Investors looking for simplicity often turn to the famed Bogleheads Three-Fund Portfolio. As its name suggests, the portfolio holds only three funds, making it the ideal core portfolio for fuss-free investing. The three-fund portfolio typically holds the following:
- A US total stock market fund
- A total international stock fund
- A total US bond fund
Why the three-fund portfolio works
The three-fund portfolio has all the hallmarks of a good investment strategy: diversification, low cost, and simplicity.
First, despite holding just three funds, the portfolio is incredibly well diversified. It provides exposure to thousands of stocks and bonds across the world. As such, it’s much less risky compared to a portfolio of individual stocks.
Since a three-fund portfolio is usually built using low-cost index funds or exchange-traded funds (ETFs), your overall investing costs are kept low. For instance, the Vanguard Total Stock Market ETF (VTI)...
