Choosing funds.
The three-fund portfolio in plain English.
The Bogleheads three-fund portfolio (US stocks + international stocks + bonds) is the consensus default for most investors. The decisions inside it are simpler than the fund-screening industry pretends. Pick a low-cost total-market fund at your brokerage, decide an international allocation, decide a bond allocation by age. Done.
READING TIME: ~8 MIN
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 20 (or younger if you have a long horizon). Rebalance annually. The whole portfolio takes 30 minutes a year to maintain.
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 an investment fund charges, taken as a small slice of your balance. A 0.03% ratio costs $3 per year on every $10,000 invested. 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 four 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). 0.07%.
- 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, 0.05%) 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 for investors to hold far more of their home country stocks than global market capitalization weights would suggest. US investors typically hold 80-100% US stocks vs the ~60% market-cap weight."); 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: bond percentage = age minus 20. A 30-year-old: 10% bonds. A 50-year-old: 30%. A 70-year-old: 50%. 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.
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 reduces the final portfolio by roughly 28%. The fee compounds against you year after year. Detail and the calculator at Expense Ratio Impact.
Index funds at the major brokerages run 0.00% to 0.05%. 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
Last updated 2026-05-01. Not financial advice. Specific tickers and ERs change; verify current values.
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