Three-fund portfolio.

In plain English

The three-fund portfolio covers nearly all publicly traded stocks and investment-grade bonds using three broad low-cost index funds, with the mix between them set by the holder. The design comes from index fund communities and rests on the argument that broad market exposure at low cost, held consistently, is hard to improve on after fees and taxes. Rebalancing is straightforward because there are only three lines to compare. Fund placement can matter for taxes, since bond interest and international funds are treated differently across account types. The structure does not decide the stock-to-bond split, which is the choice that actually drives the risk.

01Why it matters

Fewer holdings means fewer decisions and lower costs, and over decades the cost difference alone compounds into a meaningful share of the ending balance.

02The math, step by step

A 60/30/10 mix means 60 percent US stocks, 30 percent international stocks, and 10 percent bonds. Suppose those funds average 0.05 percent in fees against 0.75 percent for an actively managed alternative. On 200,000 that is 100 a year versus 1,500. Over 30 years at a 7 percent gross return, the gap in ending balance is roughly 270,000.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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