Lazy Portfolio ETF

Lazy Portfolio ETF

Lazy permanent portfolios built with ETFs

Bogleheads Three Funds Portfolio: ETF allocation and returns

The Bogleheads Three Funds Portfolio is a Very High Risk portfolio and can be implemented with 3 ETFs .

It's exposed for 80% on the Stock Market.

In the last 30 Years , the Bogleheads Three Funds Portfolio obtained a 7.78% compound annual return , with a 12.41% standard deviation.

Asset Allocation and ETFs

The Bogleheads Three Funds Portfolio has the following asset allocation:

The Bogleheads Three Funds Portfolio can be implemented with the following ETFs:

Most of Lazy Portfolios are made of common components (asset classes), very simple and well defined. For a more complete view, find out the most common ETFs you can use to build your portfolio.

Portfolio and ETF Returns as of Dec 31, 2023

The Bogleheads Three Funds Portfolio guaranteed the following returns.

  • no fees or capital gain taxes.
  • a rebalancing of the components at every January 1st. How do returns change with different rebalancing strategies?
  • the reinvestment of dividends.
  • the actual US Inflation rates.

In 2023, the Bogleheads Three Funds Portfolio granted a 2.62% dividend yield . If you are interested in getting periodic income, please refer to the Bogleheads Three Funds Portfolio: Dividend Yield page.

Capital Growth as of Dec 31, 2023

Hidden Potential: The Science of Achieving Greater Things

Portfolio Metrics as of Dec 31, 2023

Metrics of Bogleheads Three Funds Portfolio , updated as of 31 December 2023.

  • Annualized Portfolio Return : it's the annualized geometric mean return of the portfolio
  • Deepest/Longest Drawdown : a drawdown refers to the decline in value from a relative peak value to a relative trough. The deepest (or maximum) drawdown is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained. The longest drawdown is the period observed from a peak to the subsequent peak with the greatest duration.
  • Longest negative period : it's the maximum period for which an overall negative return has been observed
  • Standard Deviation : it's a measure of the dispersion of returns around the mean
  • Sharpe Ratio : it's a measure of risk-adjusted performance of the portfolio. It's calculated by dividing the excess return of the portfolio over the risk-free rate by the portfolio standard deviation. The risk-free rate here considered is the 1-3 Mth T-Bill return
  • Sortino Ratio : another measure of risk-adjusted performance of the portfolio. It's a modification of the Sharpe Ratio (same formula but the denominator is the portfolio downside standard deviation)
  • Ulcer Index : it's a measure of downside risk that quantifies the depth and duration of drawdowns in an investment portfolio
  • Best/Worst 10Y returns : the best and the worst 10-year return over a time frame
  • Rolling Returns : N-year returns over a time frame, calculated over all the available data source (best, worst, % of positive returns). Each rolling period, longer than the longest negative period , yielded a non-negative minimum return.
  • Safe Withdrawal Rate (SWR) : it's the percentage of the original portfolio balance that can be withdrawn at the end of each year with inflation adjustment, without the portfolio running out of money ( dollar amount withdrawal ).
  • Perpetual Withdrawal Rate (PWR) : it's the percentage of portfolio balance that can be withdrawn at the end of each year, while retaining the inflation adjusted portfolio balance ( percentage withdrawal ).

Portfolio Components Correlation

Correlation measures to what degree the returns of the two assets move in relation to each other.

If you want to learn more about historical correlations, you can find out here how the main asset class are correlated to each other .

A drawdown refers to the decline in value from a relative peak value to a relative trough. A maximum drawdown is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained.

Rolling Returns

( more details )

A rolling return is a measure of investment performance that calculates the return of an investment over a set period of time, with the starting date rolling forward . This approach can provide a more accurate representation of the investment's historical performance and helps investors to evaluate the investment's consistency over time.

If you need a deeper detail about rolling returns, please refer to the Bogleheads Three Funds Portfolio: Rolling Returns page.

Seasonality

In which months is it better to invest in Bogleheads Three Funds Portfolio ?

Monthly Returns

This section provides a visual/tabular representation of the performance variability in the Bogleheads Three Funds Portfolio over time. It illustrates the distribution of monthly returns, showcasing the range and frequency of positive and negative returns.

  • VTI - Vanguard Total Stock Market (VTI) , up to December 2001
  • VEU - Vanguard FTSE All-World ex-US (VEU) , up to December 2007
  • BND - Vanguard Total Bond Market (BND) , up to December 2007

Portfolio efficiency

The following portfolios granted a higher return over 30 Years and a less severe drawdown at the same time.

Here's a list containing the Best Classic Portfolios , with the highest returns over 30 Years and Very High Risk categorization.

Principios

  • 100 FREE STRATEGIES
  • Products & Tools
  • Trading Strategies
  • Candlestick Strategies
  • Investment Strategies
  • Bitcoin & Crypto Strategies
  • Python Trading Strategies
  • Traders and trading books
  • Risk Management
  • Trading Psychology
  • Day Trading Strategies
  • Seasonal Strategies
  • Research Papers Strategies
  • Trading Indicator Strategies
  • Backtesting Trading Strategies
  • Trading Strategy Glossary
  • Become A Member

boglehead portfolio allocation

  • Trading strategies

Bogleheads 3 and 4 Fund Portfolio: Backtest and Performance Analysis

Jack Bogle’s famous advice was to avoid searching for individual stocks, sectors, or markets that may perform better and simply invest in the entire market. This means using index funds to build a diversified portfolio. The Bogleheads 3 Fund Portfolio (global stocks, U.S. bonds) and Bogleheads 4 Fund Portfolio (global stocks, global bonds) are good examples of the approach. Let’s find out what they are about.

Boglehead 3 Fund Portfolio is a simple, low-cost investment strategy that consists of three index funds: a U.S. Total Stock Market Index Fund, an International Stock Market Index Fund, and a U.S. Total Bond Market Index Fund. Boglehead 4 Fund Portfolio adds Total International Bond Market Index Fund to the mix. Both portfolios aim to provide diversification and long-term growth, with a focus on minimizing costs .

In this post, we take a look at the Bogleheads 3 Fund Portfolio (global stocks, U.S. bonds) and Bogleheads 4 Fund Portfolio (global stocks, global bonds). We end the article with backtests of both portfolios.

Table of contents:

What is the Bogleheads 3 Fund Portfolio?

The Bogleheads 3 Fund Portfolio is a low-cost investment strategy that was popularized by the Bogleheads, a group of investors who follow the philosophy of investing legend Jack Bogle. The strategy involves investing in three index funds that provide broad exposure to the stock and bond markets. The three funds are:

  • U.S. Total Stock Market Index Fund : This fund provides exposure to the entire U.S. stock market, including small, mid, and large-cap stocks.
  • International Stock Market Index Fund : This fund provides exposure to stocks in developed and emerging markets outside of the U.S.
  • U.S. Total Bond Market Index Fund : This fund provides exposure to the entire U.S. bond market, including government and corporate bonds.

The Bogleheads 3 Fund Portfolio is designed to be a simple, low-cost, and diversified investment strategy. By investing in the three funds, investors can potentially capture the long-term growth of the stock and bond markets while reducing the risks associated with investing in individual stocks or bonds. The strategy is based on the idea of “buy and hold” investing, which involves making regular contributions to the portfolio and holding the investments for the long term.

How to Invest in a Bogleheads 3 Fund Portfolio

To invest in a Bogleheads 3 Fund Portfolio, follow these steps:

  • Open a brokerage account : Open an account with a brokerage firm that offers the index ETFs you need to construct your portfolio.
  • Choose your funds : Select a U.S. Total Stock Market Index Fund (such as Vanguard Total Stock Market- VTI), an International Stock Market Index Fund (such as Vanguard FTSE All-World ex-US – VEU), and a U.S. Total Bond Market Index Fund (Vanguard Total Bond Market – BND).
  • Determine your asset : Decide how much of your portfolio you want to allocate to each of the three funds. A common allocation is to have 50% of your portfolio invested in the U.S. stock market, 30% invested in the international stock market, and 20% invested in bonds.
  • Start investing : Start by investing a lump sum or setting up a regular contribution plan. If you’re starting with a small amount, consider using dollar-cost averaging to reduce the impact of market volatility.
  • Monitor and rebalance : Over time, the values of your index funds may change and your asset allocation may become imbalanced. Consider periodically rebalancing your portfolio to maintain your target allocation.

What are the Benefits of a Bogleheads 3 Fund Portfolio?

The Bogleheads 3 Fund Portfolio has several benefits, including:

  • Diversification : The portfolio provides exposure to multiple asset classes and markets, reducing the risk of investing in any one individual stock or market.
  • Low costs : By investing in low-cost index funds, investors can minimize the impact of expenses on their returns. This can result in a higher return over the long term.
  • Ease of use : The Bogleheads 3 Fund Portfolio is simple and straightforward, making it easy for investors to understand and implement.
  • Long-term growth potential : The strategy is based on the idea of “buy and hold” investing, which can potentially provide long-term growth for investors.
  • Consistency : The strategy is consistent with the philosophy of investing legend Jack Bogle, who advocated for low-cost and diversified investing.

What are the Risks Involved with a Bogleheads 3 Fund Portfolio?

While a Bogleheads 3 Fund Portfolio has several benefits, there are also some risks involved, including:

  • Market risk : The stock and bond markets are subject to fluctuations, so investing in a Bogleheads 3 Fund Portfolio does not guarantee a profit or protect against loss.
  • Inflation risk : The value of the portfolio can be eroded over time by inflation, especially if the portfolio is not regularly rebalanced.
  • Currency risk : The international stock market fund exposes investors to currency risk, which is the risk that changes in currency exchange rates will negatively impact the value of the portfolio.
  • Interest rate risk : The bond market is subject to interest rate risk, which is the risk that changes in interest rates will negatively impact the value of the bond portion of the portfolio.
  • Political risk : The international stock market fund exposes investors to political risk, which is the risk that changes in government policies or political events will negatively impact the value of the portfolio.

What Assets Does the Bogleheads 3 Fund Portfolio Include?

The Bogleheads 3 Fund Portfolio typically includes three types of low-cost index funds:

  • Total Stock Market Index Fund (for example, the ETF with the ticker code VTI): This fund provides exposure to the entire U.S. stock market and includes all types of companies, regardless of size or sector.
  • Total International Stock Market Index Fund (for example, the ETF with the ticker code VEU): This fund provides exposure to the global stock market and includes companies from developed and emerging markets.
  • Total Bond Market Index Fund (for example, the ETF with the ticker code BND): This fund provides exposure to the U.S. bond market and includes a variety of bonds with different maturities and credit qualities.

The goal of the Bogleheads 3 Fund Portfolio is to provide broad market exposure and diversification while minimizing costs and reducing the risk of investing in individual stocks. By investing in low-cost index funds, investors can potentially achieve long-term growth and reduce the impact of expenses on their returns.

How to Select the Right Funds for the Bogleheads 3 Fund Portfolio

To select the right funds for a Bogleheads 3 Fund Portfolio, consider the following steps:

  • Look for low-cost index funds : Choose funds with low expense ratios to minimize the impact of fees on your returns.
  • Choose a Total Stock Market Index Fund : Select a fund that tracks the entire U.S. stock market and includes a broad range of companies.
  • Choose a Total International Stock Market Index Fund : Select a fund that tracks the global stock market and includes companies from both developed and emerging markets.
  • Choose a Total Bond Market Index Fund : Select a fund that tracks the U.S. bond market and includes a variety of bonds with different maturities and credit qualities.
  • Consider the fund’s size and liquidity : Select funds that are large enough to be easily traded, and have a high level of liquidity to ensure that you can buy and sell shares without affecting the price.
  • Consider the fund’s tax efficiency : Select funds that are tax-efficient to minimize the impact of taxes on your returns.

All this considered, we believe VTI, VEU, and BND might be suitable.

Boglehead 3 allocations

John Bogle didn’t give specific recommendations on allocating the three different assets. In this article, we allocate 50% to US stocks, 30 to international stocks, and 20% to bonds.

What is the Bogleheads 4 Fund Portfolio?

The Bogleheads 4 Fund Portfolio is an investment strategy that includes four low-cost index funds to provide broad market exposure and diversification. The portfolio includes:

  • Total International Bond Market Index Fund ( for example, the ETF with the ticker code VXUS or IXUS): This fund provides exposure to the global bond market and includes bonds from both developed and emerging markets.

The goal of the Bogleheads 4 Fund Portfolio is to provide even greater diversification and include a mix of U.S. and international bonds. By investing in low-cost index funds, investors can potentially achieve long-term growth and reduce the impact of expenses on their returns.

How to Invest in a Bogleheads 4 Fund Portfolio

To invest in a Bogleheads 4 Fund Portfolio, follow these steps:

  • Determine your investment goals : Consider your risk tolerance, investment time horizon, and financial goals.
  • Choose low-cost index funds : Select funds with low expense ratios to minimize the impact of fees on your returns.
  • Allocate your investments : Decide how much of your portfolio to allocate to each of the four funds based on your investment goals and risk tolerance.
  • Make regular contributions : Consider making regular contributions to the portfolio to take advantage of dollar-cost averaging.
  • Monitor and rebalance : Regularly review and rebalance the portfolio to ensure it remains aligned with your investment goals and risk tolerance.

We believe VTI, VEU, BND, and VXIS/IXUS might be suitable.

What are the Benefits of a Bogleheads 4 Fund Portfolio?

The Bogleheads 4 Fund Portfolio offers several benefits, including:

  • Global diversification : The portfolio includes exposure to both U.S. and international stocks and bonds, reducing the impact of any single market or sector on your returns.
  • Low-cost investing : By investing in low-cost index funds, you can minimize the impact of fees and expenses on your returns.
  • Ease of management : The portfolio is relatively simple to manage and does not require frequent monitoring or rebalancing.
  • Potential for long-term growth : By investing in a diversified portfolio of low-cost index funds, you can potentially achieve long-term growth.

What Assets Does the Bogleheads 4 Fund Portfolio Include?

The Bogleheads 4 Fund Portfolio typically includes the following assets:

  • Total U.S. Stock Market Index Fund (VTI): This fund tracks the performance of the U.S. stock market as a whole, offering exposure to large, mid, and small-cap stocks.
  • Total International Stock Market Index Fund (VEU): This fund tracks the performance of international stocks, offering exposure to international companies and economies.
  • Total U.S. Bond Market Index Fund (BND): This fund tracks the performance of the U.S. bond market, offering exposure to a variety of U.S. bonds.
  • Total International Bond Market Index Fund (VXUS/IXUS): This fund tracks the performance of international bonds, offering exposure to bonds issued by international governments and corporations.

This portfolio typically seeks to provide exposure to a variety of asset classes and markets, allowing for diversification and the potential for long-term growth.

How to Select the Right Funds for the Bogleheads 4 Fund Portfolio

When selecting funds for the Bogleheads 4 Fund Portfolio, consider the following:

  • Type of fund : Choose the total stock market, bond market, international stock market, and international bond market funds.
  • Expense Ratio : Look for low-cost index funds with an expense ratio under 0.10%.
  • Fund Provider : Consider reputable and established fund providers with a strong track record.
  • Fund Objective : Make sure the funds align with your investment goals and risk tolerance.
  • Fund Performance : Review the historical performance of the funds, but keep in mind that past performance is not a guarantee of future results.

Boglehead 4 allocations

John Bogle didn’t give specific recommendations on allocating the four different assets. This article allocates 50% to US stocks, 30 to international stocks, 10% to bonds, and 10% to international bonds.

What is the Difference Between the Bogleheads 3 and 4 Fund Portfolios?

While both portfolios seek to provide diversified exposure to a variety of asset classes and markets and are based on the principle of passive investing and low-cost index funds, they differ in terms of the number of funds they include and the specific assets they hold.

The Bogleheads 3 Fund Portfolio consists of three funds: a Total U.S. Stock Market Index Fund, a Total International Stock Market Index Fund, and a Total U.S. Bond Market Index Fund.

On the other hand, the Bogleheads 4 Fund Portfolio consists of four funds: a Total U.S. Stock Market Index Fund, a Total International Stock Market Index Fund, a Total U.S. Bond Market Index Fund, and a Total International Bond Market Index Fund.

The Bogleheads 4 Fund Portfolio includes an additional fund that provides exposure to the international bond market, whereas the Bogleheads 3 Fund Portfolio does not.

Which Bogleheads Portfolio is Best for a Global Investor?

The Bogleheads 4 Fund Portfolio may be a better option for a global investor as it includes exposure to the international stock and bond markets. This provides a more diversified portfolio compared to the Bogleheads 3 Fund Portfolio, which only includes exposure to the international stock market.

However, both portfolios have their advantages and disadvantages, and the best option for a global investor will depend on their individual investment goals, risk tolerance, and other factors. It is important to consider the asset allocation, expense ratio, and historical performance of each fund in the portfolio before making a decision.

How to Create a Balanced Investment Mix with the Bogleheads Portfolios

To create a balanced investment mix with the Bogleheads portfolios, it is important to consider your individual investment goals, time horizon, and risk tolerance.

For a balanced mix, allocating a portion of your portfolio to each of the funds in the Bogleheads 3 or 4 Fund Portfolio is recommended, depending on which one you choose. A common allocation strategy is to invest in a ratio of approximately 60% stocks and 40% bonds.

How Market Conditions Affect the Boglehead Portfolios

Market conditions can have a significant impact on the performance of the Bogleheads portfolios, as they are invested in a mix of stocks and bonds, both of which can be affected by changes in market conditions. For example, in times of economic uncertainty or market volatility, stock prices may fall, which can negatively impact the stock components of the portfolios. Conversely, when the economy is growing and the market is stable, stock prices may increase, providing positive returns for the portfolios.

Bonds can also be affected by changes in market conditions, with changes in interest rates significantly impacting bond prices. In general, rising interest rates can lead to lower bond prices and lower returns, while falling interest rates can boost bond prices and returns.

It is important to keep in mind that the Boglehead4s portfolios are designed for long-term investing and market fluctuations are a normal part of the investment process. By staying disciplined and avoiding reactive decisions, investors can weather short-term market conditions and benefit from the long-term returns of a well-diversified portfolio.

Bogleheads 3 And 4 Fund Portfolio Backtest – Do They Work?

Let’s backtest both portfolios using the ticker codes mentioned in the article. We start with the Bogleheads 3 portfolio:

Bogleheads 3 portfolio backtest and performance

Trading rules.

boglehead portfolio allocation

The annual return is 7.6%, dividends are included and reinvested, and max drawdown is 28%.

Bogleheads 4 portfolio backtest and performance

We allocated 50% to VTI, 30% to VEU, 10% to BND, and 10% to IXUS. We got the following equity curve:

The annual return was 7.8%and max drawdown was 31%.

List of trading strategies

We have written over 1200 articles on this blog since we started in 2012. Many articles contain specific trading rules that can be backtested for profitability and performance metrics.

The trading rules are compiled into a package where you can purchase all of them (recommended) or just a few of your choice. We have hundreds of trading ideas in the compilation.

The strategies are taken from our landing page of profitable trading strategies .

The strategies also come with logic in plain English (plain English is for Python trading and backtesting ).

For a list of the strategies we have made, please click on the green banner:

These strategies must not be misunderstood for the premium strategies that we charge a fee for:

How do I invest in a Bogleheads 3 Fund Portfolio?

The Bogleheads 3 Fund Portfolio is a low-cost investment strategy popularized by Jack Bogle. It consists of three index funds: U.S. Total Stock Market, International Stock Market, and U.S. Total Bond Market. Steps include opening a brokerage account, choosing specific index funds (e.g., VTI, VEU, BND), determining asset allocation, starting investments, and monitoring for periodic rebalancing.

What is the Bogleheads 4 Fund Portfolio and its benefits?

The Bogleheads 4 Fund Portfolio adds international bonds to the 3 Fund Portfolio, offering global diversification, low-cost investing, ease of management, and potential for long-term growth. The Bogleheads 4 Fund Portfolio adds international bonds to the 3 Fund Portfolio, offering global diversification, low-cost investing, ease of management, and potential for long-term growth.

How do market conditions affect Bogleheads portfolios?

Market conditions can impact performance; for instance, economic uncertainty or volatility may affect stock prices, and changes in interest rates can impact bonds. The backtest showed an annual return of 7.6%, dividends included and reinvested, with a maximum drawdown of 28%.

RELATED ARTICLES MORE FROM AUTHOR

 width=

Supertrend Indicator Trading Strategy – (Backtest And Performance)

 width=

Bitcoin Bollinger Bands Trading Strategy (Performance, Backtest, Setup, Rules)

The first rate cut by the federal reserve: analyzing its effect on s&p 500, rosh hashanah trading strategy – how does the stock market perform (backtest, performance, code), etf sector rotation trading strategy – (vix, setup, rules, backtest, results), dow jones new all-time high trading strategy (rules and backtest), all-time high trading strategy for international stocks – (setup, rules, backtest, results), gold envelope trading strategy – (performance, backtest, setup, rules), 5 bond trading strategies (treasury) – (video, backtest, example, performance, setup, and rules).

boglehead portfolio allocation

Cross-Asset Return Predictability: Carry Trades, Stocks and Commodities

What percentage of cfd traders lose money (broker trading statistics), what happens after a good year in the stock market (returns..., popular category.

  • Trading strategies 678
  • Research Papers Trading Strategies 395
  • Traders and trading books 71
  • Seasonal strategies 63
  • Investing 63
  • Trading indicators 54
  • Candlestick patterns 53
  • Privacy Policy
  • Disclaimer – Terms of Use
  • Rational Thinking
  • About This Site
  • Testimonials
  • Copyrighted, But…
  • Trading Strategies Daily

Session expired

Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.

country flag

  • Stock Trading For Beginners

How to Build the Boglehead 3-Fund Portfolio

The Boglehead 3-fund portfolio has become one of the most popular investment portfolios among DIY investors because it is easy to understand and implementation is straightforward.

For this reason, it’s also sometimes called a lazy portfolio or lazy 3-fund portfolio because it’s simple and easy to execute.

The Boglehead 3-fund portfolio consists of a:

  • US stock market index fund
  • international stock market index fund, and
  • bond market index fund

The specific funds you choose will depend on the broker or investment platform you’re using (e.g., Vanguard, Fidelity, etc.), but there are many options available that will fit the bill.

The funds often come in the form of an ETF , which are cheapest, or in the form of a mutual fund .

Allocations in the 3-fund portfolio

Once you’ve chosen your three index funds, all you need to do is decide how much money you want to allocate to each one.

A common split is 60/30/10, with 60 percent in stocks , 30 percent in bonds , and 10 percent in cash (e.g., savings account, money market account).

But you can adjust this to suit your own risk tolerance and investment goals.

For example, if you’re retired, looking for income and are more concerned about capital preservation, you might want to allocate a larger percentage to bonds.

Or, if you have a longer time horizon and are willing to take on more risk, you could invest a higher percentage in stocks.

The Boglehead 3-fund portfolio is a simple way to build a diversified investment portfolio with just three index funds.

It’s suitable for both beginner investors and experienced DIY investors alike. So if you’re looking for an easy way to invest without having to choose individual stocks or manage your own portfolio, this could be the right option for you.

There is a lot of value in having a simple portfolio , even for financial professionals.

Vanguard ETFs for the 3-fund portfolio

The three Vanguard ETFs that could work for the 3-fund portfolio include:

  • Vanguard S&P 500 ETF (VOO)
  • Vanguard Total International Stock ETF (VXUS)
  • Vanguard Total Bond Market ETF (BND)

Fidelity ETFs for the 3-fund portfolio

The three Fidelity ETFs that could work for the 3-fund portfolio include:

  • Fidelity ZERO Large Cap Index Fund (FNILX)
  • Fidelity ZERO Extended Market Index Fund (FZIPX)
  • Fidelity Government Income Fund (FGOVX)

3-fund portfolios from other providers

Other providers also offer index funds that could work for a 3-fund portfolio. Some examples include:

  • Schwab US Broad Market ETF (SCHB)
  • iShares Core S&P 500 ETF (IVV)
  • SPDR S&P 500 ETF (SPY)

How has the 3-fund portfolio performed over time?

Given there’s no official allocation associated with the 3-fund portfolio, there’s no easy way to say how it’s performed.

What we can do is take different example allocations and look at their performance over time.

Let’s look at two example portfolios.

Portfolio Allocations

Portfolio returns.

Portfolio 2, which has more bonds, has lower returns but has better risk-adjusted returns , as evidenced through lower Sharpe and Sortino ratios, as well as lower drawdowns and less volatility .

Portfolio Growth and Annual Returns

How has the 3-fund portfolio performed over time?

Annual returns of the three fund categories:

How has the 3-fund portfolio performed over time?

The chart below illustrates Portfolio 2’s shallower drawdowns, especially during the dot-com crash from 2000-02 and the 2008 financial crisis:

boglehead portfolio allocation

Drawdowns for Historical Market Stress Periods

Portfolio return and risk metrics, boglehead 3-fund portfolio faqs, what is the boglehead 3-fund portfolio.

The Boglehead 3-fund portfolio is a simple, low-cost portfolio that consists of just three index funds.

It’s suitable for both beginner investors and experienced DIY investors alike.

Does the Boglehead 3-fund portfolio outperform the stock market?

On a risk-adjusted basis, it will tend to do so given the bond portion provides diversification .

The international stock portfolio also helps diversify the US stocks portion on the equity side.

What are some Boglehead 3-fund portfolio ETFs?

There are many different Boglehead 3-fund portfolio ETFs available from different providers.

Some examples include Vanguard S&P 500 ETF (VOO), Vanguard Total International Stock ETF (VXUS), and Vanguard Total Bond Market ETF (BND).

Can I lose money in the Boglehead 3-fund portfolio?

As with any investment, there’s always a risk you could lose money.

However, over the long term, the Boglehead 3-fund portfolio has outperformed the stock market on a risk-adjusted basis.

How do I choose the right Boglehead 3-fund portfolio for me?

The best way to choose the right Boglehead 3-fund portfolio for you is to consider your investment goals and risk tolerance.

For example, if you are retired and more focused on generating income, you might want to allocate a larger percentage to bonds.

What is the Boglehead 3-fund portfolio asset allocation?

There is no official Boglehead 3-fund portfolio asset allocation, as it’s all a matter of discretion.

The basic concept of the 3-fund portfolio is to allocate to the basic framework of domestic stocks, international stocks, and bonds.

However, a common split is 60 percent stocks, 30 percent bonds, and 10 percent cash or shorter-term bonds.

In other words, being analogous to a 60/40 portfolio .

Is the 3-fund portfolio good for diversification?

It’s okay, but not ideal in terms of balancing.

The 3-fund portfolio doesn’t shed insight on allocation, but most concentrate their money in stocks and have the bulk of their risk in stocks.

We’ve written on the idea of balancing portfolios better in other articles.

  • The Math Behind Portfolio Diversification
  • How to Balance Risk to Achieve More Return Per Each Unit of Risk
  • Building a Balanced Portfolio with Options
  • Building a Balanced Portfolio with VRP Overlay

What are some Boglehead 3-fund portfolio alternatives?

Some Boglehead 3-fund portfolio alternatives include the 4-fund portfolio and the 5-fund portfolio.

These portfolios add additional diversification by including small cap value and real estate investments, such as REITs .

Some versions also might include commodities or gold to help provide exposure to more so-called hard assets.

Alternative portfolios might also provide exposure to inflation-indexed bonds , such as TIPS.

As with anything related to trading or investing, there are lots of different portfolio approaches you can try .

The Boglehead 3-fund portfolio is just one option that you might want to consider, especially for those who want to keep things simple.

What is the Boglehead 3-fund portfolio withdrawal rate?

The Boglehead 3-fund portfolio withdrawal rate is the percentage of your portfolio that you can safely withdraw each year without running out of money.

A common rule of thumb is the 4 percent rule , which says you can withdraw 4 percent of your portfolio value each year without having to worry about depleting your savings.

So, for example, if you have a $100,000 Boglehead 3-fund portfolio, you could withdraw $4,000 per year or a little over $300 per month without running out of money.

Of course, this is just a general guideline and your actual withdrawal rate may be higher or lower depending on your specific circumstances.

What is the Boglehead 3-fund portfolio rebalancing?

Rebalancing is the process of resetting your asset allocation back to your original target percentage.

For example, say you originally allocated 60 percent of your Boglehead 3-fund portfolio to domestic and international stocks, 30 percent to bonds, and 10 percent to cash.

Over time, as the stock market goes up and down, your asset allocation will naturally drift away from your original targets.

Rebalancing simply means selling some of your winners (assets that have gone up in value) and buying more of your losers (assets that have gone down in value) to get back to your original targets.

Rebalancing can be done on a regular basis, such as once a year, or when your asset allocation gets out of whack by a certain percentage.

For example, you might rebalance when your stocks go up to 70 percent of your portfolio (sell some to buy bonds) or down to 50 percent (sell bonds to buy stocks).

What is the Boglehead 3-fund portfolio return?

The Boglehead 3-fund portfolio return is the percentage of your investment that you earn each year from interest and dividends .

It does not include capital gains or losses from selling assets.

The Boglehead 3-fund portfolio return will depend on the specific investments you hold and the current market conditions.

In general, stocks have outperformed other asset classes over the long run.

However, there have been periods where bonds or even cash have done better than stocks.

Returns are also affected by things like inflation and fees.

What is the Boglehead 3-fund portfolio expense ratio?

The Boglehead 3-fund portfolio expense ratio is the percentage of your investment that is charged in annual fees by the fund managers.

For example, if you have a Boglehead 3-fund portfolio with an expense ratio of 0.5 percent, that means you will pay $50 in annual fees for every $10,000 you invest.

Expense ratios can vary widely, from as low as 0.1 percent to more than 2 percent for actively managed funds.

Generally, index funds have lower expense ratios than actively managed funds.

Should I allocate less money to bonds than stocks in the 3-fund portfolio as I get closer to retirement?

Your asset allocation will depend on your investment goals, risk tolerance, and time horizon.

In general, stocks are considered to be more volatile than bonds, so a higher percentage allocation to stocks will result in a higher potential return, but also a higher risk of loss.

Bonds are considered to be less volatile than stocks, so a lower percentage allocation to bonds will result in a lower potential return, but also a lower risk of loss.

What is the Boglehead 3-fund portfolio stock allocation?

The Boglehead 3-fund portfolio stock allocation is the percentage of your investment that is allocated to stocks.

For example, if you have a Boglehead 3-fund portfolio with an asset allocation of 30 percent domestic stocks, 30 percent international stocks, and 40 percent bonds, that means 60 percent of your overall investment will be in stocks.

As mentioned, your allocation to equities will depend on your investment goals, risk tolerance, and time horizon.

What is the 3-fund portfolio bond allocation?

The Boglehead 3-fund portfolio bond allocation is the percentage of your investment that is allocated to bonds.

For example, if you have a 3-fund portfolio with an allocation of 60 percent stocks and 40 percent bonds, then you’d have a fairly standard 40 percent allocation to fixed income.

In general, bonds are considered to be less volatile than stocks, so a lower percentage allocation to bonds will result in a lower potential return, but also lower drawdowns.

What is the Boglehead 3-fund portfolio equity premium?

The Boglehead 3-fund portfolio equity premium – also known as the equity risk premium – is the difference between the returns of stocks and bonds.

For example, if over the past 10 years stocks have returned an average of 7 percent per year and bonds have returned an average of 3 percent per year, then the equity premium would be 4 percent.

This equity premium is one reason why stocks are considered to be riskier than bonds.

What is the Boglehead 3-fund portfolio Sharpe ratio?

The Boglehead 3-fund portfolio Sharpe ratio is a measure of risk-adjusted return.

It is calculated by dividing the portfolio’s excess return (the difference between the portfolio’s return and the risk-free rate ) by the portfolio’s standard deviation of returns.

A higher Sharpe ratio indicates a better risk-adjusted return.

For example, if a portfolio has a return of 10 percent and a standard deviation of 20 percent, then its Sharpe ratio would be 0.5.

If another portfolio has a return of 15 percent and a standard deviation of 15 percent, then its Sharpe ratio would be 1.0.

The first portfolio has a higher return, but the second portfolio has a better risk-adjusted return.

The average Sharpe ratio of asset classes is around 0.2 to 0.3 over time.

If excess returns are too high or low relative to excess risks then it will change capital allocation decisions until those ratios get back into a more appropriate equilibrium .

What is the 3-fund portfolio standard deviation?

The Boglehead 3-fund portfolio standard deviation is a measure of volatility.

It is calculated by taking the square root of the sum of the squares of the returns.

For example, if a portfolio has returns of 1, 2, and 3 percent over three years, then its standard deviation would be sqrt((1^2 + 2^2 + 3^2)/3) = 1.732 percent.

A higher standard deviation indicates a more volatile investment.

What is the 3-fund portfolio tracking error?

The Boglehead 3-fund portfolio tracking error is a measure of how closely a portfolio tracks its benchmark.

It is calculated as the standard deviation of the difference between the portfolio’s return and the benchmark’s return.

For example, if a portfolio has a return of 10 percent and its benchmark has a return of 12 percent, then the tracking error would be 2%.

A lower tracking error indicates an investment that more closely tracks its benchmark.

What is the 3-fund portfolio information ratio?

The Boglehead 3-fund portfolio information ratio is a measure of active risk.

It is calculated by dividing the portfolio’s excess return (the difference between the portfolio’s return and the risk-free rate) by the tracking error.

For example, if a portfolio has a return of 10 percent and a tracking error of 2 percent, then the information ratio would be 5.

A higher information ratio indicates a more actively managed investment.

What is the 3-fund portfolio R-squared?

The Boglehead 3-fund portfolio R-squared is a measure of how much of the portfolio’s return can be explained by the return of its benchmark.

It is calculated as the correlation between the portfolio and its benchmark squared.

For example, if a portfolio has a correlation of 0.6, then the R-squared would be 0.36 (the square of the correlation between the two returns).

A higher R-squared indicates a more closely tracked investment.

What is the 3-fund portfolio alpha?

The Boglehead 3-fund portfolio alpha is a measure of how much of the portfolio’s return is due to active management.

It is calculated as the difference between the portfolio’s return and the return of its benchmark, adjusted for risk.

For example, if a portfolio has a return of 10 percent and its benchmark has a return of 12 percent, then the alpha would be minus-2 percent.

A positive alpha indicates that the portfolio has outperformed its benchmark, while a negative alpha indicates that the benchmark has outperformed the portfolio.

What is the 3-fund portfolio beta?

The Boglehead 3-fund portfolio beta is a measure of the portfolio’s volatility relative to its benchmark.

It is calculated as the correlation between the portfolio and its benchmark.

The formula for calculating beta is the covariance of the return of an asset with the return of the benchmark, divided by the variance of the return of the benchmark over a certain period.

A higher beta indicates a more volatile investment.

Summary – Boglehead 3-fund portfolio

The Boglehead 3-fund portfolio is a simple, low-cost way to build a diversified investment portfolio.

It’s suitable for both beginner investors and experienced DIY investors alike. If you’re looking for an easy way to invest without having to choose individual stocks or excessively manage your own portfolio, this 3-fund portfolio be an option to consider.

Bogleheads.org

Investing Advice Inspired by Jack Bogle

Skip to content

  • Forum Policies
  • Support this Site
  • Board index US Investors Personal Investments

IRA Portfolio Allocation for Long Term Care

Post by Zeus » Tue Jan 02, 2024 3:34 am

  • He requires nursing facility care 1 year from today
  • His portfolio earns 4% per year
  • Medical inflation is 6% per year
  • VANGUARD LIFESTRTGY MODERATE GROWTH INVESTOR (VSMGX) 90%
  • VANGUARD FEDERAL MONEY MARKET INVESTOR (VMFXX) 10%

Re: IRA Portfolio Allocation for Long Term Care

Post by 123 » Tue Jan 02, 2024 3:51 am

Zeus wrote: ↑ Tue Jan 02, 2024 3:34 am ...We are in the midst of Medicaid / long-term care planning and we are working with an attorney to setup an irrevocable trust to protect his home from being a part of his estate for Medicaid purposes..

Post by Zeus » Tue Jan 02, 2024 4:03 am

123 wrote: ↑ Tue Jan 02, 2024 3:51 am If he has no spouse who would use the home it would seem that the home equity could be used to provide for a higher level of care than the standard provided by Medicaid in most states.

Post by cheese_breath » Tue Jan 02, 2024 6:32 am

Post by Circe » Tue Jan 02, 2024 12:07 pm

Post by HomeStretch » Tue Jan 02, 2024 3:36 pm

Return to “Personal Investments”

  • US Investors
  • ↳   Personal Investments
  • ↳   Investing - Theory, News & General
  • ↳   Personal Finance (Not Investing)
  • Non-US investors
  • ↳   Non-US Investing
  • ↳   Canada - Financial Wisdom Forum
  • ↳   Spain - Bogleheads® España
  • ↳   Spain
  • ↳   United Arab Emirates
  • ↳   The Bogleheads® Wiki: a collaborative work of the Bogleheads community
  • ↳   Canada - finiki (wiki)
  • ↳   Personal Consumer Issues
  • ↳   Local Chapters and Bogleheads Community
  • ↳   US Chapters
  • ↳   Wiki and Reference Library
  • ↳   Non-US Chapters
  • ↳   Calendar of Events
  • ↳   Forum Issues and Administration
  • Board index
  • All times are UTC

Powered by phpBB ® Forum Software © phpBB Limited

Privacy | Terms

Time: 0.395s | Peak Memory Usage: 1 MiB | GZIP: Off

boglehead portfolio allocation

Investor Resources

  • Get Started

What does it mean to be a “Boglehead” Investor?

boglehead portfolio allocation

A “Boglehead” is an investor who follows investing principles of Jack Bogle, founder of Vanguard Investments using low cost ETF’s like VTI.  The purpose of this blog post is to outline the investment principles of a Boglehead Investor.

Boglehead Investing Principles

These principles are based on patience, discipline, and the power of compounding interest.  They are designed to help investors achieve their financial goals over the long term.

Before you jump into buying stocks and bonds, invest time into your PLAN upfront before you jump into buying stocks and bonds.  Now, let’s break down each of these principles including how I’ve applied them to my investing success.

Develop a Workable Plan

A workable plan is a comprehensive financial plan that is tailored to your financial goals and risk tolerance. It should include a budget, an emergency fund, and a retirement plan. The plan should be reviewed and updated regularly to ensure that it remains relevant.

Each Boglehead develops a unique plan called an IPS.  An Investment policy statement (IPS)  is a statement that defines your general investment goals and objectives. It describes the strategies that you will use to meet these objectives, and contains specific information on subjects such as  asset allocation ,  risk tolerance, and liquidity requirements. 

The first step in investing as a Boglehead is to write down your IPS then stick to it.  This will be critical as you navidate the highs and lows of investing.

Here is an IPS example for you to use

Too many investors fail since they have no plan.  They simply jump into buying the latest stock or chase past performance.  Nobody can predict the future, so build you plan and stick to it.

Invest Early and Often

Once you have a regular savings pattern, you can begin accumulating financial wealth. How much saving is enough? For retirement, 20% of income may be a good starting point, but this will vary widely from person to person. If you want to be retire before age 65, or plan to leave significant assets to charity or to children, you probably need to save even more.  Starting a regular savings plan early in life is important because investment returns compound over a longer period. 

The image below demonstrates the benefit of starting early.

File:Young early.jpg

The best way to save money is to arrange automatic deductions from your paycheck. Many  401(k)s  offer this. When you invest in an  IRA  or taxable account, choose a provider that will automatically deduct money from your bank account the day after pay day. This is described as “paying yourself first,” and it goes a long way towards establishing and reinforcing reasonable spending habits.

There are  guidelines  for which accounts you should fund and in what order. But always remember, you first need to save the money. When you start, saving regularly is more important than your choice of investments.

Bearing Risk

Your risk tolerance is your ability to stick to an investment plan through difficult financial and market conditions. To know if an asset allocation matches your risk tolerance, ask yourself if you held it, would you sell during the next bear market? This is very hard to answer honestly before you have experienced one.

In Bogleheads investing philosophy, it’s important to invest in a way that is appropriate for your financial situation and goals . This means that you should never bear too much or too little risk. Investing too conservatively can result in lower returns, while investing too aggressively can lead to higher risk and potential losses.

To determine the appropriate level of risk for your investments, you should consider your financial goals, time horizon, and risk tolerance. If you’re investing for a long-term goal, such as retirement, you may be able to tolerate more risk than if you’re investing for a short-term goal, such as a down payment on a house. It’s important to find a balance between risk and reward that is appropriate for your individual situation.

To give you enough money for retirement, you want assets with a decent expected return. This means you need to own  stocks . Stocks return a share of the profits generated by publicly owned companies. But although they offer a chance of good returns, stocks are volatile and risky. In 2008, some markets fell 50% from their previous highs. Over time, stock prices roughly follow the trend of the economy, which is to grow. But prices can stagnate or decline for decade-long periods. This is why your  asset allocation needs to include bonds as well as stocks.  Boglehead philosophy is to buy stocks in a well diversified, low cost Index Fund. 

The most popular stock fund is the Vanduard VTI ETF: Vanguard Total Stock Market Index Fund ETF consisting of over 3,000 U.S. stocks.

Bonds are a promise to pay back a loan of money on a set schedule. Bonds do not have the expected returns of stocks, but they are much less volatile. A mix of stocks and bonds will produce reasonable growth while limiting the size of the inevitable drops.  How much in bonds? This is the basic question of asset allocation. Before you decide, you first need to balance your ability, willingness, and need to take  risk . The more risk you can handle, the less bonds you need. When you are young, your prime earning years lie ahead, and it will be decades before you need to access the money. So, higher stock allocations may be suitable, because big drops in stock prices will not hurt as long as you do not sell during the drop.

John Bogle  wrote: [2]

[A]s we age, we usually have (1) more wealth to protect, (2) less time to recoup severe losses, (3) greater need for income, and (4) perhaps an increased nervousness as markets jump around. All four of these factors suggest more bonds as we age. —  Common Sense on Mutual Funds , John Bogle

Although your exact asset allocation should depend on your goals for the money, there are a few general guidelines that you can follow. These are based on practice rather than on theory, and are only a starting point for decision making, not the end.

For example,  Benjamin Graham  wrote: [3]

We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequence inverse range of 75% to 25% in bonds. There is an implication here that the standard division should be an equal one, or 50-50, between the two major investment mediums. —  Quoted in  The Intelligent Investor , Jason Zweig

Alternatively,  John Bogle  recommends “ roughly your age in bonds “. For instance, if you are 45, 45% of your portfolio should be in high-quality bonds. He describes the idea as just “ a crude starting point ” which “ [c]learly … must be adjusted to reflect an investor’s objectives, risk tolerance, and overall financial position “. He also suggests that you should treat any national or state retirement income you might receive as if it is a bond, setting its assumed value appropriately.

This “ age in bonds ” and its variants, age minus ten years or age minus twenty years, are only approximate starting points. You will probably want to adjust them to fit your circumstances. For example, if you have a guaranteed state or other pension, this changes both your need and your willingness to take risk. Some investors do not add pensions and Social Security to their asset allocation of bond holdings.

It is easy to underestimate risk and to overestimate your tolerance for risk. In 2008, many people learned too late that they should have been holding more bonds. Think carefully before choosing an asset allocation with high stock market allocations. If you have not been through a major market downturn before, your abstract logical thoughts about risk can quickly become emotional ones. The developing field of neuroeconomics explains how mental traits and emotional effects that work well in other areas undermine our ability to deal rationally with markets and investing.

You should generally own bond funds  instead of individual bonds , for convenience and diversification. Using individual  corporate  or  municipal  bonds require a very large holding in order to achieve the broad diversification and increased safety of a bond fund. The high number of different bonds in bond funds lets you ignore the risk of any one bond defaulting. You can manage  Interest rate risk  by choosing funds with short and intermediate-term  duration , and  default risk  by choosing funds with high credit ratings. The idea here is for your bond holdings to reduce violent up and down swings in overall portfolio value. You want your risks on the equity side, not the bond side.

The most popular Bogleheads bond fund is the ETF BND: Vanguard Total Bond Market for its low cost and diversification.

Never Try to Time the Market

Keep costs low.

Michael

About AssetRise

The mission of AssetRise is to empower individual investors to acheive financial success. We created AssetRise due to the void we found in simple portfolio tools following the Bogleheads investment methodology. Don’t hesitate to contact us for feedback or product requests, we’re here to serve you the individual investor.

  • Email AssetRise

Recent Posts

boglehead portfolio allocation

What Is The 4 Percent Rule for Retirement?

boglehead portfolio allocation

Which is best? Dollar Cost Averaging or Lump Sum Invest?

boglehead portfolio allocation

ETF Funds vs. Mutual Funds: Which is right for you?

  • Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Optimized Portfolio

Investing and Personal Finance

Bogleheads 2 Fund Portfolio for Purists & Minimalists (2023)

Last Updated: July 18, 2023 No Comments – 3 min. read

A Bogleheads 2 Fund Portfolio is a simpler implementation of the popular Bogleheads 4-Fund Portfolio that is globally diversified in stocks and bonds. Here we’ll look at its components, historical performance, and the best ETFs to use for it in 2023.

Interested in more Lazy Portfolios? See the full list here.

Disclosure:  Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here .

Bogleheads 2 Fund Portfolio Video

Prefer video? Watch it here:

boglehead portfolio allocation

What Is the Bogleheads 2 Fund Portfolio?

The Bogleheads 2 Fund Portfolio is just a simpler version of the popular Bogleheads 4 Fund Portfolio (that holds global stocks and global bonds), which is just the Bogleheads 3 Fund Portfolio + international bonds.

A 2-fund version of a Boglehead strategy is the least popular of these 3 portfolios, so I'm not going to spend time here going over the benefits of things like indexing and global diversification. If you've landed here, you probably already know those things. If not, go read my post on the Bogleheads 3 Fund Portfolio first and then come back here.

The point of this post is just to show how a Bogleheads 2 Fund Portfolio is the simplest, most agnostic implementation of global indexing for stocks and bonds outside of a target date fund, and it can be implemented with low-cost Vanguard funds. As such, it makes a nice choice for Boglehead purists and minimalists. This is more important than it may seem at first glance, as simplicity in portfolios is extremely valuable psychologically and its benefits are often overlooked.

I'm also not going to go over different asset allocations between stocks and bonds. Remember that there's no set prescription for asset allocation by Boglehead model portfolios, and investors are encouraged to choose their own based on their personal goal(s), time horizon, and risk tolerance. I've got a post covering that here . As such, keeping with the theme of simplicity for the discussion here, I'm going to be using what is arguably a one-size-fits-most allocation of 80/20, meaning 80% stocks and 20% bonds.

Using 2 funds eliminates the need to choose how much money should go to the U.S. and how much money should go to international markets for both stocks and bonds, type(s) of bonds, and bond duration. This approach lets the market decide those allocations, assets, and effective duration based on their relative market cap weights.

As such, this is again the most agnostic, hands-off way to implement this type of Boglehead strategy, which effectively saves the investor a lot of mental effort and mitigates uncertainty and the investor's own biases . Using 2 funds instead of 4 funds also simplifies rebalancing , saving the investor time as well.

Thus, an 80/20 allocation for the Bogleheads 2 Fund Portfolio is as follows:

  • 80% Total World Stock Market
  • 20% Total World Bond Market

bogleheads 2 fund portfolio

Bogleheads 2 Fund Portfolio ETF Pies for M1 Finance

We can construct the 80/20 Bogleheads 2 Fund Portfolio using 80% VT, the Vanguard Total World Stock ETF, and 20% BNDW, the Vanguard Total World Bond ETF.

Here's that pie to use on M1 Finance .

M1 Finance  is a great choice of broker to implement the Bogleheads 2 Fund Portfolio because it makes regular rebalancing seamless and easy, has zero transaction fees, allows fractional shares, and incorporates dynamic rebalancing for new deposits. I wrote a comprehensive review of M1 Finance here .

Canadian investors can use Questrade , and those outside North America can use  eToro .

M1 Finance currently has an account transfer promotion to earn up to $15,000 as outlined below:

m1 transfer promo aug 23

M1 also currently has a promotion for up to $500 when initially funding an investment account:

m1 bonus

What do you think of the Bogleheads 2 Fund Portfolio? Let me know in the comments.

Are you nearing or in retirement? Use my link here to get a free holistic financial plan from fiduciary advisors at Retirable to manage your savings, spend smarter, and navigate key decisions.

Don't want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com .

Disclosure:  None.

Disclaimer:  While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here .

m1

Related Posts

  • The 5 Best Stock Brokers Online for Investing (2023 Review)
  • Buy Borrow Die Strategy Explained – How the Rich Avoid Taxes
  • QQQ vs. QQQM – NASDAQ 100 Index ETFs from Invesco
  • How to Invest in the Dow Jones Index – ETF Options
  • How To Buy Microsoft Stock With $100 – Invest in Microsoft

boglehead portfolio allocation

About John Williamson, APMA®

Analytical data nerd, investing enthusiast, fintech consultant, Boglehead, and Oxford comma advocate. I'm not a big fan of social media, but you can find me on LinkedIn and Reddit .

Reader Interactions

Leave a reply cancel reply.

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Don't subscribe All Replies to my comments Notify me of followup comments via e-mail. You can also subscribe without commenting.

Amazon Affiliate Disclosure

OptimizedPortfolio.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Email Newsletter

Sign up to receive email updates when a new post is published.

Don't worry, I hate spam too. No ads.

Privacy Overview

Bogleheads Three-fund Portfolio

The three-fund portfolio is a portfolio popularized by Jack Bogle fans (boggleheads). It uses only three fundamental asset classes: a U.S total stock market fund, a total international stock market fund, and a total bond market fund. The portfolio could be replicated using three low-cost ETFs.

Asset Allocation

Performance.

The chart shows the growth of an initial investment of $10,000 in Bogleheads Three-fund Portfolio , comparing it to the performance of the S&P 500 index or another benchmark. All prices have been adjusted for splits and dividends. The portfolio is rebalanced Quarterly

The earliest data available for this chart is Jul 26, 2007, corresponding to the inception date of VEA

As of Jan 5, 2024, the Bogleheads Three-fund Portfolio returned -1.60% Year-To-Date and 7.58% of annualized return in the last 10 years.

Monthly Returns Heatmap

.css-1o54g89{margin:0;font:inherit;display:-webkit-inline-box;display:-webkit-inline-flex;display:-ms-inline-flexbox;display:inline-flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;} sharpe ratio .css-17cvltj{-webkit-user-select:none;-moz-user-select:none;-ms-user-select:none;user-select:none;width:1em;height:1em;display:inline-block;fill:currentcolor;-webkit-flex-shrink:0;-ms-flex-negative:0;flex-shrink:0;-webkit-transition:fill 200ms cubic-bezier(0.4, 0, 0.2, 1) 0ms;transition:fill 200ms cubic-bezier(0.4, 0, 0.2, 1) 0ms;font-size:inherit;margin-left:4px;} .css-1gbtas2{z-index:1500;pointer-events:none;} .css-t3d3gi{z-index:1500;pointer-events:none;}.

The Sharpe ratio of Bogleheads Three-fund Portfolio lies between the 25th and 75th percentiles. It indicates that the portfolio's risk-adjusted performance is in line with the majority of portfolios. This suggests a balanced approach to risk and return, which might be suitable for a broad range of investors.

Dividend yield

Bogleheads Three-fund Portfolio granted a 2.32% dividend yield in the last twelve months.

Expense Ratio

The Bogleheads Three-fund Portfolio has an expense ratio of 0.04% which is considered to be low. Below you can find the expense ratios of portfolio funds side-by-side and effortlessly compare their relative costs.

Risk-Adjusted Performance

This table presents a comparison of risk-adjusted performance metrics for positions. Risk-adjusted metrics are performance indicators that assess an investment's returns in relation to its risk, enabling a more accurate comparison of different investment options.

Asset Correlations Table

Drawdowns chart.

The Drawdowns chart displays portfolio losses from any high point along the way.

Worst Drawdowns

The table below displays the maximum drawdowns of the Bogleheads Three-fund Portfolio . A maximum drawdown is a measure of risk, indicating the largest reduction in portfolio value due to a series of losing trades.

The maximum drawdown for the Bogleheads Three-fund Portfolio was 47.74% , occurring on Mar 9, 2009 . Recovery took 539 trading sessions.

Volatility Chart

The current Bogleheads Three-fund Portfolio volatility is 2.82% , representing the average percentage change in the investments's value, either up or down over the past month. The chart below shows the rolling one-month volatility.

IMAGES

  1. Asset allocation

    boglehead portfolio allocation

  2. Three-fund portfolio

    boglehead portfolio allocation

  3. Asset Allocation "Boglehead Permanente"

    boglehead portfolio allocation

  4. 60-40-Bogleheads-Asset-Allocation

    boglehead portfolio allocation

  5. The Bogleheads 80/20 Portfolio

    boglehead portfolio allocation

  6. Two-fund portfolio

    boglehead portfolio allocation

VIDEO

  1. my portfolio allocation #stockmarket

  2. MadMan in Bath Tub Criticizes the Boglehead Three Fund Portfolio and $BND ETF

  3. Buying The Market (ITOT/VTI) vs. Individual Stocks

  4. The 2024 Asset Allocation Draft

  5. Mastering Asset Allocation: The Key to Financial Success #success #inspiration

  6. PORTFOLIO ALLOCATION RISK

COMMENTS

  1. Asset allocation

    Asset allocation means dividing an investment portfolio among different asset classes. Typically these are stocks, bonds, and cash. [1] [note 1] Determining which mix of assets to hold in a portfolio is a personal choice.

  2. Lazy portfolios

    Main article: Three-fund portfolio A number of popular authors and columnists have suggested three-fund lazy portfolios. These usually consist of three equal parts of bonds (total bond market or TIPS), total US market and total international market.

  3. Three-fund portfolio

    Three-fund portfolio Talk View source View history More Read View source View history From Bogleheads This article contains details specific to United States (US) investors . For non-US investors, acting on fund or ETF suggestions in it may have harmful US tax consequences. Non-US investors can find related information at Simple non-US portfolios.

  4. Total portfolio allocation and withdrawal

    Total portfolio allocation and withdrawal (TPAW) describes the "total portfolio" approach to asset allocation and withdrawal. The total portfolio approach means that the present value of future savings and retirement income, valued using the safe bond rate, is counted as safe bonds in the portfolio.

  5. Portfolio allocation

    Portfolio allocation by sal14 » Wed Jul 05, 2023 7:36 pm Hi all, I'm currently 29 years old and I'm trying to determine how I should allocate my portfolio. Currently, this is what I'm thinking of doing based on the 3 fund portfolio: 80/20 stock/bond portfolio 10% total bond 72% total US stock market 18% total international market

  6. Bogleheads 3 Fund Portfolio Review and Vanguard ETFs (2023)

    Watch it here: What Is the Bogleheads 3 Fund Portfolio? The Bogleheads 3 Fund Portfolio is arguably the most popular lazy portfolio, which just means a portfolio that you don't need to constantly monitor or change.

  7. Bogleheads Three Funds Portfolio: ETF allocation and returns

    The Bogleheads Three Funds Portfolio has the following asset allocation: 80% Stocks 20% Fixed Income 0% Commodities The Bogleheads Three Funds Portfolio can be implemented with the following ETFs: Most of Lazy Portfolios are made of common components (asset classes), very simple and well defined.

  8. Lazy Portfolios in 2022

    January 11, 2023 by blbarnitz The following table lists 2022 total returns for various examples of "lazy portfolios". Some of the portfolios (Coffeehouse and Coward's) are designed as 60/40 stock/bond portfolios. Other portfolios (Armstrong Ideal and Swensen) are designed as 70/30 stock/bond portfolios.

  9. Bogleheads 3 and 4 Fund Portfolio: Backtest and Performance Analysis

    Boglehead 3 Fund Portfolio is a simple, low-cost investment strategy that consists of three index funds: a U.S. Total Stock Market Index Fund, an International Stock Market Index Fund, and a U.S. Total Bond Market Index Fund. Boglehead 4 Fund Portfolio adds Total International Bond Market Index Fund to the mix.

  10. How to Build the Boglehead 3-Fund Portfolio

    The Boglehead 3-fund portfolio stock allocation is the percentage of your investment that is allocated to stocks. For example, if you have a Boglehead 3-fund portfolio with an asset allocation of 30 percent domestic stocks, 30 percent international stocks, and 40 percent bonds, that means 60 percent of your overall investment will be in stocks. ...

  11. Portfolio Allocation

    Portfolio Allocation by Mugsieboxer » Sun Dec 17, 2023 5:03 pm I am almost 67 and have a 401K that is currently split like this: Large Cap Indexes: 30.26%, Midcap Indexes: 15.91%, Small Cap Indexes: 12.46%, International 9.67%, Bonds: 14.07%, Stable Funds 17.62%. With recent gains in the market it gave me a gain of over $150,000.

  12. IRA Portfolio Allocation for Long Term Care

    Current Portfolio - Pre-Tax IRA. VANGUARD LIFESTRTGY MODERATE GROWTH INVESTOR (VSMGX) 90%. VANGUARD FEDERAL MONEY MARKET INVESTOR (VMFXX) 10%. He also has an emergency fund (savings account) that would cover 1.5 years of household expenses or 3 months in a nursing facility. Thank you for your time and thoughts. 123.

  13. The Bogleheads' Guide to the Three-Fund Portfolio Book Review

    A diehard, long-term Boglehead may not learn a single thing from this book, but you should buy it anyway for the sheer pleasure factor. An investing rookie will find that the book not only teaches you about one of the reasonable asset allocations (and certainly the most popular) you can use, but is a primer on basic investing, portfolio management, and most importantly, good investing behavior.

  14. Bogleheads 4 Fund Portfolio Review and Vanguard ETFs To Use

    The Bogleheads 4 Fund Portfolio, as the name suggests, is comprised of 4 funds capturing U.S. stocks, U.S. bonds, international stocks, and international bonds. This gets you fully diversified globally across all styles and cap sizes for stocks and bonds. Let's look at the specific assets. Stocks

  15. Allocation Calculator for full portfolio : r/Bogleheads

    Here are my core criteria for allocation of funds across all my portfolio: Traditional IRAs and 401Ks should hold as much Bond funds as possible to provide the best tax advantages. Cash should only be held in Taxable and Bank accounts (prior to age 60), and should have a fixed dollar target and not a percentage of full allocation.

  16. What is your portfolio breakdown? : r/Bogleheads

    What is your portfolio breakdown? Example format: Age: 22 Roth IRA: VTI - 70% VXUS - 30% 401k: VFIAX - 100% Taxable Brokerage: AAPL - 30% MSFT - 70% ... And curious as to why you chose the allocations you did! And how do you plan to adjust in the coming years? Archived post. New comments cannot be posted and votes cannot be cast. Sort by:

  17. What is Boglehead Guide to Investing?

    An Investment policy statement (IPS) is a statement that defines your general investment goals and objectives. It describes the strategies that you will use to meet these objectives, and contains specific information on subjects such as asset allocation , risk tolerance, and liquidity requirements.

  18. What does it mean to be a "Boglehead" Investor?

    - AssetRise Portfolio Management Tool Get Started What does it mean to be a "Boglehead" Investor? A "Boglehead" is an investor who follows investing principles of Jack Bogle, founder of Vanguard Investments using low cost ETF's like VTI. The purpose of this blog post is to outline the investment principles of a Boglehead Investor.

  19. Portfolio Allocation Review; how we looking? : r/Bogleheads

    Bogleheads are passive investors who follow Jack Bogle's simple but powerful message to diversify and let compounding grow wealth. Jack founded Vanguard and pioneered indexed mutual funds. His work has since inspired others to get the most out of their long-term stock and bond investments by indexing. Active managers want your money - our ...

  20. Question

    Question - fund/account allocation. Just maxed our IRAs for the year! I'm hoping to ask how to allocate funds between Roth IRA, 401k and taxable. I currently have FZROX in our Roth IRAs, something that tracks SP500 in my traditional 401k, and VTI/VXUS/BNDW in our taxable. Recently read that you should put bond funds in tax advantaged accounts ...

  21. Three Fund Portfolio Allocation By Age Recommendation

    A very traditional allocation is 60/40 in equity vs bonds, although with today's bond market a lot of people now recommend something closer to 70/30. That said, if your time horizon is 30+ years, a more aggressive, risky portfolio (e.g. 80/20 or even no bonds) can make sense.

  22. Bogleheads 2 Fund Portfolio for Purists & Minimalists (2023)

    Thus, an 80/20 allocation for the Bogleheads 2 Fund Portfolio is as follows: 80% Total World Stock Market 20% Total World Bond Market Bogleheads 2 Fund Portfolio ETF Pies for M1 Finance We can construct the 80/20 Bogleheads 2 Fund Portfolio using 80% VT, the Vanguard Total World Stock ETF, and 20% BNDW, the Vanguard Total World Bond ETF.

  23. Bogleheads Three-fund Portfolio

    The table below displays the maximum drawdowns of the Bogleheads Three-fund Portfolio. A maximum drawdown is a measure of risk, indicating the largest reduction in portfolio value due to a series of losing trades. The maximum drawdown for the Bogleheads Three-fund Portfolio was 47.74%, occurring on Mar 9, 2009. Recovery took 539 trading sessions.

  24. Same fund allocation within each account? : r/Bogleheads

    Bogleheads are passive investors who follow Jack Bogle's simple but powerful message to diversify and let compounding grow wealth. Jack founded Vanguard and pioneered indexed mutual funds. His work has since inspired others to get the most out of their long-term stock and bond investments by indexing. Active managers want your money - our ...

  25. The Bogleheads 4 Fund Portfolio: Is It Right for You?

    Key Takeaways In a rush? Read through the key takeaways instead: The Bogleheads 4-fund Portfolio is essentially the Bogleheads 3-fund Portfolio but with the inclusion of a group of international bonds. In terms of asset allocation, this portfolio comprises U.S bonds and stocks, and international bonds and stocks.