Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Thu May 21, 2020 4:01 pm

I have been researching the threads so titled and I have literally read every page of each thread. Yet I am still left wondering which is the better way to go? I get it, everyone has a different reason for going with their choice. I'm trying to decide which seems to be the better way, primarily for safety... and also, for ease of use / manipulation / tracking. etc. I am 69, this year I am cutting my work back to 10-12 hours a week (because I like my work and can!), I am not really in the accumulation phase nor the withdrawal phase just yet, though I expect I will soon begin regularly withdrawing some money soon for every day living expenses.

Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176

Taylor Larimore's 3 Fund portfolio - VTSAX, VBTLX, and VTIAX (total international stock index fund) : I believe this is the war horse for Bogleheads. Likely the one most favored from what I have read on this thread and on this forum.
viewtopic.php?f=10&t=88005

4 Fund portfolio - Adding VTABX (Total International Bond Index Fund) to the 3 fund portfolio (VTSAX, VBTLX and VTIAX).
(No direct link, but it has been discussed in multiple threads)

I am looking for those here that USE these as their portfolio's , so true comparisons can be made. Let's deal with facts rather than conjecture, figures not just opinions. I hope to spur some good reasons why one would pick one of these portfolio choices over the other. I'm sure we all have our reasons, it should prove interesting what those reasons are. In reading the threads on all of these, it is truly interesting to see what folks think about each of them. Here, I'd like to see what folks think actually comparing the 4 portfolios.

I realize some folks will be adverse to ALL of these. That's fine, everyone is certainly entitled to put their hard earned dollars to work in whatever way they think works best for them. But in this thread, I'd like to keep the comments to comparing these 4 portfolios. There are lots of other threads for other portfolio opinions.

There is no right or wrong, and NONE of us can predict the future... especially with the economy moving forward post Covid-19. I suspect that any of these choices will do well in the long run.

(Full disclosure: I have been slowly working my way towards the 4 fund portfolio, balancing within 2 taxable accounts and 2 IRA's to get to my goal, which may not be fully attainable due to tax concerns in one taxable account with individual stock holdings. But I want the majority of my holdings to be in one of these 4 choices.)
"Whats done is done, and can't be undone"

sycamore
Posts: 433
Joined: Tue May 08, 2018 12:06 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by sycamore » Thu May 21, 2020 4:21 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
...
Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967
...
Randtor, I know you're looking for responses from people who have a 1, 2, 3, or 4 fund portfolio. Sorry I can't participate as my portfolio doesn't fit.

But I will ask why you think the 1 fund is a bit scary. In principle it's no different from the 4 fund portfolio that rebalances every day.

theorist
Posts: 602
Joined: Sat Sep 28, 2019 11:39 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by theorist » Thu May 21, 2020 4:26 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
I have been researching the threads so titled and I have literally read every page of each thread. Yet I am still left wondering which is the better way to go? I get it, everyone has a different reason for going with their choice. I'm trying to decide which seems to be the better way, primarily for safety... and also, for ease of use / manipulation / tracking. etc. I am 69, this year I am cutting my work back to 10-12 hours a week (because I like my work and can!), I am not really in the accumulation phase nor the withdrawal phase just yet, though I expect I will soon begin regularly withdrawing some money soon for every day living expenses.

Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176

Taylor Larimore's 3 Fund portfolio - VTSAX, VBTLX, and VTIAX (total international stock index fund) : I believe this is the war horse for Bogleheads. Likely the one most favored from what I have read on this thread and on this forum.
viewtopic.php?f=10&t=88005

4 Fund portfolio - Adding VTABX (Total International Bond Index Fund) to the 3 fund portfolio (VTSAX, VBTLX and VTIAX).
(No direct link, but it has been discussed in multiple threads)

I am looking for those here that USE these as their portfolio's , so true comparisons can be made. Let's deal with facts rather than conjecture, figures not just opinions. I hope to spur some good reasons why one would pick one of these portfolio choices over the other. I'm sure we all have our reasons, it should prove interesting what those reasons are. In reading the threads on all of these, it is truly interesting to see what folks think about each of them. Here, I'd like to see what folks think actually comparing the 4 portfolios.

I realize some folks will be adverse to ALL of these. That's fine, everyone is certainly entitled to put their hard earned dollars to work in whatever way they think works best for them. But in this thread, I'd like to keep the comments to comparing these 4 portfolios. There are lots of other threads for other portfolio opinions.

There is no right or wrong, and NONE of us can predict the future... especially with the economy moving forward post Covid-19. I suspect that any of these choices will do well in the long run.

(Full disclosure: I have been slowly working my way towards the 4 fund portfolio, balancing within 2 taxable accounts and 2 IRA's to get to my goal, which may not be fully attainable due to tax concerns in one taxable account with individual stock holdings. But I want the majority of my holdings to be in one of these 4 choices.)
The answer to your question depends on several things.

— Taxable account? Tax protected?

— what allocation do you favor? Is it stable with time or do you imagine tweaking it?

— what fraction of equities do you want in international vs US holdings?

...and so forth.

klaus14
Posts: 459
Joined: Sun Nov 25, 2018 7:43 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by klaus14 » Thu May 21, 2020 4:34 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
I have been researching the threads so titled and I have literally read every page of each thread. Yet I am still left wondering which is the better way to go? I get it, everyone has a different reason for going with their choice. I'm trying to decide which seems to be the better way, primarily for safety... and also, for ease of use / manipulation / tracking. etc. I am 69, this year I am cutting my work back to 10-12 hours a week (because I like my work and can!), I am not really in the accumulation phase nor the withdrawal phase just yet, though I expect I will soon begin regularly withdrawing some money soon for every day living expenses.

Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176

Taylor Larimore's 3 Fund portfolio - VTSAX, VBTLX, and VTIAX (total international stock index fund) : I believe this is the war horse for Bogleheads. Likely the one most favored from what I have read on this thread and on this forum.
viewtopic.php?f=10&t=88005

4 Fund portfolio - Adding VTABX (Total International Bond Index Fund) to the 3 fund portfolio (VTSAX, VBTLX and VTIAX).
(No direct link, but it has been discussed in multiple threads)

I am looking for those here that USE these as their portfolio's , so true comparisons can be made. Let's deal with facts rather than conjecture, figures not just opinions. I hope to spur some good reasons why one would pick one of these portfolio choices over the other. I'm sure we all have our reasons, it should prove interesting what those reasons are. In reading the threads on all of these, it is truly interesting to see what folks think about each of them. Here, I'd like to see what folks think actually comparing the 4 portfolios.

I realize some folks will be adverse to ALL of these. That's fine, everyone is certainly entitled to put their hard earned dollars to work in whatever way they think works best for them. But in this thread, I'd like to keep the comments to comparing these 4 portfolios. There are lots of other threads for other portfolio opinions.

There is no right or wrong, and NONE of us can predict the future... especially with the economy moving forward post Covid-19. I suspect that any of these choices will do well in the long run.

(Full disclosure: I have been slowly working my way towards the 4 fund portfolio, balancing within 2 taxable accounts and 2 IRA's to get to my goal, which may not be fully attainable due to tax concerns in one taxable account with individual stock holdings. But I want the majority of my holdings to be in one of these 4 choices.)
1 fund is equal to 4 funds. I mean Vanguard implements 1 fund as those 4 funds for you. That's the whole point of 1 fund. See here.

Due to simplicity i would suggest 1 fund but tax concerns are very important, so if you post current state of all your accounts you would get better advice.

During retirement you would also need inflation protection. Vanguard's retirement funds also have this. See.
it has 8% in short term TIPS. A better way would be putting money in I-Bonds since TIPS now have negative rates. If you are married, you can place 20k to I-Bonds every year.

So 1 LifeStrategy fund + IBonds is a good solution if you can, or you can just use the target retirement fund.

But if you are already have capital gains, then probably you should just keep doing what you have been doing (4-fund). Just add some inflation protection. I don't think you need International Bonds though, but they won't hurt either.
Last edited by klaus14 on Thu May 21, 2020 4:45 pm, edited 4 times in total.
35% US, 20 ExUS Dev, 10% EM, 10% EM Bonds, 10% Gold, 10% EDV, 5% I/EE Bonds.

bgf
Posts: 1485
Joined: Fri Nov 10, 2017 9:35 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by bgf » Thu May 21, 2020 4:38 pm

i use a target date fund wherever available. my taxable account is 4 fund mirroring the target date fund. where a target date fund isnt available or is prohibitively expensive, i use a balanced ETF, AOA.

if i had my way, i'd owned Vanguard's 2050 target date fund everywhere and be done with it. maybe one day!
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

Triple digit golfer
Posts: 5150
Joined: Mon May 18, 2009 5:57 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Triple digit golfer » Thu May 21, 2020 4:43 pm

First, throw out the 4 funder. International bonds are really not necessary, in my opinion, and don't add much. Others may disagree. I would only hold them if I went the 1 fund route because they're in it.

Next, determine whether you want international equities or not.

If no to international, your choice is the 2 fund. Place bonds in tax protected accounts and equities anywhere. You're done.

If yes, your choice is between 3 fund and 1 fund. Whether you have taxable accounts or not is a big factor. Seems that you do, meaning 3 fund is optimal. Place your bonds in the tax protected account and equities anywhere.

That's the simplistic view.

With bonds yielding so little, it may be fine to simply use a 1 fund portfolio in all accounts. What is your marginal tax bracket?

rixer
Posts: 661
Joined: Tue Sep 11, 2012 4:18 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by rixer » Thu May 21, 2020 4:49 pm

I use one fund. It's VSCGX but it's actually made up of 4 different index funds so it's well diversified and stays in balance. It's good enough as Longinvest says and I don't have to worry about making poor decisions in keeping it balanced. I don't have to worry about the wife trying to sort things out if I'm gone. It's just so very simple that all I have to do is decide once a year how much I am going to withdraw.
So far, I've been sleeping very well during these volatile times.

For us, it works. :sharebeer
Last edited by rixer on Thu May 21, 2020 4:50 pm, edited 1 time in total.

petulant
Posts: 1222
Joined: Thu Sep 22, 2016 1:09 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by petulant » Thu May 21, 2020 4:49 pm

We are young accumulators. Right now we are 80% in S&P 500 funds and 20% in international index funds. Particular fund depends on account since money is spread across 403(b), 401(k), 457(b), 401(a), HSA, Roth IRA, and traditional IRA. In 10-15 years I will start adding bonds with the exact strategy undetermined.

longinvest
Posts: 4247
Joined: Sat Aug 11, 2012 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by longinvest » Thu May 21, 2020 4:53 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
Yet I am still left wondering which is the better way to go?
The best portfolio during one's lifetime can only be known after the fact, after one's death.
Randtor wrote:
Thu May 21, 2020 4:01 pm
Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967
The One-Fund Portfolio is about holding a good-enough portfolio composed a single identical globally-diversified all-in-one fund or ETF with a fixed or gliding allocation across all of the investor's accounts (Traditional, Roth, ..., and even taxable).

One qualifying all-in-one fund, the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), for example, holds 10,981 global stocks and 15,573 global bonds. That's a total of over 26 thousands distinct baskets for one's nest egg. There's no justification for fear.

The first post of the One-Fund Portfolio thread lists many flaws of commonly-heard arguments against using such all-in-one funds or ETFs in a taxable account. Later posts provide a mathematical proof of the adequacy of using a mirrored asset allocation in all accounts (which is what using a single identical all-in-one fund in all accounts, even in taxable, does). And another post even hints* at the futility of tax-loss harvesting a One-Fund Portfolio in a taxable account.

* It explains the futility of tax loss harvesting a One-Fund Portfolio for Canadian investors who use the average cost basis to calculate capital gains. It would be most interesting to see a similar study in the context of the US tax system, which is slightly different when using tax lots.

The use of a single identical all-in-one index fund or ETF in all accounts (including taxable) greatly simplifies a portfolio, eliminates the need to rebalance, and sidesteps a long list of potential behavioral pitfalls. Many investors are likely to lose more to behavioral pitfalls with separate funds or ETFs than to save in taxes even when they're lucky enough to select an asset location strategy that beats the mirrored one (unforeseeable) in their specific long-term investing time frame.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

inbox788
Posts: 6939
Joined: Thu Mar 15, 2012 5:24 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by inbox788 » Thu May 21, 2020 5:21 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
I am not really in the accumulation phase nor the withdrawal phase just yet, though I expect I will soon begin regularly withdrawing some money soon for every day living expenses.
I'm far from where you are, so my immediate needs are quite different than yours, but I expect they'll match up later.

IMO, there's little benefit (or risk) to add international bonds, and even if I'm wrong, the net effect on the whole thing isn't going to be significant, so I'm inclined to throw out the complication early on.

The Lifestrategy Moderate Growth is a terrific 60/40 single fund, and is in fact a cloaked 4 fund portfolio. "36% Total Stock Market Index Fund; 28% Total Bond Market II Index Fund; 24% Total International Stock Index Fund; and 12% Vanguard Total International Bond Index Fund" https://investor.vanguard.com/mutual-fu ... olio/vsmgx
I'm a tweaker (optimizer), so have a hard time settling on one answer and the 0.13 EF bothers me more than it should. It's $130/$100k invested per year, and I expect it will be going down a bit. Otherwise, it's one of a handful of funds I'd consider lifers.

If you're talking about funds in a tax advantaged account, it doesn't matter if you switch it up later, but in a taxable account, you may be more restricted (especially if you don't have offsetting tax advantaged accounts you can use to counterbalance).

I'm a believer in the benefit of international stock diversification, though recently, it's been the wrong play. My target is around 50/50 or something comparable to world market cap share, but fortunately, I'm far from target. Was probably around 10% now heading towards 20%. The underperformance of ex-US has meant that I've added disproportunately more to international, and to maintain and increase AA share. Some would rebalance, but I'm expecting that in the next decade or two, there will be a catch up period, where my portfolio would increase less than if I'd rebalanced, but also requiring less rebalancing later.

There's really little practical difference optimizing these choices, but I think having more funds vs. an all in one helps with tax location. I'm slowly figuring out ideal fund placement and withdraw strategy during retirement.

https://www.bogleheads.org/wiki/Tax-eff ... _placement

longinvest
Posts: 4247
Joined: Sat Aug 11, 2012 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by longinvest » Thu May 21, 2020 5:40 pm

This page contains an important warning, which is most often ignored by investors, unfortunately:
  • Tax rates and brackets change frequently. What was a logical tax location one year may turn out to be a poor choice a few years later. Consider if it's worth the effort (added complexity) to take this approach.
It also ignores the very important concern of the effective Tax-adjusted asset allocation of the portfolio:
if you need your portfolio to double in order to provide an adequate standard of living, you actually need it to double in after-tax value. Your ability to take risk is determined by the consequences of losses; losing $100K in your Roth IRA will reduce your standard of living (or require more additional savings to keep the same standard) by more than losing $100K in your traditional IRA or taxable account does.
The problem is that to determine the best tax-efficient fund placement strategy while considering the effective after-tax risk of the portfolio, one needs to know many precise things about the future: precise future returns and taxable cash flows of portfolio assets in every future year of one's lifetime, precise future tax law changes and their timing during one's lifetime, precise future changes to one's circumstances and their timing during one's lifetime.

Many investors mistakenly think that the objective should be to minimize taxes. Minimizing taxes is easy: in general, the poorer one is, the less taxes one pays. So, to eliminate taxes on portfolio gains, one simply needs to have a $0 portfolio. Problem solved. Some tax-efficient fund placement strategies sometimes succeed at reducing taxes by effectively reducing after-tax wealth. That isn't very sensible.

A better objective is to aim for higher after-tax portfolio withdrawals in retirement. This is an extremely difficult problem to solve, as a lower-returning portfolio, before taxes, can sometimes generate higher after-tax withdrawals.

The One-Fund Portfolio thread contains a mathematical proof that using a mirrored asset location strategy is good enough:
longinvest wrote:
Thu Oct 17, 2019 12:28 am
Here's the thing. If prioritizing bonds in tax-advantaged accounts turns out to be best over one's specific lifetime, a mirrored allocation will turn out to be superior to having prioritized stocks in tax-advantaged accounts. If prioritizing stocks in tax-advantaged accounts turns out to be best over one's specific lifetime, a mirrored allocation will turn out to be superior to having prioritized bonds in tax-advantaged accounts. A mirrored allocation is thus mathematically guaranteed not to turn out to have been the worst location strategy among these three strategies, even if tax laws change in unexpected ways.
Some people might consider this mathematical guarantee, of not being the worst asset location strategy, "not very attractive", yet I have not seen a mathematical proof of a "more attractive" asset location strategy that is guaranteed to always beat a simple mirrored allocation strategy.

It's quite similar to indexing, when you think about it. William Sharpe's theorem guarantees that a simple total-market cap-weighted index investment strategy is guaranteed to never be worse than average (before fees). Some people might consider this mathematical guarantee "not very attractive", yet I have not seen a mathematical proof of a "more attractive" investment strategy that is guaranteed to always beat it.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

Ferdinand2014
Posts: 1417
Joined: Mon Dec 17, 2018 6:49 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Ferdinand2014 » Thu May 21, 2020 6:21 pm

Keep it simple. Pick something with low fees. Pick something you can have conviction - not somebody else’s idea of the perfect portfolio - otherwise you will sell out. I personally do Warren Buffett’s portfolio of cash and a super low cost S&P 500 index fund. I have been very happy with my results and I could care less what anyone else thinks about my lack of bonds, international, or frankly anything else. Bottom line, you must read, learn and decide yourself.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

User avatar
galeno
Posts: 1877
Joined: Fri Dec 21, 2007 12:06 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by galeno » Thu May 21, 2020 6:32 pm

I like the 2 fund port. X% VT + Y% BNDW. I like once a year rebalancing. Not the every day you'd get with using just one fund.
USA-NRA. 50/50. TER = 0.44%. Exp real CAGR = 2.0%. AWR = 4.0%.: Port: 40% VWRD + 05% VDEM + 05% WSML + 10% IDTP + 20% VDCP + 15% VDTY + 05% CASH.

inbox788
Posts: 6939
Joined: Thu Mar 15, 2012 5:24 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by inbox788 » Thu May 21, 2020 6:34 pm

longinvest wrote:
Thu May 21, 2020 5:40 pm
It also ignores the very important concern of the effective Tax-adjusted asset allocation of the portfolio:
...
A better objective is to aim for higher after-tax portfolio withdrawals in retirement. This is an extremely difficult problem to solve, as a lower-returning portfolio (before taxes) can sometimes generate higher after-tax withdrawals.

The One-Fund Portfolio thread contains a mathematical proof that using a mirrored asset location strategy is good enough:
longinvest wrote:
Thu Oct 17, 2019 12:28 am
Here's the thing. If prioritizing bonds in tax-advantaged accounts turns out to be best over one's specific lifetime, a mirrored allocation will turn out to be superior to having prioritized stocks in tax-advantaged accounts. If prioritizing stocks in tax-advantaged accounts turns out to be best over one's specific lifetime, a mirrored allocation will turn out to be superior to having prioritized bonds in tax-advantaged accounts. A mirrored allocation is thus mathematically guaranteed not to turn out to have been the worst location strategy among these three strategies, even if tax laws change in unexpected ways.
Excellent point, and thanks for the references. I've barely begun to understand tax placement, but one nagging issue I've had was during accumulation with high taxes, it benefits to have growth stocks in tax deferred accounts, but it wasn't clear that during decumulation in lower tax brackets would be the opposite (and now even my original premise is in doubt). High growth in a taxable account (sometimes from individual stocks held a long time) is a form of tax deferment, but carries LTCG tax liabilities and are inflexible in balancing between accounts can further complicate matters.

My strategy during accumulation has been simple. Instead of paying higher taxes now, defer and hopefully pay lower taxes later. I've been confused by this whole placement issue, and while I haven't mirrored, I have diversified and kept some stocks and bonds in both tax advantaged and taxable. The simple strategy in decumulation is to take RMDs and limit annual income to avoid the higher tax brackets, and if there are any lower tax brackets to fill, use them up. Those bonds in taxable can be tapped for cash with smaller income tax effects, and hopefully there is enough flexibility in tax advantaged to do any required rebalancing.

I'm still looking for the 5 year old explanation on who benefits from "prioritizing stocks in tax-advantaged accounts" and those that "prioritized bonds in tax-advantaged accounts". Hopefully one day I can enter all my data into i-orp or something like it and it will spit out exactly what to do. In the mean time, I have done some back of the napkin calculations for after tax AA and they're close enough to my desired AA to not bother me given all the other assumptions and uncertainty.

User avatar
Taylor Larimore
Advisory Board
Posts: 29406
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Taylor Larimore » Thu May 21, 2020 6:45 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
I have been researching the threads so titled and I have literally read every page of each thread. Yet I am still left wondering which is the better way to go?
Randtor:

Below are articles recommending The Three Fund Portfolio:

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

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

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

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

"The BigLaw Investor Portfolio" by Joshua Hunt

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

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

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

"How To Create A Three-Fund Portfolio" by Camilo Maldonado, Forbes

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

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

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

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

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

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

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

"Next to Nothing" by Jonathan Clements

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

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

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

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

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

"3 Fund Portfolio: The Lazy Way To Invest" by Just Start Investing

"The Three-Fund Portfolio" -- Boglehead wiki

"The Three Fund Portfolio: A Simple Diversified Investing Strategy" by Bible Matters

"The 3 Fund Portfolio: Simple Investing That Works" by Clevergirl Finance

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

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

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

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

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Thu May 21, 2020 7:21 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176
I am honored! But in all fairness that portfolio is the Jack Bogle and Warren Buffett portfolio!

It has worked well.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Thu May 21, 2020 7:22 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
I have been researching the threads so titled and I have literally read every page of each thread. Yet I am still left wondering which is the better way to go? I get it, everyone has a different reason for going with their choice. I'm trying to decide which seems to be the better way, primarily for safety... and also, for ease of use / manipulation / tracking. etc. I am 69, this year I am cutting my work back to 10-12 hours a week (because I like my work and can!), I am not really in the accumulation phase nor the withdrawal phase just yet, though I expect I will soon begin regularly withdrawing some money soon for every day living expenses.

Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176

Taylor Larimore's 3 Fund portfolio - VTSAX, VBTLX, and VTIAX (total international stock index fund) : I believe this is the war horse for Bogleheads. Likely the one most favored from what I have read on this thread and on this forum.
viewtopic.php?f=10&t=88005

4 Fund portfolio - Adding VTABX (Total International Bond Index Fund) to the 3 fund portfolio (VTSAX, VBTLX and VTIAX).
(No direct link, but it has been discussed in multiple threads)

I am looking for those here that USE these as their portfolio's , so true comparisons can be made. Let's deal with facts rather than conjecture, figures not just opinions. I hope to spur some good reasons why one would pick one of these portfolio choices over the other. I'm sure we all have our reasons, it should prove interesting what those reasons are. In reading the threads on all of these, it is truly interesting to see what folks think about each of them. Here, I'd like to see what folks think actually comparing the 4 portfolios.

I realize some folks will be adverse to ALL of these. That's fine, everyone is certainly entitled to put their hard earned dollars to work in whatever way they think works best for them. But in this thread, I'd like to keep the comments to comparing these 4 portfolios. There are lots of other threads for other portfolio opinions.

There is no right or wrong, and NONE of us can predict the future... especially with the economy moving forward post Covid-19. I suspect that any of these choices will do well in the long run.

(Full disclosure: I have been slowly working my way towards the 4 fund portfolio, balancing within 2 taxable accounts and 2 IRA's to get to my goal, which may not be fully attainable due to tax concerns in one taxable account with individual stock holdings. But I want the majority of my holdings to be in one of these 4 choices.)
The Four Fund Portfolio is actually the "Vanguard Four Fund Portfolio".
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
nisiprius
Advisory Board
Posts: 40787
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by nisiprius » Thu May 21, 2020 8:07 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
The composition of VSMGX is:
Vanguard Total Stock Market Index Fund Investor Shares 36.40%
Vanguard Total Bond Market II Index Fund Investor Shares 27.80%
Vanguard Total International Stock Index Fund Investor Shares 24.30%
Vanguard Total International Bond Index Fund Investor Shares 11.50%
It is a "fund of funds."

It is my opinion that it is virtually the same in every respect, including safety, as holding those four funds individually in the same proportions in the same brokerage account.

There are some tiny details; Vanguard Total Bond Market II is not literally the same fund as Vanguard Total Bond Market, but I believe it is a near-perfect clone. Also, if you have both taxable and non-taxable holdings you may be able to optimize taxes a little bit by holding four separate funds and choosing where you hold them to optimize taxation. You can also make adjustments in the mix, etc. Finally, the expense ratios for the individual funds are slightly lower than for the all-in-one fund. So there can be some slight disadvantages in holding the four funds separately, but nothing "scary" that I can think of.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Dominic
Posts: 372
Joined: Sat Jul 02, 2016 11:36 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Dominic » Thu May 21, 2020 9:27 pm

The one-fund portfolio is as simple as it gets, and owns almost every publicly traded asset on Earth. For tax-advantaged investors, it should be the default.

The two-fund portfolio is a little cheaper and gives you finer-grained control over the stock/bond allocation, better tax-efficiency, flexibility in rebalancing policy, etc. However, you sacrifice global diversification, which I think is a significant risk. If the dollar falls, for instance, this will lag a three-fund portfolio.

I think the three-fund portfolio is the sweet spot for investors with taxable accounts (or poor 1-fund 401k options). It's simple, affordable, and globally diversified in equities.

The four-fund portfolio is unnecessary in my opinion. International bonds hedged to the dollar do reduce volatility per Vanguard's research, but the effect is extremely marginal, and international bonds (and hedging) are more expensive and add complexity. The only scenario they protect against is a Treasury default, which is going to cause problems bigger than someone's bond portfolio. However, it does give better tax-efficiency, cost, and control than the one-fund portfolio does.


In my opinion, three fund > four fund > two fund, and the placement of one fund depends on the specifics.

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Thu May 21, 2020 9:32 pm

Another option is a simple Vanguard Balanced Index Fund that Jack Bogle often recommended. In fact he noted his grandkids money was in that one simple fund.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
oldzey
Posts: 1527
Joined: Sun Apr 13, 2014 8:38 pm
Location: Land of Lincoln

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by oldzey » Thu May 21, 2020 9:41 pm

As a U.S. investor, a 2 fund portfolio (U.S. Equity Index Funds & TIAA Traditional) works for me! :beer
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

Texanbybirth
Posts: 1329
Joined: Tue Apr 14, 2015 12:07 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Texanbybirth » Thu May 21, 2020 10:29 pm

Vanguard’s TDF 2050 is our only retirement investment. As I’m only 35, I’ll let you know how it works out in 30 years! :beer

(We also now own an aggressive allocation (80/20) fund for “shorter term” investments, too.)
Old Tom Bombadil is a merry fellow, | Bright blue his jacket is, and his boots are yellow. | None has ever caught him yet, for Tom, he is the master: | His songs are stronger songs, and his feet are faster.

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 11:15 am

sycamore wrote:
Thu May 21, 2020 4:21 pm
Randtor wrote:
Thu May 21, 2020 4:01 pm
...
Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
viewtopic.php?f=10&t=287967
...
Randtor, I know you're looking for responses from people who have a 1, 2, 3, or 4 fund portfolio. Sorry I can't participate as my portfolio doesn't fit.

But I will ask why you think the 1 fund is a bit scary. In principle it's no different from the 4 fund portfolio that rebalances every day.
Sycamore, true...in principal. But in comparison, returns are different as are expenses. Granted not terribly different, but not exactly the same. And the total value of the funds are quite different as well. So even though the “basket” is huge, one is still putting ALL of their eggs into it.😁
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 11:23 am

klaus14 wrote:
Thu May 21, 2020 4:34 pm

1 fund is equal to 4 funds. I mean Vanguard implements 1 fund as those 4 funds for you. That's the whole point of 1 fund. See here.

Due to simplicity i would suggest 1 fund but tax concerns are very important, so if you post current state of all your accounts you would get better advice.

During retirement you would also need inflation protection. Vanguard's retirement funds also have this. See.
it has 8% in short term TIPS. A better way would be putting money in I-Bonds since TIPS now have negative rates. If you are married, you can place 20k to I-Bonds every year.

So 1 LifeStrategy fund + IBonds is a good solution if you can, or you can just use the target retirement fund.

But if you are already have capital gains, then probably you should just keep doing what you have been doing (4-fund). Just add some inflation protection. I don't think you need International Bonds though, but they won't hurt either.
Klaus, thanks for your suggestions, but, as mentioned, I am trying to compare using JUST these portfolios. One can always add more of course, but I am interested in comparing without adding more complexity. thanks!
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 11:35 am

Triple digit golfer wrote:
Thu May 21, 2020 4:43 pm
First, throw out the 4 funder. International bonds are really not necessary, in my opinion, and don't add much. Others may disagree. I would only hold them if I went the 1 fund route because they're in it.

Next, determine whether you want international equities or not.

If no to international, your choice is the 2 fund. Place bonds in tax protected accounts and equities anywhere. You're done.

If yes, your choice is between 3 fund and 1 fund. Whether you have taxable accounts or not is a big factor. Seems that you do, meaning 3 fund is optimal. Place your bonds in the tax protected account and equities anywhere.

That's the simplistic view.

With bonds yielding so little, it may be fine to simply use a 1 fund portfolio in all accounts. What is your marginal tax bracket?
Well presented TDG. One of the reasons I am hesitant to use the one fund portfolio is the high percentage of non-US stocks and bonds. I have been heading for the 4 funds, but with a smaller percentage invested in international stocks/bonds. However, the rebalancing effort required between IRA and taxable accounts becomes a bit complicated. tax bracket will be uncertain as I am “mostly” retiring... I expect tho that it will be 22%. I have a large sum just received from a real estate sale that is going into a taxable account. That’s the difficulty in trying to rebalance.
"Whats done is done, and can't be undone"

User avatar
galawdawg
Posts: 631
Joined: Thu Dec 14, 2017 12:59 pm
Location: Georgia

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by galawdawg » Sat May 23, 2020 11:58 am

We had a one fund portfolio during most of our accumulation years...all VTSAX. A few years before retirement, we started rebalancing into a two-fund portfolio (VTSAX and VBTLX) which is where we remain a few years into retirement.

We like the two-fund portfolio for a couple of reasons. First, the overall annual expense ratio is lower than it would be for an "all in one", blended, or target date fund. Second, we prefer the ability to control our asset allocation according to our ability, willingness and need to take risk at various phases of life. Third, we happened to agree with Jack Bogle's view that there is no need to add an international index fund as a total US market index fund already provides international exposure due to the global footprint of US companies.

And while past returns are no indication of future performance, Bogle's approach to international paid off for us. $10,000 invested in VTIAX (Total International Index, ER .11%) in 2010 would only be worth about $12,000 today while that same $10,000 invested in VTSAX (Total US Stock Market, ER .04%) would be worth about $30,000. So by sticking with the two-fund, we have realized a significantly higher return than if we had included international.

And while one-fund target date portfolios automatically rebalance, we just do it once a year or when our portfolio is more than 5% from our desired allocation.

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 12:29 pm

rixer wrote:
Thu May 21, 2020 4:49 pm
I use one fund. It's VSCGX but it's actually made up of 4 different index funds so it's well diversified and stays in balance. It's good enough as Longinvest says and I don't have to worry about making poor decisions in keeping it balanced. I don't have to worry about the wife trying to sort things out if I'm gone. It's just so very simple that all I have to do is decide once a year how much I am going to withdraw.
So far, I've been sleeping very well during these volatile times.

For us, it works. :sharebeer
So, this looks to be the more conservative life style investment... a close cousin to VSMGX. Apparently this does the same job but a bit more on the conservative side. That works!
"Whats done is done, and can't be undone"

whereskyle
Posts: 726
Joined: Wed Jan 29, 2020 10:29 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by whereskyle » Sat May 23, 2020 12:34 pm

abuss368 wrote:
Thu May 21, 2020 7:21 pm
Randtor wrote:
Thu May 21, 2020 4:01 pm

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176
I am honored! But in all fairness that portfolio is the Jack Bogle and Warren Buffett portfolio!

It has worked well.
WB's portfolio at least at his death will be 90% S&P 500 index fund and 10% short term treasuries if I recall.
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

RadAudit
Posts: 3822
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by RadAudit » Sat May 23, 2020 12:38 pm

Randtor wrote:
Thu May 21, 2020 4:01 pm
Yet I am still left wondering which is the better way to go? I get it, everyone has a different reason for going with their choice. I'm trying to decide which seems to be the better way, primarily for safety... and also, for ease of use / manipulation / tracking. etc
I'm 73. I'm still wondering which is the better way to go.

After a long journey through the wilderness (20+ years. Long story.), I arrived at the point of a moving toward a four fund portfolio about 25+ years ago. And I was doing OK until DW said she didn't want to rebalance portfolios because it was too complicated. Tore that portfolio up and re-invested in a 1 fund portfolio. (Actually a portfolio of two 1 fund portfolios to keep the AA where I wanted.) I believe that the portfolio is relatively safe - nothing is ever really totally safe - and for me it is easy. I like the daily rebalancing to maintain the risk level I've chosen and, since I don't get to watch the daily ups and downs of the elements within the 1 fund portfolio, I'm a lot less likely to get too excited about any one day move either way.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 12:40 pm

longinvest wrote:
Thu May 21, 2020 4:53 pm

The use of a single identical all-in-one index fund or ETF in all accounts (including taxable) greatly simplifies a portfolio, eliminates the need to rebalance, and sidesteps a long list of potential behavioral pitfalls. Many investors are likely to lose more to behavioral pitfalls with separate funds or ETFs than to save in taxes even when they're lucky enough to select an asset location strategy that beats the mirrored one (unforeseeable) in their specific long-term investing time frame.
Longinvest, I read through your entire post and thoroughly enjoyed it. well presented, well thought out, a ton of statistical proof -kudos to you on all your research and factual information- in short, for me a very tempting way to go. My only hesitancy, as mentioned, is the % of International stocks/bonds that make up the portfolio. That’s just me of course, but I am not keen on that high a percent. Otherwise I love the simplicity! Thanks for a great explanation and effort to keep up with your original thread.
"Whats done is done, and can't be undone"

3funder
Posts: 1329
Joined: Sun Oct 15, 2017 9:35 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by 3funder » Sat May 23, 2020 12:42 pm

I'm not convinced any one of these options would provide much of an edge over the others as long as you stay the course.

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 12:49 pm

Ferdinand2014 wrote:
Thu May 21, 2020 6:21 pm
Keep it simple. Pick something with low fees. Pick something you can have conviction - not somebody else’s idea of the perfect portfolio - otherwise you will sell out. I personally do Warren Buffett’s portfolio of cash and a super low cost S&P 500 index fund. I have been very happy with my results and I could care less what anyone else thinks about my lack of bonds, international, or frankly anything else. Bottom line, you must read, learn and decide yourself.
Great advice re: K.I.S.S. (Keep it simple, stupid!)! I have NO idea what the “perfect portfolio” may be, but I suspect “ beauty is in the eye of the beholder”. Your plan seems to be working for you! If I may ask, which S & P 500 index fund do you use?
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 12:56 pm

galeno wrote:
Thu May 21, 2020 6:32 pm
I like the 2 fund port. X% VT + Y% BNDW. I like once a year rebalancing. Not the every day you'd get with using just one fund.
As always, “There’s more than one road...”😀
"Whats done is done, and can't be undone"

Ferdinand2014
Posts: 1417
Joined: Mon Dec 17, 2018 6:49 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Ferdinand2014 » Sat May 23, 2020 1:06 pm

Randtor wrote:
Sat May 23, 2020 12:49 pm
Ferdinand2014 wrote:
Thu May 21, 2020 6:21 pm
Keep it simple. Pick something with low fees. Pick something you can have conviction - not somebody else’s idea of the perfect portfolio - otherwise you will sell out. I personally do Warren Buffett’s portfolio of cash and a super low cost S&P 500 index fund. I have been very happy with my results and I could care less what anyone else thinks about my lack of bonds, international, or frankly anything else. Bottom line, you must read, learn and decide yourself.
Great advice re: K.I.S.S. (Keep it simple, stupid!)! I have NO idea what the “perfect portfolio” may be, but I suspect “ beauty is in the eye of the beholder”. Your plan seems to be working for you! If I may ask, which S & P 500 index fund do you use?
FXAIX (Fidelity 500 index fund) expense ratio 0.015
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 1:09 pm

Taylor Larimore wrote:
Thu May 21, 2020 6:45 pm
Randtor wrote:
Thu May 21, 2020 4:01 pm
I have been researching the threads so titled and I have literally read every page of each thread. Yet I am still left wondering which is the better way to go?
Randtord

Below are articles recommending The Three Fund Portfolio:

(Edited for brevity)

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
Taylor, as always, a very appreciative post. I have read...and reread!.. your “sticky” on the 3 fund portfolio... every page. There is simply an overwhelming amount of great information there, presented simply and straight forward. Thus the impetus for me to ask the question of this titled thread. There is a close relationship between the 2,3 and 4 fund portfolios. Longinvest’ details and presentations in the 1 fund portfolio got me really thinking. I believe any one of these portfolios would work just fine. I believe it comes down to personal preference..include International, or not. If so, how much, and in what combination? Once those decisions are made, it appears the answer will present itself as to which portfolio is right for each of us.
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 1:13 pm

Abuss368,
Do you prefer the 2 fund?
Thanks!
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 1:23 pm

nisiprius wrote:
Thu May 21, 2020 8:07 pm
Randtor wrote:
Thu May 21, 2020 4:01 pm
Longinvest's 1 fund portfolio - VSMGX Life Strategy Moderate Growth Fund) : I wonder how safe it is to have ALL your eggs in one basket. Yes, the fund has stocks and bonds, and appears fairly stable, yet the thought of everything in one fund is a bit scary to me.
The composition of VSMGX is:
Vanguard Total Stock Market Index Fund Investor Shares 36.40%
Vanguard Total Bond Market II Index Fund Investor Shares 27.80%
Vanguard Total International Stock Index Fund Investor Shares 24.30%
Vanguard Total International Bond Index Fund Investor Shares 11.50%
It is a "fund of funds."

It is my opinion that it is virtually the same in every respect, including safety, as holding those four funds individually in the same proportions in the same brokerage account.

There are some tiny details; Vanguard Total Bond Market II is not literally the same fund as Vanguard Total Bond Market, but I believe it is a near-perfect clone. Also, if you have both taxable and non-taxable holdings you may be able to optimize taxes a little bit by holding four separate funds and choosing where you hold them to optimize taxation. You can also make adjustments in the mix, etc. Finally, the expense ratios for the individual funds are slightly lower than for the all-in-one fund. So there can be some slight disadvantages in holding the four funds separately, but nothing "scary" that I can think of.
Thanks for the response Nisiprius. I agree the holdings in VSMGX are the 4 fund portfolio. It’s just the percentages that you are given, rather than going wIth your own choice of percentages. Assuming the managers of the fund know a lot more about investing than I, if I wanted to include a high percent of international, I would go with this.😁
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 1:29 pm

galawdawg wrote:
Sat May 23, 2020 11:58 am
We had a one fund portfolio during most of our accumulation years...all VTSAX. A few years before retirement, we started rebalancing into a two-fund portfolio (VTSAX and VBTLX) which is where we remain a few years into retirement.

We like the two-fund portfolio for a couple of reasons. First, the overall annual expense ratio is lower than it would be for an "all in one", blended, or target date fund. Second, we prefer the ability to control our asset allocation according to our ability, willingness and need to take risk at various phases of life. Third, we happened to agree with Jack Bogle's view that there is no need to add an international index fund as a total US market index fund already provides international exposure due to the global footprint of US companies.

And while past returns are no indication of future performance, Bogle's approach to international paid off for us. $10,000 invested in VTIAX (Total International Index, ER .11%) in 2010 would only be worth about $12,000 today while that same $10,000 invested in VTSAX (Total US Stock Market, ER .04%) would be worth about $30,000. So by sticking with the two-fund, we have realized a significantly higher return than if we had included international.

And while one-fund target date portfolios automatically rebalance, we just do it once a year or when our portfolio is more than 5% from our desired allocation.
Great contribution to this thread. Your positioned now is where I am mostly heading. As mentioned, the choice comes down to what to do with International. Yea or nay, and if yea, how much. Thanks galawdawg!
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 1:35 pm

RadAudit wrote:
Sat May 23, 2020 12:38 pm
Randtor wrote:
Thu May 21, 2020 4:01 pm
Yet I am still left wondering which is the better way to go? I get it, everyone has a different reason for going with their choice. I'm trying to decide which seems to be the better way, primarily for safety... and also, for ease of use / manipulation / tracking. etc
I'm 73. I'm still wondering which is the better way to go.

After a long journey through the wilderness (20+ years. Long story.), I arrived at the point of a moving toward a four fund portfolio about 25+ years ago. And I was doing OK until DW said she didn't want to rebalance portfolios because it was too complicated. Tore that portfolio up and re-invested in a 1 fund portfolio. (Actually a portfolio of two 1 fund portfolios to keep the AA where I wanted.) I believe that the portfolio is relatively safe - nothing is ever really totally safe - and for me it is easy. I like the daily rebalancing to maintain the risk level I've chosen and, since I don't get to watch the daily ups and downs of the elements within the 1 fund portfolio, I'm a lot less likely to get too excited about any one day move either way.
Exactly. I am done with the accumulation phase. At this stage I have enough to last a lifetime I believe😆. So now it’s really about protecting our assets, hopefully balancing withdrawals and passive accumulation via dividends, interest, etc. and as you said, keep it easy enough so my DW won’t have major issues down the road. Thanks!
"Whats done is done, and can't be undone"

User avatar
Topic Author
Randtor
Posts: 103
Joined: Sat Feb 02, 2019 8:44 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Randtor » Sat May 23, 2020 1:36 pm

3funder wrote:
Sat May 23, 2020 12:42 pm
I'm not convinced any one of these options would provide much of an edge over the others as long as you stay the course.
The more I research these, the more I realize you speak the truth😁
"Whats done is done, and can't be undone"

User avatar
Taylor Larimore
Advisory Board
Posts: 29406
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by Taylor Larimore » Sat May 23, 2020 1:43 pm

Randtor wrote:

I'm 73. I'm still wondering which is the better way to go
.
Randtor:

When authorities disagree, it is often because there is no foreseeable difference.

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

_Soundwave_
Posts: 15
Joined: Sun Mar 22, 2020 8:00 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by _Soundwave_ » Sat May 23, 2020 1:48 pm

401k: VIIIX (no low fee bond funds or treasuries available)

RothIRA: SWTSX / SCHO

Etc.


Essentially various permutations of an S&P500 index/TSM and an emergency fund in short treasuries/money market across my various accounts.

Simple.

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Sat May 23, 2020 1:58 pm

Randtor wrote:
Sat May 23, 2020 1:13 pm
Abuss368,
Do you prefer the 2 fund?
Thanks!
Hi Randtor -

The short answer is I do! Back in November, I drastically simplified and changed our portfolio from Total Stock, Total International Stock, US REIT, International REIT, Total Bond, and Total International Bond to Jack Bogle's and Warren Buffett's Two Fund Portfolio.

I documented the reasons why in this thread which has provided a lot of good advice: viewtopic.php?f=10&t=188176

I and my spouse feel much better. It is so simple and it has worked very well even with the downturn. We have learned the "best" or "right" portfolio is the one that works for you and allows you to sleep well and not tinker with in a downturn.

For us, reading articles, or someone's personal thoughts and opinion on Fund A, Fund B, International, Gold, or such on an internet forum has zero impact and influence to our situation. Honestly, it no longer does anything for us and we will never complicate matters again. That is why the subject is "Personal Finance".

Probably what hit "home" the most was family and friends who have way long ago successfully retired with the Two Fund Portfolio. They accumulated "enough" and have been living from only some (not all) dividends just fine. A real life example right in form of our eyes!
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Sat May 23, 2020 2:02 pm

whereskyle wrote:
Sat May 23, 2020 12:34 pm
abuss368 wrote:
Thu May 21, 2020 7:21 pm
Randtor wrote:
Thu May 21, 2020 4:01 pm

Abuss368's 2 Fund portfolio - VTSAX (Total US Stock Market Index Fund) and VBTLX (Total US Bond Index Fund) : A proponent of the 3 fund portfolio, but an offshoot of such, by not using International Stock or bond funds.
viewtopic.php?f=10&t=188176
I am honored! But in all fairness that portfolio is the Jack Bogle and Warren Buffett portfolio!

It has worked well.
WB's portfolio at least at his death will be 90% S&P 500 index fund and 10% short term treasuries if I recall.
Correct. He noted that in a Berkshire Hathaway Annual Shareholder Report - maybe 2013 or so. Think about how simple and effective that is. A gentleman who has access to any investment opportunity anywhere in the world is recommending that.

That, and he beat the Hedge Fund managers over 10 years with his bet the S&P 500 would beat them!
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Sat May 23, 2020 2:10 pm

Randtor wrote:
Sat May 23, 2020 11:35 am
Triple digit golfer wrote:
Thu May 21, 2020 4:43 pm
First, throw out the 4 funder. International bonds are really not necessary, in my opinion, and don't add much. Others may disagree. I would only hold them if I went the 1 fund route because they're in it.

Next, determine whether you want international equities or not.

If no to international, your choice is the 2 fund. Place bonds in tax protected accounts and equities anywhere. You're done.

If yes, your choice is between 3 fund and 1 fund. Whether you have taxable accounts or not is a big factor. Seems that you do, meaning 3 fund is optimal. Place your bonds in the tax protected account and equities anywhere.

That's the simplistic view.

With bonds yielding so little, it may be fine to simply use a 1 fund portfolio in all accounts. What is your marginal tax bracket?
Well presented TDG. One of the reasons I am hesitant to use the one fund portfolio is the high percentage of non-US stocks and bonds. I have been heading for the 4 funds, but with a smaller percentage invested in international stocks/bonds. However, the rebalancing effort required between IRA and taxable accounts becomes a bit complicated. tax bracket will be uncertain as I am “mostly” retiring... I expect tho that it will be 22%. I have a large sum just received from a real estate sale that is going into a taxable account. That’s the difficulty in trying to rebalance.
I agree. The "return" to Total International Stock Index over 5 years is negative. I recently read that owning Treasury bonds since 2000 was better than Total International.

Personally, I wish I would have known that when I was 20 years younger. Time, which we do not have to recoup. I certainly don't want it now it, let alone in retirement. I watched a video last night, taped a year or so, Mr. Bogle passed. He said it is not needed and that US companies have enough international sales and revenue.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Sat May 23, 2020 2:11 pm

Randtor wrote:
Sat May 23, 2020 1:36 pm
3funder wrote:
Sat May 23, 2020 12:42 pm
I'm not convinced any one of these options would provide much of an edge over the others as long as you stay the course.
The more I research these, the more I realize you speak the truth😁
Exactly! And if you doubt you can stick with international, it is simple: don't own it.

Better to be with a portfolio that you will not panic sell or tinker with.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
anon_investor
Posts: 1879
Joined: Mon Jun 03, 2019 1:43 pm

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by anon_investor » Sat May 23, 2020 2:56 pm

abuss368 wrote:
Sat May 23, 2020 2:10 pm
Randtor wrote:
Sat May 23, 2020 11:35 am
Triple digit golfer wrote:
Thu May 21, 2020 4:43 pm
First, throw out the 4 funder. International bonds are really not necessary, in my opinion, and don't add much. Others may disagree. I would only hold them if I went the 1 fund route because they're in it.

Next, determine whether you want international equities or not.

If no to international, your choice is the 2 fund. Place bonds in tax protected accounts and equities anywhere. You're done.

If yes, your choice is between 3 fund and 1 fund. Whether you have taxable accounts or not is a big factor. Seems that you do, meaning 3 fund is optimal. Place your bonds in the tax protected account and equities anywhere.

That's the simplistic view.

With bonds yielding so little, it may be fine to simply use a 1 fund portfolio in all accounts. What is your marginal tax bracket?
Well presented TDG. One of the reasons I am hesitant to use the one fund portfolio is the high percentage of non-US stocks and bonds. I have been heading for the 4 funds, but with a smaller percentage invested in international stocks/bonds. However, the rebalancing effort required between IRA and taxable accounts becomes a bit complicated. tax bracket will be uncertain as I am “mostly” retiring... I expect tho that it will be 22%. I have a large sum just received from a real estate sale that is going into a taxable account. That’s the difficulty in trying to rebalance.
I agree. The "return" to Total International Stock Index over 5 years is negative. I recently read that owning Treasury bonds since 2000 was better than Total International.

Personally, I wish I would have known that when I was 20 years younger. Time, which we do not have to recoup. I certainly don't want it now it, let alone in retirement. I watched a video last night, taped a year or so, Mr. Bogle passed. He said it is not needed and that US companies have enough international sales and revenue.
I believe in March at the most recent lows, long term treasuries had out performed even the S&P500 over the proceeding 20 years. Although with the rapid recover of the S&P500 I think that is no longer the case today.

nanameg
Posts: 169
Joined: Fri Mar 20, 2020 10:57 am

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by nanameg » Sat May 23, 2020 4:56 pm

I, too, am trying to decide between the portfolios the OP enumerates.


I’m 64 and have been investing in Vanguard index funds for about 18 years.

I started with just US stocks and bonds but after a review by a PAS advisor in 2018 I was persuaded to add international stocks and bonds. That 4 fund portfolio is their default portfolio.

I roughly followed the portfolio they recommended on my own until March when I panicked since we are close to retirement and my husband is a dentist...his practice would be shut down as well.

I sold off the international funds first since I never really “ believed “ in them...I remembered reading Bogle saying they weren’t necessary.

I realized within a week or two that selling was a mistake and I filled out the Vanguard Risk tolerance questionnaire and get back in at a 45/55 allocation but with the 4 funds. My husbands 401k can’t be managed by PAS and I’ve split that account into a 50/50 2 fund portfolio.

It’s only been a little more than a month but I’m much happier with the 2 fund portfolio...I think I’ll take my chances and go with that for all our accounts and dispense with the PAS.

I too have been reading the threads on international investing and I think at our age and our amount saved I’m willing to just keep it extremely simple and go with the 2 fund portfolio.

I don’t like the one fund portfolio myself...it’s too opaque for me. Also too much with the rebalancing daily that you pay for and I don’t want ...and too many funds in play.

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Sat May 23, 2020 5:08 pm

nanameg wrote:
Sat May 23, 2020 4:56 pm
I, too, am trying to decide between the portfolios the OP enumerates.


I’m 64 and have been investing in Vanguard index funds for about 18 years.

I started with just US stocks and bonds but after a review by a PAS advisor in 2018 I was persuaded to add international stocks and bonds. That 4 fund portfolio is their default portfolio.

I roughly followed the portfolio they recommended on my own until March when I panicked since we are close to retirement and my husband is a dentist...his practice would be shut down as well.

I sold off the international funds first since I never really “ believed “ in them...I remembered reading Bogle saying they weren’t necessary.

I realized within a week or two that selling was a mistake and I filled out the Vanguard Risk tolerance questionnaire and get back in at a 45/55 allocation but with the 4 funds. My husbands 401k can’t be managed by PAS and I’ve split that account into a 50/50 2 fund portfolio.

It’s only been a little more than a month but I’m much happier with the 2 fund portfolio...I think I’ll take my chances and go with that for all our accounts and dispense with the PAS.

I too have been reading the threads on international investing and I think at our age and our amount saved I’m willing to just keep it extremely simple and go with the 2 fund portfolio.

I don’t like the one fund portfolio myself...it’s too opaque for me. Also too much with the rebalancing daily that you pay for and I don’t want ...and too many funds in play.
You have made a wise choice with the two fund portfolio.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 19647
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Portfolios: 1 Fund, 2 Fund, 3 Fund or 4 Fund?

Post by abuss368 » Sat May 23, 2020 5:47 pm

Ferdinand2014 wrote:
Thu May 21, 2020 6:21 pm
Keep it simple. Pick something with low fees. Pick something you can have conviction - not somebody else’s idea of the perfect portfolio - otherwise you will sell out. I personally do Warren Buffett’s portfolio of cash and a super low cost S&P 500 index fund. I have been very happy with my results and I could care less what anyone else thinks about my lack of bonds, international, or frankly anything else. Bottom line, you must read, learn and decide yourself.
^^^^^^ This here above, is excellent advice. The older I get, I more I am appreciating this. It is so important to stay the course through all markets.

Simple works.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

Post Reply