The three-fund portfolio is one of the most popular do-it-yourself investing strategies. It holds the entire global stock and bond markets with just three low-cost index funds, then lets you set a stock-to-bond ratio that matches your risk tolerance. It's simple, cheap, and hard to beat over the long run.
| Fund | Role | Example ticker | Expense ratio |
|---|
| Total U.S. stock | Growth engine — the whole U.S. market | VTI | 0.03% |
| Total international stock | Diversification outside the U.S. | VXUS | 0.07% |
| Total U.S. bond | Stability and ballast | BND | 0.03% |
Example allocations
A common approach is to hold more stocks when you're young and more bonds as you near your goal. For example: aggressive — 60% VTI / 30% VXUS / 10% BND; balanced — 45% VTI / 25% VXUS / 30% BND; conservative — 30% VTI / 15% VXUS / 55% BND. These are illustrations, not recommendations; your right mix depends on your timeline and comfort with volatility.
Why it works
You own thousands of companies worldwide plus a broad bond position, all at a blended cost of a few hundredths of a percent per year. There's nothing to pick, time, or chase — and decades of evidence show that low-cost, broadly diversified portfolios beat most actively managed ones.
Rebalancing
Once or twice a year, nudge the funds back to your target percentages, or simply add new money to whichever fund is under-weight. That's the entire maintenance routine.
Educational information only — not investment advice, and not a recommendation to buy any security. Expense ratios are approximate and can change; verify with the fund issuer. We are not a licensed financial advisor.