Two-fund portfolio

From Bogleheads

Investors who want a simple asset allocation portfolio often use a two-fund portfolio. This consists of one equity index fund and one fixed income fund. The fund selections can vary depending on asset class (global equity or domestic equity, and bond type), and asset type (mutual fund, exchange-traded fund (ETF), and collective investment trust (CIT)).

Global two-fund portfolios

Rick Ferri has proposed a two-fund portfolio consisting of the following asset classes:

  • A global stock market index fund/ETF
  • A US intermediate term bond index fund/ETF

He suggests a US total market bond index fund/ETF for the fixed income selection. However, you can substitute a global bond index fund/ETF, a US intermediate-term bond index fund/ETF, a US intermediate-term treasury bond index fund/ETF, or a US municipal bond index fund/ETF for the fixed income allocation. You may also find that employer-provided retirement plans will use collective investment trusts as investment vehicles.

You can adjust Rick Ferri's two-fund portfolio to reflect any stock/bond allocation. The charts below show suggestions for different asset allocations.

Global two-fund portfolio allocations

US-only two-fund portfolios

Both John Bogle and Warren Buffett have recommended portfolios for investors who want to invest in US domestic stocks and bonds.

John Bogle's two-fund portfolio

John Bogle has often suggested that an investor can use one total US stock market index fund and one total US bond index fund.[note 1] He has also suggested that an intermediate-term bond index fund, or a low-cost intermediate municipal bond fund can be used for fixed income allocations. You can allocate the portfolio in various stock/bond allocations, as shown in the charts below.

John Bogle's two-fund portfolio allocations

Warren Buffett's two-fund portfolio

Warren Buffett's two-fund portfolio

Warren Buffett has suggested a two-fund portfolio consisting of a 90% allocation to an S&P 500 index fund and a 10% allocation to treasury bills.[note 2]

You can purchase treasury bills in a brokerage (or Treasury Direct) account, where investors tender a noncompetitive bid at auction. You can also use a treasury money market fund, or an ETF investing in 1 to 3 month bills for access to the treasury bill market.

However, you are free to substitute an intermediate bond fund (total bond, intermediate bond, treasury bond, or municipal bond) for the t-bill allocation if desirable. Many employer-provided retirement plans offer S&P 500 index funds or collective investment trusts.

You can also choose to allocate the Buffett two-fund portfolio to various stock/bond allocations.

One balanced index fund portfolio

You can also build a two-fund portfolio by investing in a single balanced index fund. For example, Vanguard, Fidelity, and Charles Schwab offer target date retirement index funds that provide access to global stocks and intermediate bonds. Vanguard also offers global target risk balanced index funds (the LifeStrategy funds). Vanguard's funds provide access to both global stocks and global bonds. Fidelity and Schwab's target date offerings provide access to global stocks and US bonds.

Vanguard offers a US Balanced Index Fund, consisting of a 60/40 stock/bond allocation using a total US stock market index allocation and a total US bond market index allocation.

Because of tax implications, it is often recommended that balanced index funds are used in tax-deferred and tax-free investment accounts.


  1. In chapter 18 of The Little Book Of Common Sense Investing, John Bogle wrote:[1]

    Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an index portfolio. (Investors in high tax brackets, however, would hold a very low-cost quasi-index portfolio of high-grade intermediate-term municipal bonds.)...

  2. In his 2013 letter to Berkshire Hathaway shareholders, Warren Buffett wrote:[2]

    What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.


  1. John Bogle (2007). "Chapter 18 - What Should I Do Now?". The Little Book of Common Sense Investing. ISBN 978-0-470-10210-7.
  2. Warren Buffett (February 28, 2014). "2013 Letter to the Shareholders of Berkshire Hathaway Inc" (PDF). Retrieved June 8, 2023.