Is a 3 fund portfolio good?
The three-fund portfolio is a strategy that gets lots of love from investors, and for good reason. It can deliver strong growth and low risk over long time periods, and it's easy to manage. If you're trying to figure out how to set up your investments, the three-fund portfolio could be the solution.
The Bogleheads Three Funds Portfolio is a Very High Risk portfolio and can be implemented with 3 ETFs. It's exposed for 80% on the Stock Market. In the last 30 Years, the Bogleheads Three Funds Portfolio obtained a 7.61% compound annual return, with a 12.38% standard deviation.
While there is no precise answer for the number of funds one should hold in a portfolio, 8 funds (+/-2) across asset classes may be considered optimal depending on the financial objectives and goals of the investor. Further, higher allocation of portfolio to the right fund is of crucial importance.
The "age in bonds" rule is popular within the passive investing community, and is suggested by Taylor Larimore in his book, "Bogleheads' Guide to Investing." This rule recommends that an investor should subtract their age from 100 (or 110) to determine the percentage of their portfolio that should be invested in stocks ...
A number of popular authors and columnists have suggested three-fund lazy portfolios. These usually consist of three equal parts of bonds (total bond market or TIPS), total US market and total international market.
- Returns. Index funds, by nature, are designed to match the market not beat it. ...
- Rebalancing. A three-fund portfolio is not set-it-and-forget-it. ...
- No room for alternatives.
General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.
Let's factor in your age. There's a useful formula that suggests you invest a percentage equal to a hundred minus your age in a carefully selected portfolio of Equity Mutual Fund SIPs. That would be 65 per cent (100-35) of your monthly savings, which translates to Rs 39,000 per month (65 per cent of Rs 60,000).
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.
“It is generally recommended to have a portfolio size of at least $100,000 before considering investing in individual securities, and at least $500,000 before moving away from investment products and investing directly in stocks and bonds.”
How much money do I need to invest to make $3000 a month?
A well-constructed dividend portfolio could potentially yield anywhere from 2% to 8% per year. This means, to earn $3,000 monthly from dividend stocks, the required initial investment could range from $450,000 to $1.8 million, depending on the yield. Furthermore, potential capital gains can add to your total returns.
A three-fund approach can make it easier to diversify if you're choosing funds that reflect the market as a whole. Lower costs. Using index funds to construct a three-fund portfolio may be more cost-effective overall.
![Is a 3 fund portfolio good? (2024)](https://i.ytimg.com/vi/Wm2E2bgLtMQ/hq720.jpg?sqp=-oaymwEcCNAFEJQDSFXyq4qpAw4IARUAAIhCGAFwAcABBg==&rs=AOn4CLAj3HCrT0uT-9SyffcI6BxpJFMS4g)
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks.
Regardless of your age, proximity to retirement, or financial profile, Dave Ramsey recommends the exact same investment allocation: divided equally among four types of funds; growth, growth and income, aggressive growth, and international. Dave's philosophy essentially boils down to investing in the stock market.
A three-fund portfolio is a way of balancing simplicity with diversification. A three-fund portfolio normally will be split among three asset classes: domestic (U.S.) stocks, international stocks, and domestic bonds. Be mindful that some three-fund portfolios may also incidentally incorporate some alternative assets.
3 Fund portfolio asset allocation
The most common way to set up a three-fund portfolio is with: An 80/20 portfolio i.e. 64% U.S. stocks, 16% International stocks and 20% bonds (aggressive) An equal portfolio i.e. 33% U.S. stocks, 33% International stocks and 33% bonds (moderate)
Rebalancing is about managing risk, not chasing investment returns. Rebalancing your portfolio once a year is plenty. Rebalancing less frequently may be even better if your portfolio is diversified from the outset.
Some financial advisors recommend a mix of 60% stocks, 35% fixed income, and 5% cash when an investor is in their 60s. So, at age 55, and if you're still working and investing, you might consider that allocation or something with even more growth potential.
That being said, conventional financial wisdom says a good ROI is anything over 7%. As Forbes elaborates: "This is also about the average annual return of the S&P 500, accounting for inflation. Because this is an average, some years your return may be higher; some years, they may be lower.
The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.
What is the safest investment with highest return?
U.S. Treasury securities, money market mutual funds and high-yield savings accounts are considered by most experts to be the safest types of investments available.
We found that 15% of income per year (including any employer contributions) is an appropriate savings level for many people, but we recommend that higher earners aim beyond 15%. So to answer the question, we believe having one to one-and-a-half times your income saved for retirement by age 35 is a reasonable target.
So by age 35, your goal should be to have 1.5 times your salary socked away. If you earn $80,000 a year, that means you should, ideally, have $120,000 in your IRA or 401(k). Now, it's worth noting that a lot of retirement plan balances lost money in 2022 due to stock market volatility.
For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.
With this rule, you subtract your age from 100 to find your allocation to stock funds. For example, a 30-year-old would put 70 percent of a 401(k) in stocks. Naturally, this rule moves the 401(k) to become less risky as you approach retirement.
References
- https://smartasset.com/investing/whats-a-good-return-on-investment-roi
- https://finance.yahoo.com/news/fastest-ways-become-rich-investing-120025750.html
- https://www.investopedia.com/terms/l/level2_assets.asp
- https://www.moneycontrol.com/news/mcminis/what-are-stage-3-assets-in-nbfc-10110951.html
- https://www.investopedia.com/financial-edge/0410/6-investment-styles-which-fits-you.aspx
- https://www.linkedin.com/pulse/3-fund-portfolio-sal-armstrong
- https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/2-and-20-hedge-fund-fees/
- https://www.sec.gov/Archives/edgar/data/898174/000089817420000005/R17.htm
- https://www.forbes.com/advisor/investing/best-low-risk-investments/
- https://www.clevergirlfinance.com/3-fund-portfolio/
- https://www.gobankingrates.com/investing/strategy/where-do-millionaires-keep-their-money/
- https://www.fool.com/the-ascent/buying-stocks/articles/these-are-the-4-worst-investments-according-to-humphrey-yang/
- https://www.dspim.com/learn/articles/mutual-fund-intermediate/are-there-any-guaranteed-contractual-return-products-and-shouldnt-you-always-choose-them
- https://www.investopedia.com/articles/investing/111115/5-reasons-choose-mutual-funds-over-etfs.asp
- https://www.bajajfinserv.in/investments/complete-guide-investing
- https://www.bogleheads.org/wiki/Two-fund_portfolio
- https://lyonswealth.com/blog-details/how-much-money-do-i-need-to-invest-to-make-3000
- https://www.titan.com/articles/how-to-invest-in-hedge-funds
- https://www.fool.com/the-ascent/banks/articles/cds-vs-t-bills-whats-the-better-investment-now/
- https://www.forbes.com/sites/chriscarosa/2023/01/14/at-this-size-your-retirement-portfolio-is-too-big-for-mutual-funds/
- https://mintgenie.livemint.com/news/personal-finance/what-is-the-structure-of-mutual-funds-in-india-an-explainer-151693913007766
- https://ffj-online.org/wp-content/uploads/2022/11/Level-2-Assets-Definition-Examples-and-Vs.-Level-1-and-3-Assets.pdf
- https://centerpointsecurities.com/how-to-interpret-level-2-data/
- https://www.sec.gov/Archives/edgar/data/98338/000121390020009073/R12.htm
- https://www.bankrate.com/investing/best-long-term-investments/
- https://www.frgrisk.com/ifrs-9-classifying-and-staging-financial-assets/
- https://m.economictimes.com/markets/stocks/news/the-optimal-number-of-mutual-funds-that-you-should-hold-in-your-portfolio/articleshow/99009145.cms
- https://www.investopedia.com/terms/l/level1_assets.asp
- https://www.thebalancemoney.com/top-investing-strategies-2466844
- https://www.investopedia.com/articles/investing/062714/100-minus-your-age-outdated.asp
- https://tworoadsco.com/3-things-you-need-to-know-about-good-investment-returns
- https://www.fool.com/the-ascent/banks/articles/im-35-how-much-should-i-have-in-savings/
- https://smartasset.com/financial-advisor/aggressive-investor
- https://www.bankrate.com/investing/best-investments-for-beginners/
- https://www.investopedia.com/pros-and-cons-of-cds-5223947
- https://investor.vanguard.com/investor-resources-education/etfs/etf-vs-mutual-fund
- https://www.lazyportfolioetf.com/allocation/bogleheads-three-funds/
- https://www.sec.gov/Archives/edgar/data/1412100/000141210016000188/R12.htm
- https://financeunlocked.com/discover/glossary/level-1,-2,-and-3-assets-valuation
- https://ir.westell.com/all-sec-filings/xbrl_doc_only/1236
- https://www.investopedia.com/terms/i/investing.asp
- https://www.investopedia.com/retirement/retirement-income-planning/
- https://www.sec.gov/Archives/edgar/data/1364742/000119312512460708/R11.htm
- https://www.finra.org/investors/investing/investment-products/mutual-funds
- https://www.nerdwallet.com/article/investing/rebalance-portfolio-strategies
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-you-only-invest-in-sp-500-etfs/
- https://www.forbes.com/advisor/investing/how-to-invest-in-hedge-funds/
- https://www.ici.org/system/files/2021-12/21-ppr-fund-valuation-primer.pdf
- https://www.investopedia.com/terms/i/investmentpyramid.asp
- https://fortune.com/recommends/investing/golden-rules-of-investing/
- https://smartasset.com/investing/three-fund-portfolio
- https://money.com/money-market-vs-cd/
- https://money.cnn.com/retirement/guide/investing_basics.moneymag/index7.htm
- https://www.troweprice.com/personal-investing/resources/insights/youre-age-35-50-or-60-how-much-should-you-have-by-now.html
- https://www.investopedia.com/terms/t/treasurybill.asp
- https://getmoneyrich.com/historical-returns-given-top-indian-stocks/
- https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_4_concepts_u_US/45_inputs_to_fair_va_US.html
- https://www.schwab.com/learn/story/3-ways-to-build-all-etf-portfolio
- https://www.bogleheads.org/wiki/Lazy_portfolios
- https://fastercapital.com/content/Hedge-funds--Level-2-Assets-and-Hedge-Funds--A-Winning-Combination.html
- https://www.investopedia.com/ask/answers/081114/how-does-warren-buffett-choose-what-companies-buy.asp
- https://www.nerdwallet.com/article/investing/types-of-investments
- https://finance.yahoo.com/news/genius-ways-1-000-month-105500970.html
- https://en.wikipedia.org/wiki/E-2_visa
- https://www.investopedia.com/3-fund-portfolio-401k-5409269
- https://www.sec.gov/Archives/edgar/data/791963/000119312513092605/R12.htm
- https://materials.proxyvote.com/Approved/03076C/20100301/AR_55271/PDF/ameriprise_financial-ar2009_0144.pdf
- https://fortune.com/recommends/investing/safe-investments/
- https://smartasset.com/investing/average-return-on-an-all-bond-portfolio
- https://www.jamescole.co/blog/what-are-the-4-types-of-investments
- https://www.financestrategists.com/wealth-management/investment-management/level-3/
- https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-1
- https://materials.proxyvote.com/Approved/871829/20100914/AR_67757/PDF/sysco-ar2010_0070.pdf
- https://www.nerdwallet.com/article/banking/money-market-vs-cd
- https://finance.yahoo.com/news/three-fund-portfolio-140055682.html
- https://fortune.com/recommends/banking/cds-vs-money-market-accounts/
- https://www.fool.com/investing/2023/11/13/2-next-big-thing-investment-trends-face-plant-2024/
- https://www.unbiased.com/discover/retirement/can-you-retire-on-3-million
- https://www.cafonline.org/charities/investments/understanding-strategies-and-styles-of-investing
- https://www.maxlifeinsurance.com/blog/investments/types-of-investments-in-india
- https://www.sec.gov/Archives/edgar/data/1109242/000162828019002348/R22.htm
- https://www.bankrate.com/retirement/signs-your-401k-portfolio-is-too-aggressive/
- https://www.sec.gov/Archives/edgar/data/1739940/000173994020000012/R21.htm
- https://www.businesstoday.in/personal-finance/investment/story/im-35-and-earn-rs-2-lakh-a-month-how-much-and-in-which-mutual-fund-schemes-should-i-invest-397246-2023-09-07
- https://www.quora.com/How-should-an-ideal-portfolio-at-the-age-of-40-look-like
- https://www.investopedia.com/terms/l/level1.asp
- https://www.fool.com/terms/l/level-3-assets/
- https://www.investopedia.com/articles/financial-advisors/072915/what-does-ideal-retirement-portfolio-look.asp
- https://masteryourmoneynow.com.au/the-seven-levels-of-investors-according-to-robert-kiyosaki/
- https://viewpoint.pwc.com/dt/gx/en/pwc/industry/industry_INT/industry_INT/real_estate__1_INT/Applying-IFRS-for-the-real-est/Disclosures/IFRS-13-disclosures/8-3-2-Fair-value-hierarchy.html
- https://www.investopedia.com/ask/answers/033115/what-are-differences-between-treasury-bond-and-treasury-note-and-treasury-bill-tbill.asp
- https://get.investors.com/online-courses/foundation-of-investing-level-1/
- https://www.forbes.com/advisor/investing/best-safe-investments/
- https://www.sec.gov/Archives/edgar/data/1266806/000161577415003266/R10.htm
- https://www.businessinsider.com/personal-finance/6-percent-certificate-of-deposit-cd
- https://www.cbsnews.com/news/is-it-better-to-invest-in-stocks-or-a-cd/
- https://www.investopedia.com/ask/answers/032415/which-investments-have-highest-historical-returns.asp
- https://www.etfcentral.com/etf-u/guides/how-many-etfs-should-i-own
- https://www.gobankingrates.com/investing/strategy/toxic-investments-you-should-avoid/
- https://powerzerotax.com/the-truth-about-dave-ramseys-investment-philosophy/
- https://www.bankrate.com/investing/low-risk-investments/
- https://www.investopedia.com/terms/i/investing_style.asp
- https://www.thebalancemoney.com/what-is-an-investment-pyramid-5223343
- https://www.fca.org.uk/investsmart/understanding-high-risk-investments
- https://www.investopedia.com/terms/l/level3_assets.asp
- https://www.levelfouradvisors.com/