack Bogle said so therefore it must be true’ doesn’t carry water, even bogle himself says that he is not perfect. But as the person who launched Vanguard and brought thought clarity to investors with highest integrity, his words carry serious weight that can’t be easily dismissed by the rest of us who contributed nothing of comparable magnitude.

To me, it appears that the sum of current evidence weighs more in favor of US stock + US bonds.

But what do I know? I’m only 35, just got my first job and still learning a lifetime of lessons from the rest of y’all
so don’t hate! :sharebeer
"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses." - Jack Bogle
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Re: Jack Bogle - International Stocks

Post by Taylor Larimore »

pennsylvania211:

Welcome to the Bogleheads Forum!

Your second post is a good one. Nevertheless, you left out two of Mr. Bogle's main points about why he does not recommend international stocks: (1) About 50% of U.S. Company sales and profits come from international companies. (2) U.S. citizens buy and sell in U.S. dollars.

You can read my suggestion (a compromise) for international investing HERE.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom (2018): "No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holdings of non-U.S. stocks should be limited to no more than 20% of equities."
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Re: Jack Bogle - Two Fund Portfolio

Post by as9 »

Taylor Larimore wrote: Thu Feb 20, 2020 10:55 am pennsylvania211:

Welcome to the Bogleheads Forum!

Your second post is a good one. Nevertheless, you left out two of Mr. Bogle's main points about why he does not recommend international stocks: (1) About 50% of U.S. Company sales and profits come from international companies. (2) U.S. citizens buy and sell in U.S. dollars.

You can read my suggestion (a compromise) for international investing HERE.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom (2018): "No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holdings of non-U.S. stocks should be limited to no more than 20% of equities."
Re: #1
Myth 3: US multinationals provide adequate international diversification
Reality: The stocks of large US companies with operations overseas (multinationals) are sometimes highly correlated to the performance of the overall domestic stock market. Highly correlated stocks in a portfolio may indicate a lack of diversification. Therefore, US multinationals are not always good replacements for international stocks for diversification purposes. The table below compares the average correlations of several US multinationals to their foreign counterparts with US-listed shares. The non-US stocks shown have had lower correlations to the S&P 500 over the past 3 years, which typically signals better diversification benefits.
Re: #2
...currency tends to be a relatively small component of returns over time, especially compared to earnings growth and price-to-earnings ratio expansion.
From: https://www.fidelity.com/viewpoints/inv ... ting-myths
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Bogleheads:

This is interesting news regarding the Two Fund Portfolio:

“A couple of its broad index funds powered the firm's impressive flows in January. Vanguard 500 Index (VFIAX) had $7.1 billion of inflows--the most for any single fund for which Morningstar collected data in January--followed by Vanguard Total Bond Market Index's (VBTLX) $5.4 billion.”

https://www.morningstar.com/articles/96 ... ng-in-cash
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

abuss368 wrote: Thu Feb 20, 2020 1:00 pm Bogleheads:

This is interesting news regarding the Two Fund Portfolio:

“A couple of its broad index funds powered the firm's impressive flows in January. Vanguard 500 Index (VFIAX) had $7.1 billion of inflows--the most for any single fund for which Morningstar collected data in January--followed by Vanguard Total Bond Market Index's (VBTLX) $5.4 billion.”

https://www.morningstar.com/articles/96 ... ng-in-cash
Interesting that the money piled into VFIAX instead of VTSAX.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

anon_investor wrote: Thu Feb 20, 2020 1:02 pm
abuss368 wrote: Thu Feb 20, 2020 1:00 pm Bogleheads:

This is interesting news regarding the Two Fund Portfolio:

“A couple of its broad index funds powered the firm's impressive flows in January. Vanguard 500 Index (VFIAX) had $7.1 billion of inflows--the most for any single fund for which Morningstar collected data in January--followed by Vanguard Total Bond Market Index's (VBTLX) $5.4 billion.”

https://www.morningstar.com/articles/96 ... ng-in-cash
Interesting that the money piled into VFIAX instead of VTSAX.
Agreed as both are a winning strategy over the long term. Jack Bogle recommends Total Stock and Warren Buffett recommends S&P 500. Over time there is almost no difference.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

abuss368 wrote: Thu Feb 20, 2020 1:06 pm
anon_investor wrote: Thu Feb 20, 2020 1:02 pm
abuss368 wrote: Thu Feb 20, 2020 1:00 pm Bogleheads:

This is interesting news regarding the Two Fund Portfolio:

“A couple of its broad index funds powered the firm's impressive flows in January. Vanguard 500 Index (VFIAX) had $7.1 billion of inflows--the most for any single fund for which Morningstar collected data in January--followed by Vanguard Total Bond Market Index's (VBTLX) $5.4 billion.”

https://www.morningstar.com/articles/96 ... ng-in-cash
Interesting that the money piled into VFIAX instead of VTSAX.
Agreed as both are a winning strategy over the long term. Jack Bogle recommends Total Stock and Warren Buffett recommends S&P 500. Over time there is almost no difference.
Agreed, I own both (they are my tax loss harvesting partners). Buy and hold! I am still in the accumulation phase, and I do not think I have every sold any VTSAX or VFIAX for a gain.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

anon_investor wrote: Thu Feb 20, 2020 1:18 pm
abuss368 wrote: Thu Feb 20, 2020 1:06 pm
anon_investor wrote: Thu Feb 20, 2020 1:02 pm
abuss368 wrote: Thu Feb 20, 2020 1:00 pm Bogleheads:

This is interesting news regarding the Two Fund Portfolio:

“A couple of its broad index funds powered the firm's impressive flows in January. Vanguard 500 Index (VFIAX) had $7.1 billion of inflows--the most for any single fund for which Morningstar collected data in January--followed by Vanguard Total Bond Market Index's (VBTLX) $5.4 billion.”

https://www.morningstar.com/articles/96 ... ng-in-cash
Interesting that the money piled into VFIAX instead of VTSAX.
Agreed as both are a winning strategy over the long term. Jack Bogle recommends Total Stock and Warren Buffett recommends S&P 500. Over time there is almost no difference.
Agreed, I own both (they are my tax loss harvesting partners). Buy and hold! I am still in the accumulation phase, and I do not think I have every sold any VTSAX or VFIAX for a gain.
Great strategy. I have both as well. Essentially Total Stock but our employer plan has S&P 500 only (which I am changing).
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by Taylor Larimore »

Abuss368:

I am pleased to see that investors are beginning to understand the many advantages of simple total market index funds.

I realize that the S&P 500 Index Fund is not a total market index fund--but it's close.

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. 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
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