Funds and portfolios · Step-by-step guide

Choosing funds.
The three-fund portfolio in plain English.

READ5 min·UPDATED·APPLIES TOUnited States·LEVELBeginner
For new investors picking their first three-fund portfolio.

The Bogleheads three-fund portfolio (US stocks + international stocks + bonds) is the consensus default for most investors. Pick a low-cost total-market fund at your brokerage, decide an international allocation, and decide a bond allocation by age.

Specific fund tickers are US-domiciled. UK / EU / CA / AU readers should use the equivalent at their domestic broker.

This page covers picking the three funds and setting your split. For why index funds work at all, see Passive Investing or the full evidence in Index Funds; for the same question answered with specific tickers by age, see Three-Fund Portfolio.

Short answer

Three funds: a total US stock market fund, a total international stock fund, and a total bond market fund. The exact tickers depend on your brokerage. Set the international allocation around 20 to 40% of equities. Set the bond allocation around your age minus 10, the bond side of 110 minus your age in stocks (or lower if you have a long horizon). Rebalance annually. The whole portfolio takes 30 minutes a year to maintain.

On this page
  1. Fund 1: Total US Stock Market
  2. Fund 2: Total International Stock Market
  3. Fund 3: Total Bond Market
  4. How to split between the three
  5. Why expense ratios matter
  6. What this changes for tomorrow
  7. Continue the sequence

Fund 1: Total US Stock Market

Owns roughly all publicly traded US companies, weighted by market cap. The S&P 500 covers ~80% of the US market and is an acceptable simplification. Total Stock Market goes further and includes mid- and small-cap.

  • Vanguard: VTI (ETFExchange-Traded Fund (ETF)A basket of investments (stocks, bonds, or Bitcoin) that trades on a stock exchange like a single share.) or VTSAX (mutual fund). Expense ratioExpense ratioThe yearly fee a mutual fund or ETF charges, stated as a percentage of your investment and taken out of the fund's assets instead of billed to you. A 0.03% ratio costs $3 a year per $10,000 invested; a 1% ratio costs $100. Lower is better.Full definition 0.03%.
  • Fidelity: FZROX (zero expense ratio mutual fund) or FSKAX (0.015% mutual fund) or ITOT (iShares ETF, 0.03%).
  • Schwab: SCHB (ETF) or SWTSX (mutual fund). Expense ratio 0.03%.

All seven are fungible for practical purposes. Pick the one your brokerage supports natively to avoid friction.

Fund 2: Total International Stock Market

Owns developed-market and emerging-market stocks outside the US. Lower correlation with US stocks reduces portfolio volatility without sacrificing expected return.

  • Vanguard: VXUS (ETF) or VTIAX (mutual fund). 0.05% and 0.09%.
  • Fidelity: FZILX (zero ER) or FTIHX (0.06%) or IXUS (iShares, 0.07%).
  • Schwab: SCHF (developed only) or SCHE (emerging only). For total international, IXUS or FTIHX at 0.06 to 0.07%.

Fund 3: Total Bond Market

Owns a broad mix of investment-grade US bonds: Treasuries, agency mortgage-backed securities, and high-quality corporate bonds. Lower expected return than equities but lower volatility, providing dry powder for rebalancingrebalancingBuying and selling assets to restore your target portfolio split after market movements cause drift.Full definition during equity drawdowns.

  • Vanguard: BND (ETF) or VBTLX (mutual fund). 0.03%.
  • Fidelity: FXNAX (0.025%) or FBND (Fidelity ETF, 0.36%) or AGG (iShares, 0.03%).
  • Schwab: SCHZ (ETF, 0.03%).

Bond fund durationdurationA measure of how sensitive a bond price is to interest rate changes. A bond with 10-year duration falls roughly 10% in price when rates rise 1 percentage point. Longer duration = more interest rate risk. matters. BND has duration around 6 years; long-bond funds (TLT, EDV) have duration of 18+. The 2022 lesson: when rates rise, longer duration falls more. Detail at Bond Basics.

How to split between the three

US vs international

The US is approximately 60% of global market cap. A market-weighted portfolio holds roughly 60% US, 40% international. Most US-domiciled investors hold meaningfully more US than market-weight (a "home country biasHome country biasThe tendency to hold far more of your own country's stocks than its share of the world market. Example: US stocks are about 64% of the MSCI ACWI global index (August 2026), yet many US investors keep 80% or more of their stock money in US companies."); detail at Index Funds.

Reasonable defaults: 100% US (full home-country bias, simplest), 80/20 US/international, 70/30, or full market-weight 60/40. The internal debate is real; any of these is defensible.

Bond allocation by age

The classic rule: 110 minus your age in stocks, the rest in bonds, so your bond percentage is your age minus 10. A 30-year-old: 20% bonds. A 50-year-old: 40%. A 70-year-old: 60%. A more aggressive variant, 120 minus your age, puts 10 percentage points more in stocks at every age (bonds = age minus 20). The full rule is on Asset Allocation. The rule is rough but directionally right; the bond allocation should grow as the time horizon shrinks.

Modifications: longer time horizon (FIREFinancial Independence, Retire Early (FIRE)A strategy of aggressively saving and investing to reach financial independence decades before traditional retirement age.Full definition retiring at 50) suggests less bonds; high job security and stable income suggests less bonds; near retirement and want to preserve principal suggests more.

Three-Fund Portfolio Allocator

Methodology: simple visualization, not advice. Allocations should sum to 100; the warning line flags when they don't.

Why expense ratios matter

A 1% annual expense ratio on a 7% nominal return cuts the compound growth rate to 6%. Over 40 years, that 1 percentage point leaves a single deposit roughly 31% smaller. With steady monthly contributions the gap is closer to a quarter, since later deposits have less time to compound. The fee compounds against you year after year. Detail and the calculator at Expense Ratio Impact.

1% a year in fees, 31% less after 40 years
Ending balance of one deposit, 7% return before fees
No feegrows 7% a year
31% kept
1% expense ratiogrows 6% a year
31% smaller
0No-fee ending balance
Balance reached with or without the feeRoughly 31% of the no-fee balance, kept by paying no feeMissing after the 1% fee
Both portfolios earn the same 7% before fees. The 1% expense ratio cuts growth to 6% a year, so after 40 years that balance is roughly 31% smaller. With no fee, that 31% stays in the portfolio.

Index funds at the major brokerages run 0.00% to 0.10%. Active mutual funds typically run 0.50% to 1.50%. The difference is structural: passive does not require an expensive research team.

What this changes for tomorrow

  • Audit your current portfolio for funds with expense ratios above 0.20%. Switch to the index equivalent at your brokerage.
  • Decide your three-fund split (US/international/bond) and write it down. Without a written allocation, drift happens.
  • Rebalance annually if any allocation has drifted more than 5 percentage points from target.

Continue the sequence

→ Bond Basics, what BND is · 6 min → Passive Investing, the case for indexing → Index Funds, the full long-form guide → Fund-by-Fund Comparison, every option side-by-side → Expense Ratio Impact Calculator, the cost of fees over time

Where to go from here

Do next

Expense Ratio Impact

Confirm the specific funds you pick are actually low-cost before committing.

Read next

Index Funds

The full evidence base behind why index funds beat picking, if unconvinced.

Explore further
  • VTI vs VOO vs FSKAXWhich specific US total-market fund to actually buy at your broker.
  • Target Date FundsA one-fund alternative if managing three funds and rebalancing is unwanted.
  • RebalancingHow the annual rebalancing step actually works mechanically.

Last updated . Not financial advice. Specific tickers and ERs change; verify current values. Disclosures · How pages are reviewed

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