(1929 - 2019)
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A three-fund portfolio is a portfolio which does not slice and dice, but uses only basic asset classes — usually a domestic stock "total market" index fund, an international stock "total market" index fund and a bond "total market" index fund. It is often recommended for and by Bogleheads attracted by "the majesty of simplicity" (Bogle's phrase), and for those who want finer control and better tax-efficiency than they would get in an all-in-one fund like a target retirement fund.
There is no magic in the number three; the phrase is shorthand for a style of portfolio construction that emphasizes simplicity, and is related to lazy portfolios. (more...)
This week in financial history
- 1928 - The Société anonyme de la Bourse de Luxembourg was incorporated as a limited company, establishing the Luxembourg Stock Exchange. Source: History
- 2012 - The president signed the Jumpstart Our Business Startups (JOBS) Act into law, which allows small businesses to use crowdfunding for seeking actual investors. It can raise up to $1 million this way. Source: JOBS Act opens fundraising doors for small firms
- 1988 - The Standard & Poors 500 stock index was overhauled. Instead of being made up of 400 industrial stocks, 40 utilities, 40 financial stocks and 20 transportation issues, its industry weights were set to float freely, so that stocks from all sectors are represented by market value. Source: S&P 500 2001 Directory (Standard & Poors, New York, 2001), p. 10.
- 1998 - The Dow Jones Industrial Average closes over 9,000 for the first time. Source: Closing milestones of the Dow Jones Industrial Average
- 1720 - King George I signed the South Sea Bill, granting virtual monopoly powers of financing to the South Sea Co. The stock closed the day at 335, up from less than 100 a few weeks earlier. By year-end, many investors had lost 80% of their money. Sources: John Carswell, The South Sea Bubble (The Cresset Press, London, 1960), pp. 124, 127.; and Charles Mackay, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, Chapter Two: The South Sea Bubble.
- 1792 - The first market crash in the US hit rock bottom on April 7, 1792. The price of 6% United States bonds slumped to 100, down from 127.50 on January 31st, a 22% plunge in just 13 weeks. Source: David J. Cowen, The First Bank of the United States and the Securities Market Crash of 1792, The Journal of Economic History, December, 2000 (Vol. 60, No. 4), pp. 1044, 1051.
- 1958 - The U.S. Ninth Circuit Court of Appeals upheld a ruling that affirmed the right of a fund adviser (Insurance Securities Incorporated, or ISI) to sell a controlling interest in its stock at a premium to its book value. This opened the flood gates to public ownership of management companies. Source: John C. Bogle remarks, February 24, 2006, (U.S. Court of Appeals decision)
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