The Three-Fund Portfolio prioritizes simplicity in diversification by owning the whole world in just three low-cost index funds.
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
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
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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
Change the home country to translate the portfolio to local assets, currency, and inflation.