A three-fund portfolio is a great beginner low-risk portfolio that is a low-cost way to invest in the three major asset classes: 70% U.S. stocks, 20% international stocks, and 10% U.S. bonds. This kind of portfolio is a simple yet cost-effective way to invest in the market. This example is an aggressively weighted portfolio as it contains 90% stocks and 10% bonds. I chose 90% stocks and 10% bonds because the bond market is horrible right now, and interest rates are at 0. If you are more comfortable with a less risky portfolio, you can increase the percentage that is allocated to bonds, for example, 50% U.S. stocks, 10% international, and 40% bonds
If you are young and feel that bonds are worthless right now like my self, I would suggest substituting bonds and invest in REITs (Real Estate) index fund. The choice is yours, but I think this is a great way to save for retirement.
The Vanguard Total Stock Market ETF, aka (VTI), is a perfect index fund for your three-fund portfolio. VTI is a balanced fund, with a healthy mix of small-cap, mid-cap, and blue-chip stocks. VTI is a highly efficient fund with a low expense ratio. It offers a 2.29% Dividend and is up 13.5% this year. Below are the funds top 10 holdings, all great companies in one index are a must-have ETF for your long-term portfolio.
The Vanguard Total International Stock ETF tracks the performance of the FTSE Global All Cap ex U.S. Index, which measures the investment return of stocks issued by companies located outside the United States. It is a little more high risk than VTI but could make you a ton of money from emerging market stocks. VXUS is down 1% this year but is up 10.47% in the last five years. VXUS offers a 2.50% dividend and annual payout of $1.32 per share. Below are the top 10 holdings which Alibaba is the highest holding. $BABA is the Chinese amazon with a powerhouse of a CEO named Jack Ma.
Vanguard Total Bond Market Index Fund AKA BND seeks the performance of Bloomberg Barclays U.S. Aggregate Float Adjusted Index, which is the bond market. This fund measures the performance of a broad spectrum of public, investment-grade, taxable, fixed-income securities in the United States-including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities-all with maturities of more than one year. BND has a one year return of 4.56% and is a relatively low-risk investment. This ETF offers a dividend yield of 2.36% with an annual payout of $2.07; the dividend frequency is monthly, making this a significant investment to reinvest your dividends in with low risk.
3 Fund Portfolio
This kind of portfolio is excellent for people who DO NOT want a financial advisor to steal their gains and for someone who wants to invest in the stock market but does not have the time to research individual stocks. If you are young and want to invest in the future, this is a great strategy to build wealth with a low-risk hold and let your money compound for you year over year. Remember, the stock market averages 10% a year, and every bull market in history has exceeded the previous bear market.
Save to invest. Don’t save to spend 🙂