Three-fund portfolio

 


For 3, I actually meant number of mutual funds I am investing in, not number of stocks in a mutual fund. Intuitively, the final amount paid in taxes should be the same either way.

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A three-fund combination can serve as the core of a more complex portfolio, where you add a small play money allocation or a tilt to some corner of the market that interests you. Vanguard four fund portfolio. The International Index tracking the EAFE index does not include emerging market stocks, Canadian stocks, and has minimal exposure to international small cap stocks. This implementation creates a six-fund portfolio.

Note that the international indexes being tracked by the funds do not include Canadian stocks nor market weightings of small cap stocks.

Rowe Price International Index Fund is a developed market international index fund. The fund does not include emerging market stocks or Canadian stocks. Small cap international stocks make up only a minimal part of the portfolio. In addition, index purists should take note that the US Bond Enhanced Index Fund utilizes an active management component. The investment manager has the authority to adjust certain holdings versus the benchmark index, which could result in the fund being marginally underweight or overweight in certain sectors, or result in the portfolio having a duration or interest rate exposure that differs slightly from those of the index.

Also, the I fund tracking the EAFE index does not invest in emerging market stocks or Canadian stocks, and has minimal exposure to small cap international stocks. Retrieved from " https: Asset allocation Mutual funds Portfolios. Navigation menu Personal tools Log in. Views Read View source View history. Interaction Recent changes Getting started Editor's reference Sandbox. This page was last edited on 17 December , at Click for complete Disclaimer.

Over 10, world-wide securities. Contains every style and cap-size. Never under-performs the market less worry. Mathematically certain to out-perform most investors. You must decide for yourself what percentage of stocks to hold , based in part on your personal risk tolerance.

There are no shortcuts and and it needs to be done no matter what investment approach you are using. With Schwab, investors can construct a three-fund portfolio using: When using Dreyfus index funds, investors can build a three-fund portfolio using: With Fidelity, for example, you could construct a three-fund portfolio using: When investing in Northern Funds investors can create a three-fund portfolio using: Rowe Price investors can create a simple indexed three-fund portfolio using the following three funds: Participants of the Thrift Savings Plan can create a three-fund portfolio using the following three funds, for example: Great to be able to invest in it.

I am incredibly appreciative to have stumbled across all of this, especially at a younger age. Prior to today my company only had one index option in our k. Guess who talked me into that? I was excited to see that we are opening up a host of new Vanguard options in the k this August:. Appears to simply be a change in name. Not my real question though, should I keep going with the Vanguard or switch to one of my the newly added funds, specifically: Am I thinking correctly?

As you suspect, simply a name change. If you want some international, this would be my choice. You have helped redirect and clarify my thinking immeasurably over the last year. I cannot thank you enough. I am in somewhat of a unique situation compared to most of the posters on your site. First I am Canadian and second I live in Turkey. I have recently opened a TD Ameritrade account as it is from my research the only way for me to invest in the US market from over here.

Again thanks for much for all your knowledge sharing and experiences. So if you can acquire VTI less expensively that is absolutely what you want to do.

How do you like living in Turkey? It is high on our list. Turkey is really great. Whenever we get a chance we try to escape the city and see the rest of the country.

I think I would have to live here another 10 years to see every little historical town seems like every little town here has some kind of ancient ruin or castle etc to see Anyways long story short I highly recommend visiting. They are the only company that I could get to open an account while being a non-resident. I contacted quite a few other brokerages in both the US and Canada and none were able to help me.

Not to mention their whole website interface is pretty fancy schmancy and has tons of free resources. There is a fair bit of paperwork to fill out and I did have to mail in my application but they were on top of it and it only took about 10 business days to get everything in order. What a great blog! I also am a non US resident and have a TD Ameritrade account, which I transformed from a resident to a non resident when I had to move back home in France after my divorce.

My question is two fold: How much dividends do you get from your VTI and how often do they come out.? I want to reinvest those dividends if and when I get them, but since I can afford admiral shares which have a lower ER than regular shares but are not commission free, I do not want to pay more in commissions than I save in ER!

Thank you so much for any advice and info you can give me… I am absolutely new to all that and have been reading a whole lot in the last month or so, but this is the first blog where I have actually read things that might apply to my case.

No need to panic though. The big drawback to this… you would have to change your USD to whichever stock exchange you decide to work with I think TD International gives you access to all the major global exchanges and the MERs are higher as well. I myself decided to throw caution to the wind and continue to own VTI as I will be back in Canada within this year but if you are planning to live outside of the US for an extended duration you might want to take all of this into consideration.

Thanks you so much for such a prompt answer! I have been reading through the whole stock serie all weekend , still not quite done yet, but learning a whole lot. Thank you for the warning.

I am aware of the inheritance tax problem that I have or rather my two kids have! I have not found a way around it yet. My kids are Amercican and French. The way around this one is putting that money in a life insurance complicated systeme that allows you to pick and choose some of your investments which makes it basically tax free at death for my heirs. I am planning to chose a life insurance in Luxembourg because they are are way more flexible than the French in what you can invest in.

But the system does not come cheap. Although I would pick my investment the ones I have been offered so far are really expensive funds, like 1. That pretty island is French but has its own tax code and no income or inheritance tax for residents. So for now I am stuck with that LI system but I will review all that in 3 years and if by then I stll want to move back to the US when I retire, then I will get rid of the LI and consider buying directly from Vanguard.

What a great blog this is! I am also a UK based investor. Be aware that what you suggest contains duplication of US exposure. Unless, of course, you are seeking to overweight your US allocation. At least from my view. Lower growth in exchange for lower volatility. I love your site and all of your helpful advice. It has made me an indexer…and no longer a stock picker. Do you think it is worth it or is it not worth the bother? I would appreciate your insight! I prefer the Total because it is, well, Total.

See Addendum I above. I started out attempting to pick the typical Australian bluechip stocks. This does add some brokerage costs, but purchasing less often will limit the impact of these costs.

However, I like having one investment in the US separately as this allows some room to capitilise on US market movements — as well as having lower fees. VHY currently yields 5. And over the last 3 years VHY has been active, it has returned I have designed this allocation as a year old investor with a view to investing for the next 60 years. Over the last 3 years it has returned I could see some room to move here on the percentages. But I am unfamiliar with the benefits to holding it you mention.

If you say the benefits are generous enough to outweigh the risks, I trust your judgment. I agree that holding the two funds with the lower ER is best. And that, in my book, is a losers game. VHY holds high-dividend stocks which have been much in fashion of late.

Mostly I agree, but I would suggest adding bonds has more to do with when they plan to retire than their age itself. Once retired, they lose the income flow that can take advantage of market plunges. But, even more important, is their comfort level with volatility. As for those last three allocation choices, it seems to me it all depends on just how juicy those benefits for holding Aussie shares are.

It does appear to be dependent on your level of income and, therefore, your tax bracket. For me, I think it is worth keeping a reasonable portion of my funds in an Australian ETF to gain a portion of these credits. But, for any other Aussies reading this, it is probably worth running this past your accountant first.

US VEU — 0. This gives me a weighted expense ratio of 0. Craft beers are all the rage in Australia at the moment. Thanks for your posts. It gives a good idea of how an aussie investor should allocate his investments.

I am only starting out on this index fund investment journey and was wondering how are you going with your investments now that it has been a few years since your comment? Yes, I am still following the plan outlined above.

The only thing I would add is that having a nice cash buffer is very important. The allocation is, traditionally, very high-risk. But, the management fees are slightly higher. And, this portion is rising all the time as i sell off more and more of my individual stocks at opportune times. They have similarly low fees to VAS. And i still often recommend these to people just starting out in stocks.

But, i rarely add to my own holdings any more. When i held mostly individual stocks, i would be checking several times a week. The relatively stress-free nature of this investment strategy is a definite plus!

I am definately planning on keep cash for emergency and other needs. Just had another question on which broker are using? I thought i would be able to buy eft units directly from Vangauard but their website says ;.

I forgot to ask this in my last comment… but are there any thoughts or advice regarding inheritance tax with US-stocks? For me, being able to invest in the largest stock-market is preferable but not if I or my partner get stung for tax at some point in the future.

My question needs a bit of background, sorry. Now, my company is willing to front that money. Unfortunately, I only have about 13,00o in my account, so taking the 5k out will downgrade my account from Admiral Shares to Investor Shares. How will this affect me? And if I put enough money in over time to bump me back into the Admiral Shares category, is that transition easy?

Will I have a problem qualifying? You are also correct that this means your ER will rise to. Vanguard should do this automatically, but it is worth keeping an eye on and reminding them if needed. But both transitions should be seamless. It could be considerably more, or considerably less — including the possibility of a loss. Thank you so very much for this blog. I was hoping to find them or something similar, especially since there are several Vanguard funds available within the plan.

Of the non-Vanguard stock offerings in my k plan, only one is an index fund: Obviously this new mix would be for contributions going forward, but would you also suggest rebalancing my current portfolio to mirror this? Total Stock Market Index, which covers all regularly traded U. I thank you for your time and look forward to your response. I confess, I groaned a bit when I saw the length of your comment.

Most often this indicates a lot of random questions surrounded by fuzzy writing. But not in your case. Ordinarily, I advise rolling into a IRA with better fund choices as the choices in many K plans is wretched. Since these funds are in a tax-adnvataged account, you can freely rebalance without tax consequences. Both in this k and across your portfolio.

In fact, when thinking about your allocation, it is best to consider all your assets as a whole. Why not concentrate all, or most, of your bond holdings into the Total Bond Fund in the old k with its ultra low. This also has a higher ER at. Like so many others, thank you for this excellent resource. I mostly invest in my k and let them allocate the money.

After reading several of your post, I began looking at my allocation and the ER. Needless to say, most of my money is in very expensive funds. Should I allocate all of my money to the two Vanguard funds and find other bond funds to invest in outside my k or go ahead and allocate some even though the expense is high?

Also, I already have several thousand dollars in the high expense funds, should I transfer that money to the Vanguard funds or leave where they are? First, are you sure VIIX — http: If your personal allocation needs require bonds, then bite the bullet and buy the broadest based index bond fund offered in the k. For more on selecting your allocation: For tax efficiency reasons I would only buy bond funds outside your k if you have an IRA to hold them in.

Absolutely you should switch out of those high cost funds ASAP. No sense paying for them a moment longer. Since you will be switching within your k it should be easy and there will be no tax consequences. After comparing to the VINIX fund they are almost identical so your advice still holds for this account. As you promised, it was extremely easy. I look forward to reading and learning more from your post! Now all you have to do is keep adding money, stay the course and not get rattled when the market falls.

When the day comes that you are sipping umbrella drinks on a tropical shore, send old jlcollinsnh a good thought. Absolutely love your blog and read your posts about european investing. I tell a lie, I have read most articles on your website, and I have passed a bunch of them on to friends and family.

I started reading via MMM. I can see why you are confused. The two links you provided describe this fund a bit differently. On one hand they refer to it as a large-cap index fund. But one also says: Only problem now, which is making me nervous, is that of currency risk. What is your feeling on the matter given my situation? I guess the only additional thing that might affect your opinion on it all is that my next move is to open an ISA with a more broad Vanguard LifeStrategy fund which will be left alone for at least 9 years, linked below with much more diversification but still plenty invested in the Total US stock market.

Well you are tying yourself to the dollar rather than the pound. The only difference is where we live. Life Strategy is also a fine choice and I discuss those types of funds here: Both links I sent you were, I believe, are the same fund even if their descriptions were slightly different.

I have a question, and am not sure that you still answer questions on this post but here it goes. I am currently invested in the Fidelity Freedom K target date fund. Now, this fund has a. I am just a bit overwhelmed with my options and was hoping to get some insight. Thanks, I really enjoy reading your blog. But since you are willing to leave Fidelity Freedom K , you can create whatever allocation best suits your needs.

To help, check out:. Upon further research, it would seem the best route tax wise would be to invest in Irish-domiciled funds as an NRA Non-resident Alien. The relevant fund choices are as follows: However I do not know where I stand in regards to diversification out of US, being an International investor.

My thinking is between the two funds above, the ER for the All-World is just too costly 3. However, some of the readers here might have some thoughts: Hola Jim, Thank you for your generosity of spirit. I am in Mexico. How can I put all this good information to practice? Are there Vanguard products I can access? However, it appears you can buy Vanguard ETFs: I have recently started a new job, and the employer is offering Lincoln Financial Group for their matched savings accounts.

Fees are minimal at 0. What are your thoughts on this? Both of them by far offer the lowest expense ratios of the investments available at 0. Remember, you should consider your allocation across all your holdings. So depending on what else you have where and in what amounts, you might only need one of these funds.

Hi again, Thanks for the advice. A little more information about our situation. My wife and I are both After we bought our first house last year, we decided to really try working on paying off our debt and have come up with a plan to do so that we have been following. In trying to take better control of our finances I came across your blog recently which I have been reading quite a bit.

We have since decided that our goal is now to be financially independent no later than Most of our excess income is going towards our debt at the moment, but once that is paid off it will be going towards investing towards our future through our retirement accounts and personal Vanguard accounts that we will be opening. Its payout is based more on how long you work. Thanks again for the advice! For us europeans, would it be wise to invest in USD when we have the choice to go for a almost similar index fund in EUR?

Or am I seeing this the wrong way? Currency is an interesting thing. It represents the value of something, but it is not that value. That is, once you convert your currency into something tangible, the exchange rate of that currency no longer matters.

The same is true once you buy a basket of stocks. And that can look scary if they are measured in a currency other than your own. Thank you for all the great information. I have a quick question for you.

My sister needs some help with her K. Any advice or thoughts would be much appreciated. Your advice is really eye opening and I wholeheartedly agree with it. Thank you for making all your knowledge available to everyone. I have a 2 part question:. Given the available choices, what each fund is invested in, and what the expense ratios are, it looks like the choices most in line with your strategy are BSPIX for stocks and the BPRIX for bonds.

Would you agree or do you see any other funds that may be better? Asset allocation is about your needs and inclinations. This post is designed to help you decide what works best for you: As I say in the post, scan the ERs looking for the lowest. This will guide you to the index funds. If none, it will point you to the lowest cost options. Hi Jim, I have been reading through all of this blog for the past two weeks.

Thought I would reach out to you for a bit of advice. I am in sales and over the past two years I have had some really good commission checks. You will want to slap me because this money is currently sitting in an account not earning much of anything. We also have absolutely no debt except for small mortgage left on our home. Would it be a taxable account that I would need to open with vanguard?

What are your thoughts considering the current environment? Keep up the great work on this blog! But you should put that 50k to work. As for the market being at record levels, you are straying into the murky world of market timing which no one can do reliably. Thank you for your reply. To clarify, I have only been maxing out one of the two of the IRA accounts. Most of the past recent years i have put the money in the Roth instead of the traditional but now you have me thinking.

I will be maxing out again…however, I still have this extra stash that I need to do something with even after maxing out the IRA. My procrastination might have paid off so far as I have not invested this bit of cash I have sitting in a savings account.

But I am getting ready to. Now the market is doing some correcting. However, if you happen to read this and feel like commenting, I bet there are quite a few people that would like your perspective on the recent decline. I know I sure would. Stocks are on sale.

Thanks for all your insight. I just changed my k elections. There are the only two Vanguard options in the program. Does this seem like a wise allocation to you? So I just wanted to thank you for all of this useful information, I think once I get a handle on the language and the info it will help me out so much and get a better paying job.

I have one question maybe you can answer but maybe I need to contact Vanguard once I open an account with them. Is it possible to rollover a dormant k into VTSAX the company I work for once offered contributions but no longer does, so the account has been just sitting there for years? As for your old k , you want to roll this directly into an IRA.

This avoids tax and penalties. I will keep reading the stock series in order from here on out and jump around after I finish. Is 40 too late to invest in index funds? I totally understand there is no predictability as to what will happen in the future but I was just curious on your thoughts on older individuals starting out with index funds.

From there you can compare what I say with what you hear elsewhere and judge for yourself what resonates for you. Any recommendations on researching the options? Honestly I cannot thank you enough for all the information you provide. If you are halfway thru the Series you have already read this: You might also read: I really wish I could open a Vanguard account, though.

Since I work for a bank and as a covered employee, I have restricted investment options and can only trade within Merrill Edge yeah sounds like 1st world problem.

Thanks again for all the information you provided. Since then, just sits there loosing money. I didnt know much about it im 27 and just recently decided to do something about it now. The commission fees are high. I rather do it myself and be more hands on then having a company do it for me.

I am wanting to transfer it to vangaurd. I am married, we file joint and we have rental properties. We do side work, lawncare but not incorporated, just a DBA. Do you know if the income would count as earned income so we can use that to contribute to IRA? I have learned a LOT last couple weeks but feel stuck right now. I cant decide if we should transfer the IRA into a traditional or roth or something else.

I feel completely lost on this.. As for how to move the account: I should of looked into this 5 years ago but, ignorance is bliss. Yes, the lawncare business is reported using schedule C. From what I understand, you cannot contribute more then your earned income for year. Would it be before or after deductions? Also, I would like to invest more then that..

Once you have fully funded your tax-advantaged accounts, you can always and should invest in regualr taxable accounts. Its expense ratio is 0. As you said it is relatively expensive but it is as good as it gets here in Europe. Welcome, and thanks for the kind words. Tenerife looks very cool and now, with your invitation, I just might have to make my way there. Also what is the difference between management fee and MER? Thank you sooo much for this stock series!

Should she invest every thing in the large or divide it up using the formula? Also we are living on pretty small incomes, not sure if this factors into what we should choose between stocks or between a a and b. Hi Jim, First of all, I have no words to express gratitude for you putting all this information on this blog for us for free. You and your advices have been an eye opener and my spouse and I are excited to finally take control of our finances.

I have also just recently woken up to the fact that I am making many mistakes and at this rate, I will end up working till My biggest mistake has been ignorance; and thanks to you and others alike, I hope to correct that asap. I do not yet have a retirement plan available to me at work, but my spouse does, and I would like to make smarter decisions. Currently she has 14k in her b, and she is not contributing to the max which we will quickly fix but I also do not like the investment choices she has that due to our ignorance, were simply assigned to her.

She is 34 years old btw. This is what her portfolio looks like: Here are the Vanguard options in her plan: My questions to you are: Should we leave whatever she already has invested in those 3 funds and simply assign all new contributions to other Vanguard Funds such as VINIX?

Should we exchange all the existing Black Rock and eliminate it from the Portfolio and substitute it for Vanguard instead? And if we do that, are there any fees or taxes we need to pay in order to do that? She has held those funds for about 5 years. Which of the above Vanguard funds that are available to her would you recommend?

Because these are all in a b there will be no tax consequences. There should also be no fees unless Black Rock charges a backend load sales charge to exit the fund. Such things are despicable and hopefully going extinct. Should your funds have one, all the more reason to dump them. Depends on the allocation you want. With those last two you can customize whatever allocation works best for you.

This will help you decide: I have 3 options: I am 31, debt free but still live paycheck to paycheck, mainly due to social pressure. I have a very small amount in a fixed deposit account, which is at least a start, but I am trying to make a plan for the longer term.

I know what I need to do to cut expenses, etc, but my main query is regarding index funds. I know squat about investing. This is because you guys explain it pretty well. Although I read a lot and am good at maths, all the info on your tax system only confuses me. I am looking at some local index funds and would not mind risking half a paycheck to see where it takes me.

The problem is, how do I know if an index fund seems good…on any level? Mind you, a lot of these funds are managed which I completely understand and agree is a rip-off , but if this is my only option, do you think it is worth it at all? Does it depend on the numbers? Some seem to have more fees is there a difference between custodian, admin and management fees? How low is a low-cost index fund? How do I understand a good starting point from a bad starting point?

I know it is a broad query but maybe you can help me navigate the seas of your blog for a reference. I also want to thank you for this great resource. I think it would be helpful if you said exactly which country you are in. As for your basics, I think it would be wise to find the lowest cost world index fund available to you.

In the US we are looking for index funds with fees under 0. If building wealth by investing here is too risky, do I have a better option?

Even reading on investment is scaring me a little and although I will never know until I try, it feels good to be able to share the goal with others. Your posts are encouraging and coming back keeps me from slipping into the grind of wasting money. The big banks are all charging huge fees to buy into any of their funds, so it would probably be best to avoid them. Kind of high but not astronomical enough to deter if you did lump sum investments.

This may not seem like a big deal today but as you build up your investments it might turn into a bigger problem for your spouse and or children in the future. Vanguard has entities in many different countries and almost always has some sort of version of VTI and VT available.

There is a guy named Andrew Hallam that has done much more research on this than I so you may want to google him. He has a few books and a pretty informative website for expats looking to invest. Even if you are not an expat I think it still might be informative for you. Thanks Jason, I will check out both Saxo and Hallam. I guess at the levels here, they are too high to make any investment worthwhile. Reading the other comments, I know that a lot of people have this issue in other countries.

There indeed is nothing like the transparency of the US market. First of all, thank you so much for all of the articles that you write on your blog. I am Canadian 29 years old with no debt. Leveraged and Inverse Products: What you need to know. Except as noted below, all data provided by Morningstar, Inc. The information contained herein is the proprietary information of Morningstar, Inc. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely.

Charles Schwab Investment Management, Inc. Individual holdings are shown for informational purposes only and are not considered an offer to sell or a solicitation of an offer to buy a specific security.

YTD Return is adjusted for possible sales charges, and assumes reinvestment of dividends and capital gains. If the inception date of the Fund is less than the time period shown above, the Since Inception period is shown. Fund Strategy The investment seeks long-term growth of principal and income.

Distribution Yield is the Trailing Month End Yield - Morningstar computes this figure by summing the trailing month's income distributions and dividing the sum by the last month's ending Net Asset Value NAV , plus capital gains distributed over the same time period. Income refers only to interest payments from fixed-income securities and dividend payments from common stocks.

Calculated at month end:. A net expense ratio lower than the gross expense ratio may reflect a limit on or contractual waiver of fund expenses. Please read the fund prospectus for details on limits or expiration dates for any such waivers. Inverse Fund Inverse mutual funds typically use derivatives to attempt to move in the opposite direction of the underlying index by a certain multiple each day or month.

Foreign large-value funds invest mainly in big international stocks that are less expensive than the market as a whole.

Most of these funds divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. Management View All Managers.