Three-Fund Portfolio

The Three-Fund Portfolio prioritizes simplicity in diversification by owning the whole world in just three low-cost index funds.

The Three-Fund Portfolio by Taylor Larimore

Asset Allocation

  • 48% Total Stock Market
  • 12% International Stocks¹
  • 40% Intermediate Bonds
Asset Notes

1. Larimore specifically recommends international stocks equal to 20% of the equity portion of the portfolio. Since the default version here on Portfolio Charts includes 60% stocks, I allocated 12% (20% of 60) to international.

Other Versions

Larimore does not recommend a specific percentage of bonds. Instead, he suggests that you should select the percentage according to your age, goals, timeframe, and risk tolerance. I chose 40% bonds as a reasonable starting point, but you can also customize the percentage to your own needs. Here are a few examples that follow his philosophy:

60% Bonds — Less Risk

25% Bonds — More Risk

Local Interpretations

Find country-specific versions and appropriate ETFs using the Performance charts.

Author

<strong>Taylor Larimore</strong>
Taylor Larimore

Taylor Larimore is a finance veteran, author, and long-time poster at the Bogleheads forums. You can read about the Three-Fund Portfolio in his book The Bogleheads’ Guide to the Three-Fund Portfolio.

Overview

The Three-Fund Portfolio was created by Taylor Larimore after being inspired by the writings of Jack Bogle to simplify the investments from his own complex mix of 16 different funds to something much more sustainable. The original version back in 1999 actually included four funds — domestic stocks, international stocks, bonds, and cash. But as interest rates dropped over the years Larimore simplified even further, and the Three-Fund Portfolio took its final form.

While the percentages cited on Portfolio Charts represent the most common default version of the portfolio, Larimore doesn’t actually see it as a fixed asset allocation. Instead, he recommends adjusting the percentage of bonds according to your age, goals, timeframe, and risk tolerance. Those factors may naturally change over time, and the Three-Fund Portfolio can change right along with them. So it’s more than just an asset allocation — it’s a portfolio meant to grow right alongside the investor for life.

Books

Books about the Three-Fund Portfolio, and others by Taylor Larimore

Buying a book educates you, supports the author, and earns Portfolio Charts a commission.

THE BOGLEHEAD’S GUIDE TO THE THREE-FUND PORTFOLIO

THE BOGLEHEAD’S GUIDE TO INVESTING

THE BOGLEHEAD’S GUIDE TO RETIREMENT PLANNING

Articles

Insights that mention the Three-Fund Portfolio

Alternatives

Portfolios with a similar structure or design intent

Classic 60-40 — A similar Bogleheads staple without the international fund

Core Four Portfolio — Four simple index funds to own the market and minimize risk

Total Stock Market — A simple and effective broad domestic stock index fund

Performance

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