Investing can be a daunting task for beginners, especially considering the vast array of investment options available. However, one strategy that is often recommended for beginners is the 3 fund portfolio strategy.

The 3 fund portfolio strategy is a simple and effective way to build a diversified investment portfolio with just three low-cost index funds. These three funds typically cover the major asset classes – stocks, bonds, and international stocks – providing broad exposure to the market while keeping costs low.

The first fund in the 3 fund portfolio is a total stock market index fund, which gives investors exposure to a wide range of U.S. stocks. This fund tracks the performance of a broad stock market index, such as the S&P 500, and provides investors with exposure to all sectors of the economy. By investing in a total stock market index fund, investors can benefit from the growth potential of U.S. stocks while minimizing the risk associated with investing in individual stocks.

The second fund in the 3 fund portfolio is a total bond market index fund, which provides investors with exposure to a diversified portfolio of bonds. Bonds are considered lower risk investments compared to stocks, and can provide investors with income and stability during market downturns. By including a total bond market index fund in their portfolio, investors can reduce the overall volatility of their portfolio and cushion against market downturns.

The third fund in the 3 fund portfolio is an international stock market index fund, which gives investors exposure to stocks from international markets. Investing in international stocks can help investors diversify their portfolio and take advantage of growth opportunities in different regions of the world. By including an international stock market index fund in their portfolio, investors can benefit from the potential for higher returns and reduced correlation with U.S. markets.

Overall, the 3 fund portfolio strategy is a simple and efficient way for beginners to build a diversified investment portfolio. By investing in just three low-cost index funds that cover the major asset classes, investors can achieve broad exposure to the market while keeping costs low. This strategy can help beginners achieve their long-term investment goals and navigate the complexities of the investing world with ease.

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