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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
- 2000 - The Euronext Exchange was created on this date following a merger of the Amsterdam Stock Exchange, Paris Bourse and Brussels Stock Exchange. Source: Euronext
- 1998 - On September 23, 1998, a group of fourteen banks and brokerage firms invested $3.6 billion in Long-Term Capital Management L.P. (LTCM) to prevent the firm’s imminent collapse. The hedge fund, operating on leveraged capital based on mathematical models designed by Nobel laureate finance economists Myron Scholes and Robert C. Merton, had experienced massive losses after Russia devalued its currency and defaulted on its debt in August 1998. Source:Near Failure of Long-Term Capital Management, Federal Reserve History.
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