Jen Grant

Banking/Finance, Blog Post 1,500 Words PROJECT SEO METADATA & CLIENT NOTES TITLE TAG: Your Guide to Investing with the Bogleheads’ Three-Fund Portfolio FOCUS KEYWORD: Bogleheads’ Three-Fund Portfolio META DESCRIPTION: One of the most challenging aspects of investing is deciding upon which securities to invest in while meeting your financial goals. If you are looking for simplicity and low maintenance, the Bogleheads’ three-fund portfolio approach may be the solution. Find out everything you need to know about investing with these three, easy funds. URL TAG: /guide-to-bogleheads-3-fund-portfolio EXTERNAL LINKS: • • • • https://www.forbes.com/advisor/investing/how-to-create-a-3-fund-portfolio/ https://money.usnews.com/investing/investing-101/articles/how-to-build-a-3-fund-portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio https://www.marketwatch.com/story/a-boglehead-mentor-explains-the-simplest-way-to-manageyour-money- IMAGE LINKS: • • • Two Men on Sofa Looking at Laptop: https://unsplash.com/photos/jpHw8ndwJ_Q Man Talking on Phone Next to Laptop: https://unsplash.com/photos/h1RW-NFtUyc Man Reading Guide on Balcony: https://unsplash.com/photos/M20JaYyW1KI NOTES TO CLIENT: *REDACTED* J. Grant Page 1 of 7 Banking/Finance, Blog Post Due: 09/22/2019 | 1,500 Words ContentFly Project ID: m405qn6M7VbRkB1J Your Guide to Investing with the Bogleheads’ Three-Fund Portfolio On some level, people know that they should be investing their money. The only problem is that most don’t know which security accounts are worthy of investing. Buzzwords like “diversification” and “no trader fees” sound unbelievable, but do we understand why they matter or how to execute them? Any time spent researching the internet is sure to lead you through multiple philosophies on the subject. The results and information can be overwhelming. Why can’t there be a more simple investment strategy? The good news is that there is! Meet the Bogleheads’ three-fund portfolio strategy. It’s a super simple approach that generates steady returns over the long-run, which makes it ideal for retirement, business, charitable, and legacy planning. Developed by Jack Bogle, founder of the Vanguard Group and index mutual funds, superfans known as ‘Bogleheads,’ popularized this type of investment portfolio. It’s core thesis advocates that investors need only three funds to meet long-term financial goals. J. Grant Page 2 of 7 Banking/Finance, Blog Post Due: 09/22/2019 | 1,500 Words ContentFly Project ID: m405qn6M7VbRkB1J In this article, we examine what you should include in a three-fund portfolio, the philosophy behind it, and how you can begin investing. Let’s start by understanding what the Bogleheads’ three-fund portfolio is: What Is the Bogleheads Three-Fund Portfolio? The Bogleheads’ three-fund portfolio is a simple investment profile composed of three assets. These three assets are often inexpensive index funds. The industry refers to it as a ‘lazy portfolio’ due to the little maintenance required on your behalf after funding it. Three total market index funds make up the Bogleheads’ three-fund portfolio, including: 1. Total Stock Market Index Fund 2. Total Bond Market Index Fund 3. Total International Stock Fund The simplistic structure of the Boghlehead investing philosophy means that you can spend less time monitoring and adjusting your portfolio. Aside from ease, a three-fund portfolio investing strategy hinges upon fundamental principles to execute it correctly. Let’s take a closer look at the methodology and thought process behind it: What Is the Bogleheads’ Investing Philosophy? The Boglehead investing philosophy aims to create risk-adjusted returns that are much more profitable than what a traditional investor can produce. Plus, the philosophy gives novice investors the room to adjust to the world of securities. You only need one thing: the desire to achieve financial freedom. Here are the following principles used by Bogleheads across the globe: 1. Start by Creating a Practical Financial Plan Start by analyzing your household finances and build a long-term plan around your current situation alongside your future needs. Future needs include things like retirement and healthcare. Sure, you can’t predict what’s going to happen later in life, but it’s nice to know you have assets on hand that you can liquidate or grow as needed. 2. Invest Your Money Early On and Then Keep It Up Investing early certainly has its advantages over waiting until later in life. For example, if a 25-year old person wants to retire on $1 million by the age of 60, he or she must set aside roughly $500 a month to reach his or her goals. Conversely, the same person that begins investing at 35 must contribute $1,000 every month. J. Grant Page 3 of 7 Banking/Finance, Blog Post Due: 09/22/2019 | 1,500 Words ContentFly Project ID: m405qn6M7VbRkB1J 3. Don’t Take on Unnecessary Risk or Conservation The right asset allocation mix largely depends upon your tolerance to risk. Since the highest returns at the lowest cost is an investor’s primary goal, taking on an appropriate level of exposure can assist in this capacity. Bogleheads say that your bond allocation should align with your age. So, as an example, if you are 30, your mix is going to be 30 percent bonds and 70 percent stocks. While this number is an excellent jumping-off point, you can adjust according to your goals, tolerance, and financial position. Moreover, taking on too little risk may not reap the more significant returns for which you hope. You may even fall short of your big-picture needs. On the other hand, taking on too much risk means that you can lose more money than anticipated. 4. Avoid Trying to Time or Analyze the Market Too Much It’s a bit of a pipe dream to believe that an investor can buy the best stocks, watch them grow, and then sell them at the divergence point of high returns at the best price. This type of investment activity is a strategy known as ‘timing the market.’ It goes against everything for which three-fund portfolio investments stand. Bogleheads espouse the idea that timing the market is not an appropriate choice. Attempting to do so only creates frustration and loss in most cases. Bogleheads’ three-fund-portfolios are genuinely ‘set it and forget it,’ aside from post-funding maintenance. 5. Deploy the Use of Index Funds Whenever Possible You can purchase large sets of the market at a lower cost when using index funds in asset allocation. It’s a simple way to add diversification without having to read the stock market. Bogleheads tend to focus on the Vanguard index fund options. However, there are alternatives available that offer their own perspective. Now that you have a solid understanding of the philosophy that powers the Bogleheads’ three-fund approach, it’s time to examine how one can execute a plan to start investing. How to Invest with a Three-Fund Portfolio J. Grant Page 4 of 7 Banking/Finance, Blog Post Due: 09/22/2019 | 1,500 Words ContentFly Project ID: m405qn6M7VbRkB1J The first step to creating a three-fund portfolio is deciding upon which index funds to invest. It’s vital to select funds that offer low expense ratios. Doing so allows you to keep your total investing costs relatively inexpensive. Here are a few considerations to keep in the back of your mind when making the determination: Asset Allocation Takes Time But Is Well-Worth It Choosing your asset allocations across your funds is the most technical aspect of developing a three-fund portfolio. It’s an approach you must take that aligns with your personal financial situation. The most crucial element to consider is how risk-averse you are. Jack Bogle asserted that investors with an appetite for risk might want to hold 20 percent in bonds and 80 percent in stocks. This mix works well for someone who is younger and just starting their profile As retirement approaches, that allocation may shift to 40 percent or more in bonds since they are a safer bet. Your preference may be to include more or less. Keep in mind that over the long-run, stocks produce higher returns but carry greater risk while the opposite is true for bonds. It’s the maddening nature of investing. Incorporate Popular Index Funds for Diversification at a Low Price J. Grant Page 5 of 7 Banking/Finance, Blog Post Due: 09/22/2019 | 1,500 Words ContentFly Project ID: m405qn6M7VbRkB1J In this article, we stress how important it is to choose the right index funds. Focusing on a few characteristics helps you keep your investing costs low while maintaining a broad and diverse profile. You can keep your investing costs low by selecting funds that offer the lowest expense ratios on the market. A good starting point is finding funds with an expense ratio of 0.15 percent or less. The standard rate is 0.50 percent or less for best-in-class consideration. Diversification comes from funds on the S&P 500 index or total stock market. This tactic allows you to buy bigger sets of stocks under the umbrella of a single investment. Plus, it insulates you from individual stock fluctuations. It’s worth remembering that a diversified portfolio doesn’t indicate \ losses won’t occur. It just means that you may lose less money than going after individual stock picks. Maintenance After establishing a three-fund portfolio, it’s time for maintenance mode. Portfolio maintenance includes potential asset reallocations and regular contributions to grow your accounts. Your only commitment is to ensure your strategy reflects your current financial picture and supports your future goals. If these elements change, update accordingly. Final Thoughts and Considerations J. Grant Page 6 of 7 Banking/Finance, Blog Post Due: 09/22/2019 | 1,500 Words ContentFly Project ID: m405qn6M7VbRkB1J The Bogleheads’ three-fund portfolio’s hallmark is simplicity. That may be all you need to achieve your financial goals with a steady, predictable rate of return. In addition to ease-of-investment, the diversity of the portfolio spreads across three of the largest asset classes. Doing so allows you to mitigate your risk to exposure by utilizing different asset allocation levels, mainly as the market fluctuates. Of course, there are several facets to this approach. Make sure you consider the following points before making a final decision on fund selection, asset allocations, and the amounts in which you want to invest: Choose the Right Type of Account Careful asset allocation is the key to successful three-fund management. One aspect of proper distribution means investors need to understand the difference between a non-qualified and a qualified account. Opt for qualified accounts since non-qualified accounts require you to consider turnover and tax consequences. This strategy allows you to create fertile ground for generating the most considerable aftertax returns. Bogleheads’ Three-Fund Portfolios Are a Marathon, Not a Race The Bogleheads’ three-fund portfolio strategies require patience on behalf of the investor. Markets may act with volatility. Therefore, you must have the willingness to weather the storms of its ups and downs. In short, the most passive investors stand to gain the most as fluctuations occur. Keeping yourself informed concerning market conditions minimizes the potential for emotionally-charged decision-making. Losses on your investment are troubling, but trusting the process can make it easier for you to stay on track. J. Grant Page 7 of 7