Vanguard four fund portfolio

On February 6, 2013 Vanguard announced the creation of four fund portfolios by adding a strategic allocation of international hedged bonds to the firm's series of target date (Target Retirement) and target risk (LifeStrategy) funds. These funds are prevalent offerings in employer provided plans, where they are often default investment options; in 529 college savings plans; and in individual retirement arrangements.

The new allocation plan adds the Vanguard International Bond Index fund to the portfolio asset mix. This bond fund is hedged to reduce currency risk.

Three fund and four fund portfolios
The former allocation of these balanced portfolios were versions of the very popular three fund portfolio, which consists of three broad asset class index funds:
 * Total U.S. stock market index fund
 * Total international stock index fund
 * Total U.S. bond index fund

The four-fund portfolio that Vanguard is now employing consists of the following broad asset class index funds:
 * Total U.S. stock market index fund
 * Total international stock index fund
 * Total U.S. bond index fund
 * Total international bond index fund

Vanguard allocates 30% of a portfolio's stock allocation to international stocks and allocates 20% of a portfolio's bond allocation to international bonds. The table below shows the portfolio allocations for four stock/bond allocation splits.

2015 allocations
In 2015 Vanguard is increasing the international allocations to the four fund portfolios. International stock allocations will increase from 30% to 40% of a portfolio's stock allocation. International bonds will increase from 20% to 30% of a portfolio's bond allocation. The allocation changes are planned to begin in the second quarter of 2015 and be completed by the end of the year.