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0:00 3-Fund Portfolio
2:22 What is a 3-Fund Portfolio
4:20 Is a 3-Fund Portfolio diversified?
8:21 Historical Returns of a 3-Fund Portfolio
13:42 How to Create a 3-Fund Portfolio
18:00 What mutual funds or ETFs to Use
20:40 M1 Finance & 3-Fund Portfolio
26:28 How to increase returns

A three fund portfolio is a simple approach to investing that, as the name suggests, involves just three mutual funds or exchange-traded funds. In just three funds, an investor can build a diversified, low cost portfolio that’s easy to manage.

Popularized by the Bogleheads, the three fund portfolio is one of several “Lazy Portfolios.” You don’t let the Simplicity fool you. A three fund portfolio has outperformed most comparable actively managed portfolios Over the past several decades. In this article, we’ll look at what comprises a 3-fund portfolio, its diversification, its historical returns, and how to easily build a 3-fund portfolio. We’ll also look at a few ways you can supercharge the returns with a significant increase to volatility by adding a few more funds to the mix.

#3fundportfolio #bogleheads #lazyportfolios

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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

I’m also the author of Retire Before Mom and Dad–The Simple Numbers Behind a Lifetime of Financial Freedom (

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How to Create a 3 Fund Portfolio | A Beginner’s Guide

Investing can be an intimidating task, especially for beginners. With so many investment options available, it’s easy to get overwhelmed and make mistakes. However, building a solid investment portfolio doesn’t have to be complicated. One popular and effective strategy for beginner investors is creating a three-fund portfolio.

A three-fund portfolio is a simple and diversified investment approach that consists of three key asset classes: domestic stocks, international stocks, and bonds. This strategy allows you to have exposure to different types of investments while keeping costs low and minimizing risk.

Here’s a step-by-step guide on how to create your own three-fund portfolio:

1. Determine your risk tolerance: The first step in building any investment portfolio is to understand your risk tolerance. Ask yourself how comfortable you are with market fluctuations and potential losses. This will help you decide the appropriate allocation of stocks and bonds within your portfolio.

2. Allocate funds to domestic stocks: The first fund in your portfolio should be an index fund that tracks a broad domestic stock index, such as the S&P 500. This fund should represent a significant portion of your total portfolio, as it provides exposure to the US stock market. It’s a good idea to choose a low-cost fund with a reputable provider.

3. Allocate funds to international stocks: The second fund in your portfolio should be an index fund that captures international stock markets. This fund diversifies your portfolio beyond the US market, exposing you to companies from around the world. Similar to the domestic stock fund, select a low-cost index fund that covers a broad global index.

4. Allocate funds to bonds: The third and final fund in your portfolio should be a bond fund. Bonds are considered less volatile than stocks and provide stability to your portfolio. The allocation to bonds depends on your risk tolerance and investment goals. If you’re young and have a high tolerance for risk, you may have a lower allocation to bonds. On the other hand, if you’re closer to retirement and prioritize capital preservation, a higher bond allocation may be appropriate.

5. Rebalance regularly: Once you have set up your three-fund portfolio, it’s important to rebalance it periodically. Rebalancing involves adjusting the allocation of funds to maintain the desired asset mix. As some assets outperform or underperform others, the portfolio’s balance can become skewed. Rebalancing helps to bring it back in line with your target allocation.

6. Keep costs low: One of the advantages of a three-fund portfolio is its simplicity and low costs. Choose funds with low expense ratios and avoid funds with high management fees. Over time, high fees can eat into your investment returns.

7. Stay the course: Lastly, it’s crucial to stay disciplined and not make impulsive changes to your portfolio. Investing is a long-term game, and short-term fluctuations should not sway your investment decisions. Stick to your original plan and have confidence in the diversified nature of your three-fund portfolio.

In conclusion, a three-fund portfolio offers a straightforward and effective investment strategy for beginners. It allows you to diversify your holdings across domestic stocks, international stocks, and bonds while keeping costs low and managing risk. By following these steps and regularly reviewing and rebalancing your portfolio, you can set yourself up for long-term investment success.