Tom Nash
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The Three Fund Portfolio Investment Strategy
🕑 Added 2023-06-27 13:28:57 +0000 UTCInvesting can be extremely time consuming but for those who don't have the time, it can be made easy and efficient with the simple three fund portfolio.
Even though its extremely simple, this method actually outperforms most retail and professional money managers, EVERY year, all while saving time, energy, money and mental energy for investors.
This investment approach is based on three key funds:
1) a total U.S. stock market index fund
2) a total international stock index fund, excluding U.S.-based stocks
3) a total U.S. bond market index fund, consisting of bonds with varying maturities.
Sticking to these three funds will provide optimal results for most investors. The main reason is that you are getting extreme diversification with very minimal overlap.
With exposure to a vast array of stocks and bonds, without complex decision-making, without expensive management fees, and with no need to stock pick your way out of a crazy market, this is a good fit for most investors.
The SP500 can serve as option (1), the VEU as option (2) and the SWAGX can serve option (3) just to give you some examples. However, other options are available depending on your own analysis.
Look into each fund's holdings and expenses before you make a choice.
The hard part here would be the discipline. Consistency is key when implementing the three fund portfolio.
Regular contributions and disciplined investing are crucial here. Rebalancing once a year is probably the maximum amount of human intervention this strategy would require.
Bottom line: if you don't have the time to properly research stocks, but you still want diversification, low costs, and ease of management, this is a good strategy for you, assuming you stay consistent and resist market noise.
Let me know if you have any questions below.
