The 3-fund portfolio, explained
The 3-fund portfolio is a simple approach popular with Bogleheads, the followers of Vanguard founder John Bogle. You own the whole market through three low-cost index funds:
- US total stock market (or an S&P 500 index fund if that's all your plan offers)
- International total stock market
- US total bond market
Why it works
- Low cost: index funds often charge under 0.10% a year, and fees compound against you.
- Broad diversification: thousands of companies, with no stock-picking.
- Simple: pick your stock/bond split, then rebalance about once a year.
Doing it in a 401(k)
Your 401(k) has a fixed menu. Look for funds with "Index" in the name and the lowest expense ratios (found in your plan's annual fee disclosure, often called a 404a-5 notice). If your plan has no international or bond index fund, use what's available and fill the gaps in an IRA. A low-cost target-date index fund is a fine one-fund alternative.
Example splits
| Style | US stock | Intl stock | Bonds |
|---|---|---|---|
| Aggressive | 60% | 30% | 10% |
| Moderate | 50% | 20% | 30% |
| Conservative | 35% | 15% | 50% |
These are illustrations, not recommendations.
Not financial advice. This page is educational and built from public government filings. Confirm every fund and fee in your plan's official materials before acting.