Jack Bogle's 3-fund portfolio is the most evidence-backed investment strategy available to individual investors. It beats 90%+ of actively managed funds over 20-year periods — and takes 30 minutes per year to maintain.
The 3-fund portfolio
- US total stock market: VTI (Vanguard) or FSKAX (Fidelity) or SWTSX (Schwab)
- International developed markets: VXUS (Vanguard) or FTIHX (Fidelity) or SWISX (Schwab)
- US bonds: BND (Vanguard) or FXNAX (Fidelity) or SCHZ (Schwab)
Suggested allocations by age
| Age | US stocks | International | Bonds |
|---|---|---|---|
| 20s | 60% | 30% | 10% |
| 30s | 55% | 25% | 20% |
| 40s | 50% | 20% | 30% |
| 50s | 40% | 20% | 40% |
| 60+ | 30% | 15% | 55% |
Where to open the account
| Broker | Account minimums | Fund expense ratios |
|---|---|---|
| Fidelity | $0 | 0% (Zero funds) |
| Vanguard | $0 (ETFs), $3,000 (mutual funds) | 0.03-0.04% |
| Schwab | $0 | 0.03-0.06% |
| M1 Finance | $100 | 0.03-0.06% |
The rebalancing schedule
Rebalance once per year (or when any allocation drifts 5%+ from target). January 1 or your birthday are common anchors. Rebalance by contributing new money to underweight categories first — avoids selling and triggering capital gains taxes.
The expense ratio effect over 30 years
On a $100,000 portfolio: 0.04% expense ratio (Fidelity index fund) vs 0.75% (average actively managed fund). Over 30 years at 7% returns: the index fund portfolio grows to $749,000. The active fund portfolio grows to $625,000. The 0.71% fee difference costs $124,000. Not a typo.
On a $100,000 portfolio: 0.04% expense ratio (Fidelity index fund) vs 0.75% (average actively managed fund). Over 30 years at 7% returns: the index fund portfolio grows to $749,000. The active fund portfolio grows to $625,000. The 0.71% fee difference costs $124,000. Not a typo.
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