A three-fund portfolio is a portfolio which 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
| ETF: VTI | 40% |
| ETF: VXUS | 20% |
| ETF: BND | 60% |
The Bogleheads 3 Fund Portfolio is a popular investment strategy that emphasizes simplicity, tax efficiency, and risk reduction. It was popularized by the followers of Jack Bogle, the founder of Vanguard and considered the father of index investing1. The portfolio is comprised of three broad asset classes.
- A total U.S. stock market index fund
- A total international stock market index fund
- A total U.S. bond market index fund
The Bogleheads 3 Fund Portfolio draws on the idea of portfolio diversification’s ability to reduce volatility and drawdowns, protect against black swan events, and maximize risk-adjusted return. Holding multiple uncorrelated assets invariably reduces risk and can result in higher returns – and almost always higher risk-adjusted returns – than holding one asset in isolation.
The Boglehead philosophy and approach is as follows.
- Develop a workable plan.
- Invest early and often.
- Never bear too much or too little risk.
- Diversify.
- Don’t try to time the market.
- Use index funds whenever possible.
- Keep costs low.
- Minimize taxes.
- Invest with simplicity.
- Stay the course.
The Bogleheads 3 Fund Portfolio is arguably the most popular lazy portfolio, which just means a portfolio that you don’t need to constantly monitor or change.