Build The Balanced Portfolio, With ETFs
What is a balanced portfolio? A balanced portfolio is a portfolio built with just stocks and …
The three-fund portfolio is a lazy portfolio that consists of three ETFs.
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.
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
Name | Year to date | Return in 2021 | 10 year return | CAGR since 1989 (%) | STDEV | Draw Down | Expense ratio | Yield |
---|---|---|---|---|---|---|---|---|
Three Fund Portfolio (50-30-20) | -20.76 | 14.95 | 11.13 | 8.74 | 13.58 | -30.69% | 0.05% | 2.03 |
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.
Below you can see the returns of the best portfolios that we have benchmarked.
The three-fund portfolio is a hallmark of the Bogleheads forum.
At its core, the strategy slices your portfolio into three parts:
U.S. stocks
International stocks
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.
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.
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)
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!
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.
First of all, you need to get the book written by Tailor Larrimore.
Also, make sure you read the Bogleheads (Taylor Larimore) analysis of the portfolio!
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.
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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.
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.
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)