What is the 3-Fund Portfolio?
The Bogleheads 3-fund portfolio is a simple investment strategy using just three low-cost index funds to capture the entire global stock and bond markets. Named after Jack Bogle, founder of Vanguard and the father of index investing, this approach has been refined by the Bogleheads community over decades.
The philosophy is elegantly simple:
- Own everything: Capture the entire market with broad index funds
- Keep costs low: Index funds charge a fraction of active funds
- Stay the course: Don't try to time the market or pick winners
Jack Bogle's Wisdom
"Don't look for the needle in the haystack. Just buy the haystack!" - The 3-fund portfolio literally owns the entire haystack of global investments.
Why This Strategy Works
1. You Own the Entire Market
A total US stock fund holds 3,000+ companies. Add international stocks and you own 10,000+ companies worldwide. This extreme diversification means no single company failure can significantly hurt you.
2. Rock-Bottom Costs
Index funds charge 0.03-0.20% annually. Active funds average 0.50-1.0%+. That difference compounds dramatically: over 30 years, a 0.70% fee difference on $500,000 costs you $200,000+ in lost returns.
3. You Beat Most Professionals
Over 15-year periods, 90%+ of actively managed funds underperform their benchmark index. By simply owning the index, you automatically beat most professional investors.
4. Minimal Effort
No research required. No stock picking. No market timing. Just invest regularly and rebalance once or twice a year. The perfect "set it and forget it" strategy.
The Three Funds
US Total Stock Market
~3,700 US companies from large to small cap. The foundation of most American portfolios.
International Stocks
~8,000 companies across developed and emerging markets outside the US.
Total Bond Market
~10,000 investment-grade US bonds. Provides stability and income.
Allocation by Age
Your allocation depends on your risk tolerance and time horizon. A common rule: subtract your age from 110 to get your stock percentage. Here are guidelines:
| Age | US Stocks | Int'l Stocks | Bonds | Visual |
|---|---|---|---|---|
| 20s-30s | 54% | 36% | 10% | |
| 40s | 48% | 32% | 20% | |
| 50s | 42% | 28% | 30% | |
| 60s+ | 36% | 24% | 40% |
Fund Options by Provider
You can build a 3-fund portfolio with any major broker. Here are equivalent options:
| Provider | US Total Market | International | Bonds |
|---|---|---|---|
| Vanguard ETF | VTI (0.03%) | VXUS (0.07%) | BND (0.03%) |
| Vanguard Mutual | VTSAX (0.04%) | VTIAX (0.11%) | VBTLX (0.05%) |
| Fidelity | FSKAX (0.015%) | FTIHX (0.06%) | FXNAX (0.025%) |
| Schwab | SWTSX (0.03%) | SWISX (0.06%) | SWAGX (0.04%) |
| iShares | ITOT (0.03%) | IXUS (0.07%) | AGG (0.03%) |
How to Rebalance
Rebalancing keeps your portfolio aligned with your target allocation:
- Check annually: Once a year is enough for most investors
- Use the 5% rule: Rebalance when any asset class drifts 5%+ from target
- Prefer contributions: Direct new money to underweight assets instead of selling
- Tax considerations: Rebalance in tax-advantaged accounts first to avoid capital gains
Automate Everything
Set up automatic monthly contributions to your brokerage. Many brokers let you automatically invest in specific funds. This removes emotion and ensures consistency.
Frequently Asked Questions
Track Your 3-Fund Portfolio
Monitor your allocation, rebalancing needs, and total returns with AllInvestView - free for simple portfolios.
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