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  • Three Fund Portfolio

    I use a three fund portfolio.  Does anyone else on this forum do the same?  I know the WCI and PoF have somewhat more complex portfolios.

  • #2
    I do in my very small portfolio.

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    • #3
      I do in my portfolio.  Simple, cheap, no tracking error, easy to implement across multiple accounts.  I don't overweight reits, emerging, factors because my plan is good enough and I can stick with it now coming up on 10 years.

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      • #4
        I do, I like the simplicity

        Company Roth 401k = 3 fund portfolio using principal's funds

        Personal and spousal Roth Ira = 3 fund portfolio at vanguard

        Child's 529 = aggressive growth portfolio (2/3 total stock market, 1/3 International Stock market) at vanguard

        Taxable account (vast majority of net worth) = 3 fund portfolio with intermediate term munis instead of total bond fund at vanguard

        Taxable account (aggressive subdivision, makes up ~20% of net worth currently) = 100% total stock market at vanguard

        Hsa = 100% domestic stock fund (I'm blanking on the name of my Hsa provider currently)

        Wife's traditional 401k = target date fund




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        • #5
          I like the simplicity of it, and I've written a post about the three fund portfolio that you may have read.

          If you have a taxable account, and want to tax loss harvest, you can't always have a three fund portfolio, but your slightly more complex portfolio can mirror the three fund portfolio's return.

          I also like a bit of REIT exposure than VTSAX or another total stock market fund gives you (3% to 4%), so I prefer something closer to a four fund portfolio. I do a little more slicing, dicing, tilting, and of course, tax loss harvesting (over $45,000 this year, an up year) so my portfolio looks busier, but it's not that far off from a four fund portfolio, performance wise, anyway.

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          • #6




            I do, I like the simplicity

            Company Roth 401k = 3 fund portfolio using principal’s funds

            Personal and spousal Roth Ira = 3 fund portfolio at vanguard

            Child’s 529 = aggressive growth portfolio (2/3 total stock market, 1/3 International Stock market) at vanguard

            Taxable account (vast majority of net worth) = 3 fund portfolio with intermediate term munis instead of total bond fund at vanguard

            Taxable account (aggressive subdivision, makes up ~20% of net worth currently) = 100% total stock market at vanguard

            Hsa = 100% domestic stock fund (I’m blanking on the name of my Hsa provider currently)

            Wife’s traditional 401k = target date fund
            Click to expand...


            DarrVao777 - which munis do you have to make up a 3 fund portfolio in your taxable acct?

            I've maxed all retirement vehicles so taxable acct is going to start playing a larger role in my investing.

            Thanks!

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            • #7
              The longer I invest the more interested and impressed by simplicity and have been trimming funds, sectors and factors when it made sense. Trying to tinker less. I have muni bonds in taxable, but no government bonds since they looked to have zero upside for months now but will eventually try to get them in there as well.

              3 funds only sounds pretty nice.

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              • #8
                I am an incorrigible slicer-and-dicer and tinkerer at the margins. Ninety percent of the portfolio is set in pretty boring passive investments, though quite a bit more than three funds. Like Zaphod, I do appreciate the beauty of the simplicity.

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                • #9







                  I do, I like the simplicity

                  Company Roth 401k = 3 fund portfolio using principal’s funds

                  Personal and spousal Roth Ira = 3 fund portfolio at vanguard

                  Child’s 529 = aggressive growth portfolio (2/3 total stock market, 1/3 International Stock market) at vanguard

                  Taxable account (vast majority of net worth) = 3 fund portfolio with intermediate term munis instead of total bond fund at vanguard

                  Taxable account (aggressive subdivision, makes up ~20% of net worth currently) = 100% total stock market at vanguard

                  Hsa = 100% domestic stock fund (I’m blanking on the name of my Hsa provider currently)

                  Wife’s traditional 401k = target date fund
                  Click to expand…


                  DarrVao777 – which munis do you have to make up a 3 fund portfolio in your taxable acct?

                  I’ve maxed all retirement vehicles so taxable acct is going to start playing a larger role in my investing.

                  Thanks!
                  Click to expand...


                  I use Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX)

                  Comment


                  • #10
                    We expect our portfolio to become more simple over time, although I doubt we'll ever get to the three fund portfolio. Some sort of real estate and small/value tilt seems worthwhile to me. I mean, think about what there isn't in the three fund- no international bonds, no TIPS, no muni bonds, no real estate outside of publicly traded REITs, no tilt to any factors, etc. In fact, since the correlation between TSM and S&P 500 is something like 0.99, it's like you don't even own any smaller stocks at all.

                    I think it was Einstein who said you should make things as simple as possible, but not simpler. In my view, the 3 fund goes simpler. But is it reasonable? Sure. And any reasonable portfolio combined with a physician income and a reasonable savings rate will get you to financial freedom.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

                    Comment


                    • #11




                      Besides small value, there isn’t much evidence for beyond 3 fund. My parts which aren’t of the 3 include small value, very small reit, and I gamble a small percentage on individual stocks for fun but recognize it as gambling.
                      Click to expand...


                      Why would you own bonds in just one country when you're interested in owning stocks in more than one country?

                      Why would publicly traded REITS represent real estate as an asset class when it is such a tiny amount of the real estate in the world?

                      Why wouldn't adding TIPS, a completely different asset class with favorable characteristics, to a portfolio be a good idea?

                      I just don't see it as being anything particularly special as portfolios go. Reasonable. Yes. Special. No. There are simpler portfolios. There are more broadly diversified portfolios. There are lower cost portfolios.
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                      • #12
                        Mine is the exact opposite of a 3 fund portfolio. Multiple individual stock in many sectors, with many in dividend reinvestment automated setting.

                        Five terrible mutual funds that I got earlier on in the 1990's that I should sell and buy more of one or more stocks.

                        No bonds. I don't need the security of steady returns in latter life. I have income from real estate business and hence don't need to worry about a downturn in the stock market affecting my income.

                        And all neatly tied together in Quicken.

                        Comment


                        • #13
                          I have several funds, small caps, reits, munis, had some international bonds at one point, and some specific sector funds...but Im not sure the return is actually there above a simpler 3 fund portfolio in reality. Doesnt mean Ive made it to the adoption level, but I have come to grips with the reality is just as likely to perform within the same margin of error.

                          Theres zero point in being in any international bonds right now (broad funds), they have almost guaranteed zero return or worse going forward. Bonds are much simpler than stocks, you can rely on getting the nominal coupon value which then you can adjust to real to see how well or poorly it does.

                          All these factor tilts have for the most part been exposed and utilized by so many companies that they are hardly what they used to be. Remember, even 20 years ago there was not the reams of data we have available now and that made for information asymmetry that could and was exploited. Its just not what it is now. Value, can be decades of losing depending on how you define it, and even small cap premia is very misleading as it was very heavily influenced by changes in definitions and mergers of markets/indexes and actually a great majority of the small cap premia is really micro cap, which depending on the index fund you buy you might get minimal to zero exposure to.

                          In reality, the only factor out there that continues to be true is risk. You also have to be careful to check annualized returns with the overally volatility of said index since even a much higher looking return can result in very unfavorable real results if its a volatile sequence (like microcaps/sc) due to the geometric and dependent nature of the return path. I dont remember the exact period but there was a stretch where small caps did around 8% annualized but turned a $1 into $0.52, I think this was around the 29 crash and depression.

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                          • #14
                            We've been using five funds for a while, I should probably look at that to make sure it makes sense, we have 20+ years left.  Is there any benefit to trying to manage 5 funds across Solo401K, Roth and 401K?  Or is five funds in each plan basically the same as long as you keep the allocation?

                            30% Vanguard Total Stock Market Index (VTSMX, VTI)
                            10% Vanguard REIT Index Fund (VGSIX, VNQ)
                            30% Vanguard Total International Stock Index (VGTSX, VXUS)
                            15% Vanguard Total Bond Market Index (VBMFX, BND)
                            15% Vanguard Inflation-Protected Securities Fund (VIPSX, TIP*)

                            Comment


                            • #15


                              Is there any benefit to trying to manage 5 funds across Solo401K, Roth and 401K? Or is five funds in each plan basically the same as long as you keep the allocation?
                              Click to expand...


                              I think it can be simpler to manage across the funds, but I suppose it depends on the relative size of the accounts in terms of dollar amounts. If two are small (less than 15% of total), they could each have one fund in them, and you could keep all five funds (or 3 or 4 of them) in the account with the largest balance.

                              There is also the question of asset Location, which WCI addressed in a recent post, challenging my thinking.

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