The Three-Fund Portfolio Explained
The three-fund portfolio is the classic Boglehead setup. With three broad index funds you can own nearly every public company in the world plus thousands of high-quality bonds.
The three building blocks
| Fund category | What it holds | Role |
|---|---|---|
| Total US stock market index | ~3,500+ US companies, large to small | Growth engine |
| Total international stock index | Thousands of companies in developed and emerging markets | Global diversification |
| Total US bond market index | Government and investment-grade corporate bonds | Stability; cushions crashes |
Choosing the mix
First decide stocks vs. bonds (see asset allocation by age). Then split stocks between US and international. Many investors hold 20–40% of their stocks internationally; global market weight is roughly 40%.
Example
A 35-year-old choosing 80/20 with 30% international might hold 56% total US, 24% total international, and 20% total bond. Try your own numbers in our calculator.
Rebalancing
Once a year, or when a holding drifts more than ~5 percentage points from target, sell what grew and buy what lagged — or just direct new contributions to the laggard. This keeps your risk level where you chose it.