What is the Three Fund Portfolio?
The three-fund portfolio is a lazy portfolio that consists of three ETFs.
- 42.00% Total US Market (VTI)
- 18.00% International Developed (VEU)
- 40.00% U.S. Total Bond Market (BND)
The 60/40 version of the three-fund portfolio consists of 60% equities and 40% bonds.
For the past 10 years, the three-fund portfolio has returned 9.67 with a standard deviation of 10.32. Last year it returned 13.67%. The dividend yield is 1.97. The 30-year return is 8.43%.
- What is the historical return of the three-fund portfolio?
- How do the Three-Fund portfolio compare to the best portfolios?
- What is the Three Fund portfolio?
- How do you build the three-fund portfolio with ETFs?
- Portfolio allocation for the Three Fund portfolio
- What are the advantages and disadvantages of the Three-fund portfolio?
- Suggestions for your next steps
- Related questions
What is the historical return of the three-fund portfolio?
Below you see how the three-fund portfolio has performed in the past.
Data was last updated on May 1, 2021 at 08:27 a.m. ET
|Name||Asset class count||Year to date||Return in 2020||10 year return||CAGR since 1989 (%)||Risk level||Expense ratio|
|3 Fund Portfolio 80/20||3||-12.7||15.66||11.85||9.06||3||0.04%|
|3 Fund Portfolio 60/40||3||-11.92||13.67||9.67||8.43||2||0.04%|
|3 Fund Portfolio 40/60||3||-11.15||11.68||7.44||7.68||1||0.04%|
|3 Fund Portfolio 20/80||3||-10.37||9.7||5.16||6.81||1||0.04%|
|3 Fund Portfolio Equal Weight||3||-11.95||12.91||9.45||7.91||2||0.04%|
How do the Three-Fund portfolio compare to the best portfolios?
Below you can see the returns of the best portfolios that we have benchmarked.
What is the Three Fund portfolio?
The three-fund portfolio is a hallmark of the Bogleheads forum. At its core, the strategy slices your portfolio into three parts:
- U.S. stocks
- International stocks
That’s it. Simple. Effective. Elegant.
The portfolio makes room for rebalancing to work its magic while maintaining a simple exposure to almost all of the world’s investable assets.
The portfolio varies in that the allocation to the three asset classes changes depending on your risk tolerance and objective.
Taylor Larrimore of the Bogleheads forum is a strong advocate of the portfolio and has written a book detailing the strategy.
How do you build the three-fund portfolio with ETFs?
Below you can see the many types of three-fund portfolios you can build. The three-fund portfolio consists of just 3 ETFs. It you want more risk you can allocate more to the stock portion of the portfolio.
If you want more safety, then you should increase your allocation to bonds.
Portfolio allocation for the Three Fund portfolio
|Name||ESG portfolio available?||Total US Market||International Developed||Total Bond Market|
|3 Fund Portfolio 80/20||Yes||56.00%||24.00%||20.00%|
|3 Fund Portfolio 60/40||Yes||42.00%||18.00%||40.00%|
|3 Fund Portfolio 40/60||Yes||28.00%||12.00%||60.00%|
|3 Fund Portfolio 20/80||Yes||14.00%||6.00%||80.00%|
|3 Fund Portfolio Equal Weight||Yes||34.00%||33.00%||33.00%|
What are the advantages and disadvantages of the Three-fund portfolio?
- The portfolios are simple to understand.
- The Three-fund portfolio is flexible. You can change the allocation as your goals change.
- Rebalancing the three-fund portfolio is very easy.
- The three-fund portfolios have excellent returns.
- The portfolio is very cheap to maintain because it uses extremely cheap ETFs.
- The investment portfolios have good diversification. You own a slice of all the world’s assets.
- It is John Bogle approved!
- The three-fund is not sexy, and you won’t be bragging about it at parties.
- The investment portfolio has not beaten the S&P 500 in the past.
- The three-fund portfolio may be too simple for some people.
- The portfolio may not have enough asset classes to fully make use of the power of rebalancing.
Also, make sure you read the Bogleheads (Taylor Larimore) analysis of the portfolio!
Suggestions for your next steps
Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone
If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful.
Rebalancing your portfolio lowers your risk and may provide higher returns in the long run. It is completely FREE.
You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool.
Rebalancing lowers your portfolio risk and can increase your returns.
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What is the 3 Fund Portfolio for Europeans?
You can build the 3 Fund Portfolio with the following 3 European ETFs
- Total US Market (VNRT) OR iShares (CSUS)
- International Developed (SWDA, includes US)
- Total US Bond Market: SUAG (iShares US Aggregate Bond UCITS ETF)
You could use 2 ETFs. The 2 ETFs are SWDA and SUAG as SWDA consist of all developed countries including the US.
How do I build the 3 fund portfolio with Fidelity ETFs?
Fidelity does not have a total stock market ETF. They have a fund. It is called Fidelity Total Market Index Fund (FSKAX).
- Fidelity Total Market Index Fund (FSKAX).
- Total International Ex-US (FDEV)
- Total US Bond Market (FBND)