3 Fund Portfolio: Ultimate Guide to Keeping Up with the Market

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If you are looking for a great way to invest your money, then a 3 fund portfolio is the right choice for you. This post will give you all of the information you need to keep up with the markets and stay on top of your investing game.

We’ll teach you about 3 fund portfolios and how they work, what 3 funds to include in your portfolio, as well as how to properly allocate these funds across different sectors!

This investing approach is made quite popular by the “bogleheads,” who are a board of about 20 people, including doctors and professors with backgrounds in economics and finance.

A great way to invest is via a 3 fund portfolio.

You can also areas our guide on Negative Net Worth and Liquid Net Worth.

What is the 3 fund portfolio?

A 3 fund portfolio strategy is a long-term, low-cost approach to investing. This strategy usually includes three index funds: total stock market fund (representing all stocks), total international markets fund (representing foreign stocks), and emerging market equity fund (representing the stock of companies in countries with developing economies).

There are also many variations on this portfolio that will be discussed later. The 3 Fund Portfolio can take different forms depending on your risk-aversion level – but what does it mean?

The allocation between equities and bonds is up to you – do you want higher growth potential or more stability? This decision should depend on how much time you have before retirement, as well as where you’re at financially now.

  • U.S. Stocks
  • U.S. Bonds
  • International Stocks

Does the 3 fund portfolio really work?

If you’re an investor looking for simplicity, this 3 fund strategy may be for you. It means investing in 3 different asset classes – U.S stocks (representing the stock of companies based in the US) and emerging market equity fund (representing the stock of companies in countries with developing economies).

There are also many variations on this portfolio that will be discussed later. The 3 Fund Portfolio can take different forms depending on your risk-aversion level – but what does it mean?

The allocation between equities and bonds is up to you – do you want higher growth potential or more stability? This decision should depend on how much time you have before retirement, as well as where you’re at financially now.

In order to formulate a successful investment strategy, there must be the following features:

  • Diversification
  • Simple asset allocation
  • Low costs
  • Low risk

Who is the 3 fund portfolio for?

So in simple words, this is perfect for the person who wants to invest in stocks but doesn’t have a lot of wealth. The 3 fund portfolio is perfect for younger investors who are time rich and cash poor – those with 30+ years before retirement and lots of room left on their credit cards.

What should you do if you’re older or less risk-tolerant?

It’s easy! It would be best if you allocated your assets differently: instead of investing 60% in equities, use that same amount (or more!) in bonds or other securities like CDs.

If the markets go down and make it difficult to meet monthly expenses, then this strategy will provide stability without sacrificing growth potential too much.

Investing can seem complicated at first glance because there are so many different plans out there.

Let us know more about target-date funds as against this three-fund strategy.

These funds are designed to provide a mix of equities and bonds that changes from more aggressive in the beginning to less risk as you get closer to your retirement date.

The target-date fund will automatically adjust for you, so there’s no need to worry about which investment is best at any given time.

3 fund portfolio asset allocation

The name itself says “three-funds,” and it includes three funds that are U.S. stocks, international stocks, and U.S. bonds. The 3 fund portfolio is an asset allocation strategy in which you invest equally into U.S., international, and bonds funds to achieve diversification between these investments without sacrificing growth potential too much.

This type of investment plan has a low-risk factor because the money is split so evenly among different types of stocks and bonds with less emphasis on any single category.

For example, if there’s a downturn in one sector like technology stocks or corporate bond markets, it won’t have as big an impact as it would on only those two sectors specifically.

That lower risk also means that retirement investors should not need to withdraw from this fund until later than they might otherwise require for other types of portfolios because the downside movement will be “cushioned”.

Tips before you get started with a 3 fund portfolio

Here we have listed all the tips that you need to get started with the 3 fund portfolio:

  • It would be best if you had a portfolio of 3 funds, which are usually large-cap stocks (40% allocation), mid-caps (30% allocation), and bonds (30% allocation). These allocations will not change whether you invest for retirement or other needs.
  • The bond portion is the riskiest part of this portfolio because it has low returns but also higher volatility than stocks.
  • This type of investment strategy shifts with investor age: young investors need to take more risks while older ones can be less in investing in risky assets like high yield bonds or emerging markets stock holdings. Remember that asset location matters, so as an example, if you’re nearing retirement, then your focus would shift from growth assets towards income-producing investments such as dividend-paying equities.

Final Words

3 Funds Portfolio is a great way to invest with less effort. The 3 fund portfolio strategy invests in international, domestic growth, and bond funds that are all diversified across different sectors of the economy.

This article discussed how this investment style could be effective for investors looking for a simple way to grow their money over time without much work involved on their end. If you’ve been considering starting your own investments or want help setting up your current ones, let us know!

We have experts who will set up online accounts and manage them, so you don’t have to worry about it anymore – enjoy the benefits of having enough extra cash each month because we did all the hard work for you! What do you think?

I lead product content strategy for SaltMoney. Additionally, I’m helping our broader team of 4 evolve into a mature content strategy practice with the right documentation and processes to deliver quality work. Prior to Instacart, I was a content strategy lead at Uber Eats and Facebook. Before that, I was a content strategist at SapientNitro, helping major Fortune 500 brands create better, more useful digital content.

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