The 3 fund portfolio is a simple, low-cost way to invest your money. In this video I’ll share the basics of how this investment strategy works and why it’s so effective.
Timecodes:
0:00 – Intro
1:13 – Introducing The Three Fund Portfolio
2:19 – Why Total Market Index Fund
3:25 – Mitigate Individual Stock Risk
4:28 – Cuts Out Unhelpful Advisors
5:53 – Low Costs
7:21 – Simple
8:32 – Building Your 3-Fund Portfolio
10:10 – Asset Allocation
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DISCLAIMER: I am not a financial adviser. These videos are for educational and entertainment purposes only. I am merely sharing my personal opinion. Please seek professional help when needed….(read more)
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3 Fund Portfolio – The #1 Investment Portfolio
Investing can be a daunting task, especially with the myriad of options available in the market. However, for those looking for a simple, yet highly effective investment strategy, the 3 Fund Portfolio has emerged as the top choice for many investors. With its ease of implementation, low fees, and superb performance, it has become a popular portfolio construction method.
The concept behind the 3 Fund Portfolio is straightforward – invest in three key asset classes that provide broad exposure to different market segments. These three funds typically include a domestic stock fund, an international stock fund, and a bond fund. By diversifying across these three asset classes, investors can effectively manage risk and maximize returns over the long term.
One of the primary advantages of the 3 Fund Portfolio is its simplicity. Investors can easily create this portfolio with just three exchange-traded funds (ETFs) or mutual funds. This simplicity eliminates the need for complex research, stock-picking, and constant monitoring associated with more complicated portfolios. It is a hands-off approach that requires minimal maintenance, making it ideal for busy individuals or those new to investing.
Another advantage of the 3 Fund Portfolio is its low fees. Many investors tend to overlook the impact of high fees on their investment returns. However, over time, these fees can significantly erode gains. With a 3 Fund Portfolio, investors can choose low-cost index funds, which typically have much lower expense ratios compared to actively managed funds. This allows investors to keep more of their earnings, thus enhancing their overall returns.
When it comes to performance, the 3 Fund Portfolio has consistently delivered impressive results. By diversifying across asset classes, investors can capture the market returns over the long term, instead of focusing on individual stocks or sectors. This strategy helps mitigate the risk of holding a concentrated portfolio that may be heavily impacted by specific market events or economic conditions.
Furthermore, the 3 Fund Portfolio has historically outperformed many other investment strategies. Multiple studies have shown that diversification across asset classes can yield satisfactory returns while reducing risk. It is worth noting that past performance does not guarantee future results, but proponents of the 3 Fund Portfolio argue that its simplicity, low fees, and broad diversification provide a strong foundation for long-term growth.
Implementing a 3 Fund Portfolio requires careful consideration of one’s risk tolerance and investment objectives. Investors must determine the appropriate allocation percentages for each asset class based on their time horizon, financial goals, and risk appetite. It is crucial to periodically review and rebalance the portfolio to ensure it aligns with the investor’s objectives.
In conclusion, the 3 Fund Portfolio is an excellent investment strategy for those seeking simplicity, low fees, and strong performance. By diversifying across domestic and international equities, as well as bonds, investors can effectively manage risk and maximize their chances of long-term growth. However, it is essential to thoroughly research, understand one’s risk tolerance, and consult with a financial advisor when constructing and implementing this portfolio to ensure it meets individual needs and goals.
OK Chin Chan
I'm starting to form a 3-fund portfolio but really wondering if it's worth investing in bonds. I'm still fairly young (32) and it doesn't seem that long-term there's a lot of returns with them but they've been a staple for portfolios. Have they become outdated?
Tae, Thanks for great,clear,video.
Great video! May I ask why I should consider an index fund if the expense ratio of a similar ETF is less?
What do you think of the target date Vanguard funds like the VFIFX? These have a slightly higher expense ratio but seem to be less to pay attention to.
Could you swap out the bonds for a company 401k/pension plan?
Great video and new sub! I'm 28 and just started my RRSP about a year ago and only use Vanguard myself, I'm canadian so I'm holding VCN, VFV, VIU, and VEE for global equity exposure, does this sound proper? I will be looking into some of vanguards canadian bond options, however when i look into that 10-20% in fixed income/bonds, should i be looking moreso into canadian/US bonds, or is there an equal weight bond etf? Thanks in advance!
Idk why everyone tries to push vanguards. Fidelity is just as good if not better because it doesn't have the damn 3-5k minimums.
I would never invest in anything international or any bonds… they go up and down just like the s&p, but they will never have a decent return, most won't even keep up with inflation. A HYSA gives you a better return than return than bonds/international.
Thank you
Your contents are always on point ❤ You and Gary Joe Wilde are highly recommendable investing experts every investor who wants to get rich investing must work with Unfortunately, don't know why Gary chose not to own a video channel here like other experts. He is long-established and very advanced in the field.
If you absolutely hate Vanguard because of specific reasons, and you don't want to use them, what would be some other portfolio?
Tae, I am a 60 yo self employed man who started late with retirement savings. Currently, I have $250K on 3 IRAs. Which investment fund strategy would you recommend to someone like me? Have you made a video on this?
Has this idiot looked at the performance of the three he's talking about.. total sham… much better investing in the spy and some sector mutual funds like industrials and healthcare..
What do you do when you're retired and have the nest egg but are tired of paying institutional costs
Thanks for the simple explanation! I use s&p 500 index fund with fidelity. They have a lot of same holdings as the total index fund. Be careful with some of these small investment companies not sure if they will be around 20 years from now.
I inititllay liked your content.. but every content thereon is so damned recycled. Come up with something new.
How do you do asset allocation with something like a Roth IRA, which has a contribution limit? What if you contribute the maximum amount early in the year, and then the allocation becomes offset later in the year? Is there nothing you can do about it?
I mostly prefer Forextrading & Investments
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Are you worried about being too exposed to a single investment bank? What if there's another Bear Stearns or Lehman Brothers?
Im investing in trading212 in Europe and I can't find any of those index funds or ETF from Vanguard in my broker. Anyone has advice on how to invest similarly but on different ETF's? Thanks.
if you have 10 million dollars, surely you should have a better TV
My 3 fund portfolio SCHD, QQQ, JEPI. Should outperform yours by a big margin.
International stocks should be 20%, but of what?
1) 20% of the stock allocation or
2) 20% of the total portfolio
How about drawing it down in retirement)
I prefer Berkshire Hathaway over bombs
it's amazing how valuable your content is, while being simple to understand.
Is investing in the stock market available for everybody. Me for instance, I am from Burkina Faso, studying in Morocco. Can I invest in the VOO ETF?
Im newly retired at 61, I agree with much you have to say. I've more or less run my 401k with this strategy.
Hi Tae! I know this video is old, but maybe you'll see this. Is there any reason I, as a 22-year-old, should not just put everything into an S&P 500/Total Stock Index fund? I feel that a % of my portfolio being eaten up by low returns from bonds is an inefficient use of my investing dollars. If so, what age would you recommend I start buying shares of a total bond market index fund? Thank you!
Great!!!
Could you do a piece on the various proposed wealth and transaction taxes many socialist politicians are proposing to loot our investments?
I use m1 finance and for the past couple years doing 67% vti, 23% vxus, 10% bnd. Just turned 40 so may eventually increase the bnd, but glad to see this is still close to what is recommended. Obviously 2022 kicked my butt, but I keep my weekly automatic deposits into this pie and have faith it will be good in 15-20 years.
Thoughts?
What are your thoughts on a US total market index like VTSAX already having international companies within it; aka JL Collins Simple path.
can you do a vanguard tutorial on how to buy index fund on their website ? and set up automative investing, i am having hard time navigating the vanguard website, i think a lot of people would be very appreciative of this if you actually show us how to do it
This is becoming one of my favorite channels! Thank you for the information and keeping it simple.
Are you trading these in a taxable brokerage account or Roth? I like the liquidity of the brokerage account
Great Video
Thanks. Did you get a Vanguard account yet? 30k views you would think they would give you one.
My summary
US stocks VTSAX
VTI is eq ETF
International stocks VTIAX
VXUS is eq ETF
Bond VBTLX
BND is eq ETF
Asset allocation your choice, but as an example
35% in bonds
20% of stocks in international
1 fund? Target date index would effectively do this 3 fund automatically for you, right?
It’s the start of 2023 and I’d like to rebalance my portfolio which is comprised of various tech stocks and index funds into a simpler 2 fund portfolio—Total market and bonds. But 2022 was horrible. I’ve lost like 25% of portfolio value. Rebalancing requires me to sell positions at this loss. Should I still rebalance? I’m 62 yrs old.
the sound effects were awful
I'm looking for long term investment. If I have invested $1000 in BND in 2007, the current value as of 2022 would still be under $1000. Is it a right step to include this in the portfolio? What am I missing?
Why does the ETF's have a lower cost? aren't they doing the exact thing? What are the pros and cons between a regular fund and an ETF?