Build Bogleheads Three Fund Portfolio With ETFs

What is the Three Fund Portfolio?

The three-fund portfolio is a lazy portfolio that consists of three ETFs.

Article contents

How do you build the Three Fund Portfolio?

Here’s how you build the Three Fund Portfolio with 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.

What is the historical return of the three-fund portfolio?

Below you see how the three-fund portfolio has performed in the past.

Portfolio data was last updated on 11th of November 2022, 11:40 ET

NameYear to dateReturn in 202110 year returnCAGR since 1989 (%)STDEVDraw DownExpense ratioYield
Three Fund Portfolio (50-30-20)-20.7614.9511.138.7413.58-30.69%0.05%2.03
Portfolio Performance for The Three-fund portfolio

Here is what the table is showing you

Year to date: This shows what the portfolio has returned this year starting from the first trading day of the year.

10 Year return: This shows the compounded annualized growth rate over a ten-year period. The current year is excluded from calculations.

CAGR since 1989: This shows the compounded annualized growth rate since 1989. The current year is excluded from calculations.

Expense ratio: This shows the cost of holding the portfolio if you were to construct the portfolio using the proposed ETFs.

Yield: This is the expected dividend yield of the portfolio.

Please note that past performance is not a guarantee of future returns.

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.

NameSee PortfolioYear to dateReturn in 202110 year returnCAGR since 1989 (%)Draw Down
Premium PortfolioPremium-20.9732.1413.211.81-35.43%
Premium PortfolioPremium-18.728.7816.5211.28-37.63%
Premium PortfolioPremium-19.6425.6716.2911.25-37.00%
Premium PortfolioPremium-23.9913.4911.0311.21-44.87%
Premium PortfolioPremium-12.028.1714.4711.14-35.26%
Premium PortfolioPremium-14.924.7511.8510.99-36.46%
Premium PortfolioPremium-14.7929.0213.1510.99-40.85%
Premium PortfolioPremium-20.620.711.4510.93-37.91%
Premium PortfolioPremium-15.1224.5111.8710.88-36.35%
Premium PortfolioPremium-19.3822.9214.9910.85-32.77%
The 10 Best Performing 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:

  1. U.S. stocks

  2. International stocks

  3. Bonds

That’s it.

It is simple.

It is effective.

It is elegant.

The portfolio makes room for rebalancing to work its magic while maintaining 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.

Taylor Larrimore of the Bogleheads forum is a strong advocate of the portfolio and has written a book detailing the strategy.

It’s a fantastic book with plenty of evidence to show you why you need to implement this simple strategy.

The Bogleheads’ Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk

The Bogleheads’ Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk

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 3 ETFs. It you want more risk you can divide more to the stock part of the portfolio.

If you want more safety, then you should increase your allocation to bonds.

Portfolio allocation for the Three Fund portfolio

Here’s the asset allocation for the Three-Fund Portfolio.

  • 42.00% Total US Market (VTI)

  • 18.00% International Developed (VEU)

  • 40.00% U.S. Total Bond Market (BND)

What are the advantages and disadvantages of the Three-fund portfolio?

Here are the advantages 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 cheap ETFs.

  • The investment portfolios have good diversification. You own a slice of all the world’s assets.

  • It is John Bogle approved!

John C. Bogle - Founder of Vanguard and supreme commander of index investing

Here are the disadvantages the Three-fund portfolio

  • The three-fund is not sexy, and you won’t be bragging about it at parties. (You do own Tesla though - just not directly!)

  • 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 make use of the power of rebalancing.

Where can I learn more about the Three-Fund portfolio?

First of all, you need to get the book written by Tailor Larrimore.

The Bogleheads’ Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk

Also, make sure you read the Bogleheads (Taylor Larimore) analysis of the portfolio!

Suggestions for your next steps

Finding the right portfolio is hard. Maintaining your portfolio is also daunting.

If you want access to our high-performing portfolios then you want to take a look at the premium portfolios.

This is a paid product that gives you the 20 best-performing portfolios since 1989. The portfolios represent a great opportunity low-cost for you to get more money from your investment portfolios. We think it’s a no-brainer. The 20 portfolios are the best among the literally hundreds of other portfolios we have benchmarked since we started.

You stand to gain thousands more dollars EACH YEAR for the price of a few months of Netflix.

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.

What is the 3 Fund Portfolio for Europeans?

Here is how you build the 3 Fund Portfolio with ETF suitable for Europeans:

  • 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 consists 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)