Bogleheads Three-fund Portfolio (2024)

FAQs

Is the 3 fund portfolio good enough? ›

While the three-fund portfolio is great because it's simple to learn and easy to manage, it isn't without its disadvantages, as we discuss on our personal finance primer.

As of May 31, 2024, the Bogleheads Three-fund Portfolio returned 5.97% Year-To-Date and 7.83% of annualized return in the last 10 years.

Three-fund lazy portfolios

These usually consist of three equal parts of bonds (total bond market or TIPS), total US market and total international market.

Rebalancing is about managing risk, not chasing investment returns. Rebalancing your portfolio once a year is plenty. Rebalancing less frequently may be even better if your portfolio is diversified from the outset.

A Lazy Portfolio is a collection of investments that requires very little maintenance. It's the typical passive investing strategy, for long-term investors, with time horizons of more than 10 years. Choose your investment style (Classic or Alternative?), pick your Lazy Portfolios and implement them with ETFs.

VTI vs VTSAX: Key Takeaways

As you'll see in the table above, VTI and VTSAX are nearly identical in every way. The only difference is that VTI's expense ratio is slightly lower at 0.03% compared with 0.04% for VTSAX. This is in alignment with other Vanguard comparisons, such as VOO versus VFIAX.

The basic rule is that you sell 4% of your portfolio the first year. This gives you a certain $ amount to cover your living expenses for that year. In subsequent years, you sell just enough to get the same $ amount as the first year, but adjusted for inflation so that you keep the same purchasing power.

First, Warren's original rule was 30 to wants and 20 to savings, but if you can flip that, great! Apply the numbers to your after tax income. Then figure out how much you need for housing, utilities, transportation, food, insurance and clothing. If that is 50% or less, everything else is wants.

Building a Solid Foundation: The Boring Money Account

The core of Bogles recommended portfolio is having a boring money account invested primarily in index funds. Bogle suggested putting at least 95% of investable assets into low-cost, diversified index funds.

Ramsey recommends dividing your investment portfolio into four categories: 1. Growth and Income Funds (25%): Large-cap funds that invest in well-established companies with a history of paying dividends. 2. Growth Funds (25%): Mid-cap and large-cap funds focused on companies with strong growth potential.

What is Bogleheads 3 bucket strategy? ›

Stripped to its simplest form, here's the premise of the Bucket Strategy™: You organize your investments into three main groupings, or "buckets" and take the majority of the risk in Bucket No. 3, largely with stocks and real estate.

The golden butterfly portfolio involves dividing your investments equally into five market segments. Here's how to split up your investments according to Portfolio Charts (the version Stephan shared had some slight differences, but this is the original): 20% U.S. total stock market. 20% small cap value stocks.

The rule calls for purchasing a spending guarantee with 85% of wealth and investing the remaining 15% in equities with 3x leverage. Surprisingly, this leverage is a tool for managing risk.

It states that rebalancing between assets should occur only if an asset or category has drifted from its original target by an absolute percentage of 5% or a relative of 25% whichever is less.

While there is no precise answer for the number of funds one should hold in a portfolio, 8 funds (+/-2) across asset classes may be considered optimal depending on the financial objectives and goals of the investor. Further, higher allocation of portfolio to the right fund is of crucial importance.

General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.

Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.

A commonly cited rule of thumb is to own between 10 and 20 mutual funds, but the actual number will vary depending on your individual circ*mstances. Too many funds can lead to unnecessary over-diversification and overlap. There's really no point in owning, say, two index funds that invest in the same index.