The Bogleheads' Guide to the Three-fund Portfolio

Twenty benefits from the three-fund total market index portfolio. 

The Bogleheads’ Guide to The Three-Fund Portfolio describes the most popular portfolio on the Bogleheads forum. This all-indexed portfolio contains over 15,000 worldwide securities, in just three easily-managed funds, that has outperformed the vast majority of both professional and amateur investors.

If you are a new investor, or an experienced investor who wants to simplify and improve your portfolio, The Bogleheads’ Guide to The Three-Fund Portfolio is a short, easy-to-read guide to show you how.

TAYLOR LARIMORE is a sage on the Boglehead forums for everyone who wants to discover "the Boglehead way." Crowned the "King of the Bogleheads" by Jack Bogle, he has spent more than seven decades in finance and investing, in such positions as revenue officer for the IRS, chief of the Financial Division for the Small Business Administration in South Florida, and a director of the Dade County Housing Finance Authority. He is co-author of The Bogleheads' Guide to Investing and The Bogleheads' Guide to Retirement Planning.

FOREWORD BY JOHN C. BOGLE xi

PREFACE: THE HISTORY OF THE BOGLEHEADS’

THREE-FUND PORTFOLIO xvii

ACKNOWLEDGMENTS xxv

CHAPTER 1: THE INVESTMENT INDUSTRY 1

CHAPTER 2: JOHN C. BOGLE—THE INVESTOR’S BEST FRIEND 5

CHAPTER 3: JOHN BOGLE INTRODUCES THREE TOTAL MARKET INDEX FUNDS 9

CHAPTER 4: TWENTY BENEFITS OF TOTAL MARKET INDEX FUNDS (IN NO PARTICULAR ORDER) 13

Benefit1: No Advisor Risk 14

Benefit2: No Asset Bloat 17

Benefit3: No Index Front Running 19

Benefit4: No Fund Manager Risk 20

Benefit5: No Individual Stock Risk 22

Benefit6: No Overlap 24

Benefit7: No Sector Risk 25

Benefit8: No Style Drift 26

Benefit9: Low Tracking Error 27

Benefit10: Above-Average Return 28

Benefit11: Simplifi ed Contributions and Withdrawals 32

Benefit12: The Benefitof Consistency 33

Benefit13: Low Turnover 34

Benefit14: Low Costs 35

Benefit15: Maximum Diversifi cation (lower risk) 38

Benefit16: Portfolio Effi ciency (best risk/return ratio) 39

Benefit17: Low Maintenance 40

Benefit18: Easy to Rebalance 41

Benefit19: Tax Effi ciency 42

Benefit20: Simplicity (for investors, caregivers, and heirs) 44

CHAPTER 5: GETTING STARTED 49

CHAPTER 6: STAY THE COURSE 59

APPENDIX I: WHAT EXPERTS SAY 63

APPENDIX II: MEET THE BOGLEHEADS 69

GLOSSARY OF FINANCIAL TERMS 75

INDEX 79