BEST VANGUARD INDEX FUND PORTFOLIO easy 3 fund strategy

In this video, I will be going over the very BEST VANGUARD INDEX FUND PORTFOLIO, made easy.

What is the Three Fund Portfolio?
Unless you’re a big fan of Vanguard, Jack Bogle (founder of Vanguard), or are a Boglehead (huge fans of Vanguard), you probably don’t know who Taylor Larimore is.

Taylor Larimore is considered the dean of the Bogleheads and author of several books, one of which is titled The Bogleheads’ Guide to the Three-Fund Portfolio.

I think it’s safe to say that he’s the originator of the idea of a three-fund portfolio, most recently captured in this post on the Boglehead forums in 2012. The three-fund portfolio is one of the most popular portfolio setups among Bogleheads for its diversification and its simplicity.

A three-fund portfolio consists of:

Domestic stock “total market” index fund
International stock “total market” index fund
Bond “total market” index fund
You can get these funds from anywhere but the three Vanguard funds that fit this approach are:

Vanguard Total Stock Market Index Fund (VTSAX) https://finance.yahoo.com/quote/VTSAX...
Vanguard Total International Stock Index Fund (VTIAX) https://finance.yahoo.com/quote/VTIAX...
Vanguard Total Bond Market Fund (VBTLX) https://finance.yahoo.com/quote/VBTLX...

Sometimes, people will talk about a four-fund portfolio.

That’s a three-fund portfolio plus an international bond component, like the Vanguard Total International Bond Index (VTABX) https://finance.yahoo.com/quote/VTABX...

I list Vanguard mutual funds but you can invest with exchange-traded funds (ETFs) too.

The ETFs are:

Vanguard Total Stock Market ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market Fund (BND)
Vanguard Total International Bond Index (BNDX)

How do I set my allocation?
Great question!

Alternatively, you can use the very simple 120 minus your age as the stock percentage. A 40-year-old would put 80% stocks and 20% bonds.

Larimore, in his book, offers the rule that you should hold your age in bonds. So, a 40-year-old would put 60% stocks and 40% bonds.

That will tell you the percentage of stocks and bonds. Larimore, and Vanguard research on international equity, suggests a 20% international allocation where you can decide how much international exposure you’d prefer, but from there the math is easy.

If you were given an 80% stock, 20% bond and wanted to have a 20% international allocation, this is how’d you invest into the three funds:

Total Stock Market (VTSAX) – 64%
Total International Stock (VTIAX) – 16%
Total Bond Market Fund (VBTLX) – 20%


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DISCLAIMERS & DISCLOSURES

This content is for education and entertainment purposes only. Tray does not provide tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.