Bogleheads 3 Fund Portfolio - The Ultimate Guide

[@OptimizedPortfolio]

What do you think of the Bogleheads 3 Fund Portfolio? Invest in it here: optimizedportfolio.com/go/bh-3-fund

[@QuaaludeCharlie]

It is the only proven way to Let Money Work for You and then you get an LLC and Trusts and Create Wealth funds .

[@surfrduede]

This is now THE reference video for the BH 3 fund. Thanks John!

[@OptimizedPortfolio]

Thanks, David!

[@Vasili_Wears_Shorts]

This video is exactly what I needed. The 'youtube' portfolio of SCHD/SPY/QQQ is absurd and unfortunately makes a strong recency bias claim. VTI/VXUS/BND & DONE.

[@OptimizedPortfolio]

Agreed! 🙌 Glad you found it useful!

[@DanielSuarez-zn8iw]

Why is it absurd?

[@OptimizedPortfolio]

​@@DanielSuarez-zn8iw Because with some hand waving, SCHD (effectively US large cap value) + QQQ (effectively US large cap growth) roughly equals SPY (US large cap blend).

[@user-sg1bn2ij2k]

I’m in the process of rebalancing my portfolio to be 80/20. I’m 28, plan to retire around 55. When should BND be included?

[@thomassittinger8150]

IDK, bonds over the past ten years returned like 1%. SCHD total returns are close to S&P 500 and max drawdown was only 21% but still paid dividends, international stocks 6%, better replacement by far is SCHG/QQQM SCHD had the qualified dividends that grow in step with capital appreciation, and has always grown its dividends. Bonds don’t offer this upside

[@HamiltonRb]

I'm not sure what the symbol is in the US, but in Canada you can buy VGRO or VBAL, depending on your risk tolerance. They are both by Vanguard, with very low fees, diversification of global stock & bonds in a single etf, and they rebalance for you twice a year. It simply doesn't get easier.

[@OptimizedPortfolio]

Thanks for sharing!

[@ehochmuephi8219]

Thank you very much for that insight and the amazing effort. I will watch this video again sober, but it somehow is the first finance video I am whatching where I am actually buying what you're saying. Gonna do my own research after this but thank you so much for pushing me in this direction. Great stuff!

[@OptimizedPortfolio]

Hah I'll take it. Thanks.

[@ehochmuephi8219]

My pleasure and thanks for the reply! I never thought I would be looking up this bad boy: Vanguard LifeStrategy 80% Equity UCITS ETF Accumulating You Bogleheads are fascinating creatures with fascinating ideas ... I am intrigued. ;)

[@OptimizedPortfolio]

@@ehochmuephi8219 Welcome to the club! 😎

[@TJ-Stackin]

Brilliant video, brother! I'll share with fam and friends!

[@OptimizedPortfolio]

Thanks, TJ!

[@keffey99]

I enjoyed this video. It was very informative. I like how you respond to every comment, even months after the video was posted. Thanks.

[@OptimizedPortfolio]

Thanks! Glad you found it useful.

[@andrewvillanueva8933]

Fantastic video. Great explanation and breakdown. Subscribed immediately after.

[@OptimizedPortfolio]

Thanks, Andrew!

[@PixilEyes]

85% VT, 10% AVDV, 5% AVUV here. Boglehead with a slight small cap value tilt.

[@OptimizedPortfolio]

Awesome!

[@lbird2]

Excellent explanation. Thank you.

[@OptimizedPortfolio]

Glad it was helpful!

[@mattinterweb]

My main concern as a 50 yr old setting up a 20 year investment plan is the large amount of bonds in this portfolio when they have performed so badly for the last decade. I understand the importance of diversification, but the uncorrelated benefits have come into question in recent times to.

[@OptimizedPortfolio]

Sounds like recency bias at its finest. Don't forget to check your biases: kzbin.info/www/bejne/rpi6iqmMnc5_aqc

[@jackgoldman1]

John always said don't try to out perform. Take what the market gives you, which is traditionally about 5% per year.

[@mb1407]

Awesome delivery, my man!

[@OptimizedPortfolio]

Thanks!

[@Twinkletoes-c1t]

Thanks you’ve basically done a lot of hard work reading the boggle heads books and distilling it into these videos, and you have done this for free (apart from your KZbin revenue of course 😊)

[@OptimizedPortfolio]

Thanks for watching!

[@papabear4066]

I am at-least a decade away from my retirement, and I am 100% stocks. Do I have to have bonds at this time? however, I plan to add them as I get closer to my retirement. I want to know what your views are on it? Thanks 🙏

[@OptimizedPortfolio]

Asset allocation is highly personal and is based on your individual goal(s), time horizon, and need, capacity, and tolerance for risk.

[@Savsal12]

Thanks for putting in the time and work for this video it’s a great video and the content is really good.

[@OptimizedPortfolio]

Glad you enjoyed it!

[@ml5632]

Incredible Video. Thank you

[@OptimizedPortfolio]

Thanks!

[@TheCodesterr]

I’ve been investing in a Target Retirement Fund and VTSAX in a Roth, and Target Retirement Fund in 401k. Should I pull out of the TRF and invest in the other two? Can/should I do the same with 401k?

[@OptimizedPortfolio]

Your target date funds likely hold some variation of a total international stock market fund and a total US bond market fund inside them already. I'm a big fan of TDF's for someone who wants to be completely hands off. So I'd say maybe check what exactly is inside each TDF and then decide.

[@peterlanger2975]

I would appreciate your thoughts on this 3 fund variation that would take into account a factor tilt for a 60-40 portfolio. AVUS for US stocks, AVNM for international stocks and either BND or AVIG for bonds. For that matter, what's your view on a 1 fund portfolio like AVMA? Thank you and I really like your website!

[@OptimizedPortfolio]

I like it, Peter! Basically a slightly factor-tilted 3-Fund. I haven't looked into AVMA yet.

[@ICThruU]

Do you recommend an equal weighted total stock fund or s&p fund to avoid the 30% concentration in the magnificent seven diminishing diversification?

[@OptimizedPortfolio]

Probably wouldn't hurt, but also might not help much. I talked about RSP - equal weight S&P 500 - a while back here: kzbin.info/www/bejne/bXXXfWeVrtaAsLM

[@osn19]

Could you please make a video of BND vs TLT for diversification benefits ?

[@OptimizedPortfolio]

Thanks for the suggestion!

[@osn19]

@@OptimizedPortfolioThanks, really love your content and dedication

[@OptimizedPortfolio]

@@osn19 Thanks! :)

[@robertgadawski7298]

Great video. One question. The video you did a few years back mentioned the advantages of treasury bonds over a total bond fund. Have your recommendations changed in regards to the bonds? Thanks.

[@OptimizedPortfolio]

Thanks! No change; still prefer treasuries over corporates.

[@robertgadawski7298]

@@OptimizedPortfoliothank you!

[@OptimizedPortfolio]

@@robertgadawski7298 Anytime!

[@tcc447]

17:02 whoa hold on, choosing 60% VTI, 20% international stocks and 20% bonds is not going to outperform "most investors." That is a crazy assertion!

[@OptimizedPortfolio]

It is, actually, as the average investor severely lags the market and even 60/40: x.com/OptimizedPort/status/1855714773716881516

[@NivHaramati]

Thanks for a great video! Question: Why use separate ETFs for U.S and Ex-U.S. ? Why not just have VT or AVGV or other globally diversified fund (and add the bonds ETF)? VT is slightly more expansive by a few points (0.07% currently if I'm not mistaken) , but will automatically reflect the true aspect ratio of US/WORLD by market cap without you worrying about it, and is much more agnostic as a buy, hold and forget tool.

[@OptimizedPortfolio]

Most like to dial in their own manual ratio of US to international. It also allows for more tax loss harvesting in taxable space.

[@robdgonz4569]

Which fidelity index funds would be similar to the detailed 3 Vanguard Funds

[@OptimizedPortfolio]

kzbin.info/www/bejne/rHmmq2uXasikopo

[@kimberlyyang8568]

@@OptimizedPortfolio

[@randomjoe1131]

Great vid! What are your thoughts on a factor tilted boggle head portfolio?

[@OptimizedPortfolio]

That's what I do.

[@Elcapifukintan]

Thanks for this! Quick question: Can I use the same 3 fund portfolio in my HSA, Solo 401k and Roth IRA?

[@OptimizedPortfolio]

Yep!

[@TylerAlmodovar]

I love this video, it goes a great job explaining the 3FP and adds a lot of additional value. One thing I would like to know more about, is the philosophy for what type of accounts to use this strategy within for tax purposes. Thanks!

[@OptimizedPortfolio]

Thanks! It's suitable for all account types. You could be slightly more tax efficient in taxable space by using a treasury bond funds instead of total bond market.

[@TylerAlmodovar]

@@OptimizedPortfolio So would you say that it's best to invest in this type of 3FP in a IRA/401k -- max them out and if you have any investable income left over in the year add it to the same strategy in a brokerage? I'm looking to open some accounts with Vanguard this week to start my 3FP journey and want to make sure I'm doing so within the proper accounts for the best long-term returns/tax advantages :)

[@TylerAlmodovar]

@@OptimizedPortfolio So would you say the best bet is to max out the IRA, then max out the 401k with this strategy before even thinking about continuing it into a brokerage account? And then keep the same allocation across all accounts?

[@OptimizedPortfolio]

@@TylerAlmodovar Depends on your personal goal(s), potential short term liabilities, etc. and how you want to manage allocations across accounts. But yes generally speaking it's usually best to max out tax-advantaged space first.

[@RyanC1384]

I was doing stock picking and did pretty well. Realize I just got lucky and want to settle into passive investing for the long run. Seems like Bogleheads 3 fund portfolio is the way to go. Do I just dump all of my cash in at the same time or should I dollar cost average over time?

[@OptimizedPortfolio]

kzbin.info/www/bejne/sH6bm3mana2IopY

[@RyanC1384]

@@OptimizedPortfolio thank you. Lump Sum it is!

[@skycult7631]

Good video. One comment. At 10:50 you said that from 1970-2008 a global portfolio beat a US portfolio, but the graph shown doesn't appear to back that up. The graph merely shows that a 100% US portfolio is both less volatile and higher yielding than a 100% international one, and that the best mix for returns was 60/40 or 50/50, US vs International.

[@OptimizedPortfolio]

"Global." Not international. Global means a mix of US and international, as the graph shows. What I said is correct. No one is buying 100% international. The salient comparison is US vs. global, not US vs. international.

[@skycult7631]

@@OptimizedPortfolio I'm not saying you're wrong. I'm talking about the graph that has Return on the y-axis and Year-to-year volatility along the x, which coincides with your comment in the video. Seems like that would have been a good place to put a graphic showing Global vs US portfolios from 1970-2008. You inserted that graph, timing-wise, as if it backs up your claim, but it doesn't.

[@OptimizedPortfolio]

​@@skycult7631 You said the graph doesn't back up a global portfolio. It does. The highest return and lowest volatility was achieved with a globally diversified portfolio. It seems you're perhaps misinterpreting that graph. It's an efficient frontier of different allocations between US and international for that period. "Seems like that would have been a good place to put a graphic showing Global vs US portfolios from 1970-2008." It is. It does. That's what it is. Unless I'm missing what you're trying to say, you seem to be contradicting what you're saying in the same sentence.

[@skycult7631]

@@OptimizedPortfolio Okay I see it now. The blue square at 100% US is how a purely US portfolio performed, whereas the next 8 squares would be considered Global, and they all performed better. Thanks

[@OptimizedPortfolio]

@@skycult7631 Correct. Each square is a 10% shift in allocation. The one it denotes is 70% US and 30% international, which had higher returns and lower volatility - which we call "more efficient" - compared to both 100% US and 100% international, thereby illustrating the potential benefits of diversification.

[@SebhatYidelwo]

is it worth it to consider bonds that much , even at all if ur event horizon is 30+ years?

[@OptimizedPortfolio]

As usual, depends on one's need, capacity, and tolerance for risk, as well as what you mean by "worth it."

[@dividendfire855]

I have a question about your Ginger ale fund. Do you rebalance your portfolio and if so how often ?

[@OptimizedPortfolio]

Roughly annually.

[@kylerhodes479]

Great video thank you. I appreciate how you edited it to keep it on point. I am all setup in Fidelity. How would I find similar funds there? I am new to this, and will check fees comparison, but would there be any reason to consider changing to Vanguard?

[@OptimizedPortfolio]

Thanks! You can still buy the Vanguard funds I discussed here at Fidelity. Or check out my other video here for comparable Fidelity funds: kzbin.info/www/bejne/rHmmq2uXasikopo Not worth changing to Vanguard in my opinion.

[@kylerhodes479]

Thanks for the quick reply. Your videos are helpful.

[@OptimizedPortfolio]

@@kylerhodes479 Glad you think so!

[@januelespinal6328]

Does van guard target date index funds do the same as the 3 portfolio but simpler

[@OptimizedPortfolio]

Basically, yes, but of course you lose the ability to dial in specific allocations for int'l and bonds, as well as bond type and duration.

[@davidmichlin6777]

How would you alter the 3 fund portfolio if you have already retired?

[@OptimizedPortfolio]

Just more bonds. Maybe some TIPS.

[@alisonbaxter7485]

Would this work for a 90 year old? If so, what is your recommended asset allocation? I’ve just discovered all the hidden fees in my dad’s brokered account. I can’t believe how much of his money has gone to fees and commissions over the years. He wouldn’t need a broker if he could simplify his portfolio. Better late than never!

[@OptimizedPortfolio]

Thanks for the question and comment, Alison! The fundamental ideas underlying the Bogleheads 3 Fund Portfolio like broad diversification, simplicity, and low fees are great for anyone of any age, so yes, definitely, though the allocation would likely look very different from what I proposed as the one-size-fits-most 80/20. I can't provide specific, personalized advice here, but depending on the particular goal(s) of the individual, it would probably include a heavy allocation to bonds, those bonds would be short-term treasuries, and the stocks piece would be much smaller. Consider seeking out a fee-for-service fiduciary advisor and just pay them for 30 min. to an hour of their time to recommend a specific allocation.

[@alisonbaxter7485]

Thank you so much for your response and the excellent information provided in your video!

[@OptimizedPortfolio]

@@alisonbaxter7485 Anytime!

[@luisgracia6050]

How would you alter this in a taxable account?

[@OptimizedPortfolio]

I wouldn't.

[@luisgracia6050]

@@OptimizedPortfolioyou would have that bond fund in it? Not a municipal or something like that. Thank you for the quick reply!

[@OptimizedPortfolio]

If one's goal(s) and strategy warrant bonds in taxable, then sure. Treasuries would be marginally more efficient than total bond market. But don't let the tax tail wag the strategy dog. Munis typically only benefit very high income earners.

[@keffey99]

Vanguard has a downloadable list of its funds and their respective qualified dividend income (QDI) estimates for 2024 and actual QDI for 2023. VTI's estimated 2024 QDI is 93.01%, VXUS 2024 DQI is 75.30%. For BND, nothing is displayed. I don't know what that means. Maybe @OptimizedPortfolio does. But this seems to confirm @OptimizedPortfolio's assertion that taxes shouldn't be a consideration because they will be low and more than offset by growth.

[@spykex9467]

I'm thinking about using mutual funds in my Roth Ira (I have Schwab). Would SWTSX/SWISX/SWAGX accomplish this, or would you still go ETFS (VTI/VXUS/BND). I would use the mutual fund version of Vanguards, but Schwab charges a fee.

[@OptimizedPortfolio]

Mutual funds would be fine, though I don't know the specific tickers you mentioned off the top of my head.

[@spykex9467]

@@OptimizedPortfolio thank you for the response! Apologies for the not elaborating I didn't want to make the comment too long. SWTSX (total us market) | SWISX (international market) | SWAGX (bonds) - I read that selecting vanguard mutual funds would occur a fee through Schwab, so I selected the Schwab version of the Boglehead concept that you explained in this video. I have been debating between this approach and Schwab's target date fund, but I feel like this will outperform and I don't mind doing the allocations on my own. But that has been my biggest source of conflict is deciding on either of the 2 approaches.

[@OptimizedPortfolio]

Anytime! All good. I assumed those were what those funds were, but I didn't really have the time (or desire) to look them up. Maybe choose the approach you feel most comfortable with at the moment and if that changes later, you can always switch with no tax consequences.

[@spykex9467]

@@OptimizedPortfolio thank you!

[@OptimizedPortfolio]

Anytime!

[@NewYork10280]

Thanks for the info. You mentioned you have a 50/50 allocation of US/Int'l - does that mean you only invest in two funds?

[@OptimizedPortfolio]

I have a few more funds for a small cap value tilt.

[@NewYork10280]

@@OptimizedPortfolio Inquiring minds want to know...

[@OptimizedPortfolio]

@@NewYork10280 www.optimizedportfolio.com/ginger-ale-portfolio/

[@cryptomancer.]

Thanks for the informative (and well edited) video! Would it be possible for you to provide information about what the best European equivalents of these funds are for a European citizen who is not able to directly invest into something like a Vanguard fund due to regulations? I mean for instance ishares core s&p 500 instead of VOO but for VTI, VXUS, BND

[@OptimizedPortfolio]

Thanks! Sorry, I'm not at all familiar with the options for European investors. If you just mean other US-domiciled ETFs from iShares, they may be mentioned on my list here: www.optimizedportfolio.com/etfs/ Or you could possibly just Google "European equivalent of VTI" or something along those lines.

[@cryptomancer.]

@@OptimizedPortfolio thank you very much! yes I'm researching them on my own as well, just wanted to ask for some additional advice :) the link might already come in handy

[@J-YouTube324]

Thanks. I'm still not totally convinced on international stocks but I'm about to watch your video on that! Great, easy to understand content on this channel!

[@OptimizedPortfolio]

Thanks! Hopefully I can convince you. ;)

[@MikeSmith-dd7oz]

The US is the best at efficient deployment of capital. The US catches a cold the other markets get pneumonia.

[@JohnnyFlips]

SOLID VIDEO!

[@OptimizedPortfolio]

Thanks!

[@Ehhhh123]

Hi, what would be the best way to mirror and replicate VT/VTWAX with VTI/VXUS if i dont have access to VT in a 401k?

[@OptimizedPortfolio]

Current weights are about 60/40 but that shifts.

[@realmisr]

Thank you! Can you please give a fidelity version of these picks?

[@OptimizedPortfolio]

You can buy the funds I mentioned at Fidelity. Or see my video here for Fidelity funds: kzbin.info/www/bejne/rHmmq2uXasikopo

[@smalltalk.productions9977]

Thank you for the effort and sharing. I am an appreciative subscriber. My only question: BND for bonds rather than short & intermediate Treasuries? Thumbs up.

[@OptimizedPortfolio]

Thanks! BND for the sake of simplicity in this video and because it's the default Boglehead rec so I decided not to get too in the weeds on it.

[@QuadTap]

60/20/20 ITOT/SCHD/IXUS ... I replace bonds with a dividend ETF... I just can't bring myself to "invest" in government debt

[@OptimizedPortfolio]

Bonds and a dividend ETF are not at all the same thing.

[@QuadTap]

@@OptimizedPortfolio Yes, I know. But I will die on this hill.

[@OptimizedPortfolio]

@@QuadTap Weird position IMHO, considering we literally use short-term gov't debt as the "risk-free asset" to which we compare others.

[@QuadTap]

@@OptimizedPortfolio bond ETFs weren't very risk free recently... I hedge the volatility with other non-brokerage assets. Things that are completely uncorrelated and don't even mark the market often like farmland. I just hate bonds. I'll hold schd forever and I would sell the bonds if they started losing money. So regardless of academically what is correct. I know that behaviorally bonds and me are like oil and water.

[@OptimizedPortfolio]

@@QuadTap Appreciate that I said short-term* bonds aka T-bills. Longer bonds are another story. Fair enough. I suspect you may be in for a rough time when entering retirement with zero bonds, though.

[@amyx231]

I have like 2 dozen funds… including all the fidelity active ETFs. I need to clean this mess up…somehow 😅.

[@OptimizedPortfolio]

Good luck!

[@eugeneeugene3093]

What’s the point of diversification if international stock returns suck?

[@OptimizedPortfolio]

kzbin.info/www/bejne/nJ7Li5VmnbR3hNE

[@stevencrook2514]

Each super power usually lasts 250 years. USA 250 year run ends soon. They're in decline and have runaway inflation and debts in the trillions. At some point they will go the way USSR went. Maybe it'll be more like the British empire, a slow grind to insignificance. This makes me sceptical of investing traditionally over the next 20 years. Hopefully the boglehead approach works out for me.

[@OptimizedPortfolio]

What do you mean specifically by "investing traditionally?"

[@thanhdang2546]

International bonds lower the return. Bond return is equal to current yield. US bond yield is 4%, Eurobond yield is 2-3%, and Japanese Bond is 1%. Emerging market bonds are worth looking at, according to professor Burton Malkiel.

[@OptimizedPortfolio]

To be clear though, this particular portfolio does not prescribe international bonds.

[@seananderson127]

Saying people are "invested in the whole market" is not accurate. You do not get any exposure to micro-caps which are the only stocks that will yield many multiples with no penalty from mean regressions...1000% vs 14.97% from a fund.

[@OptimizedPortfolio]

Don't be pedantic. By market cap weights, these total market funds are as close as we can get to the whole market and are a sufficient proxy for such, as the market cap weight of true micro caps would be negligible. A true micro cap fund is also going to cost far more than low cost index funds such as these. I delved into the specific topic here: kzbin.info/www/bejne/foOTeYqHnZ54ebc

[@DanHickey-q3s]

I have 100 thou in retirement goin up 7 per cent a year but im 50 years old cant get till i 65.... question should i smash that or put some in s and p 500

[@OptimizedPortfolio]

I can't provide personalized advice here.

[@foodguy3435]

For bond allocation and interest rate risk, would it make sense to put half of the bonds in tips etf’s?

[@OptimizedPortfolio]

I'm of the mind nowadays that TIPS probably don't make much sense until retirement or for a short-term liability, as stocks tend to be the best inflation "hedge" over the long term.

[@anthonys5568]

Are your stats for international market performance correlated to exchange rates against the US Dollar? The last time international funds were attractive was when the US Dollar was very weak -- as the value gain was primarily due to the decline of the US Dollar and the re-conversion of foreign denominated shares to US Dollars. As the US Dollar began to advance, the gain in the foreign fund disappeared.

[@OptimizedPortfolio]

Not sure. Maybe I'll check into this. Thanks.

[@鱼眼儿看美股]

I am using 40/40/20 ratio for 401k account and rebalance every quarter.

[@OptimizedPortfolio]

Thanks for watching!

[@seananderson127]

What if you can't wait for an index fund? This would be a case where it's not possible. If you are 20yrs old, hands down: use index funds and ETFs. Some fifty year old who hasn't saved a penny? Index funds are not an option. They have to make up for lost time.

[@OptimizedPortfolio]

Putting aside the fact that the term "index fund" could describe many different strategies, please explain how or why "index funds are not an option" for a fifty year old who hasn't saved. This logic makes no sense. You make it sound like there's a suitable alternative that is guaranteed to return more than "index funds," allowing them to "make up for lost time." I certainly hope that's not what you're suggesting.

[@jackgoldman1]

John Bogle also recommended 5% gold bullion. Don't see that here.

[@OptimizedPortfolio]

Bogle was AGAINST owning gold. He said 5% max if you feel you must own it: kzbin.info/www/bejne/marGlJaYmrp7fassi=bwB3INm_ABezmae1&t=86

[@jackgoldman1]

@@OptimizedPortfolio He was not against it. His ideal portfolio had 5% gold bullion and 5% emerging markets. His own words on video.

[@OptimizedPortfolio]

@@jackgoldman1 Can you link me a source on that? Because I just linked you a video where he quite literally says "gold is not an investment" and that it makes no sense to own it. Did you not bother to watch it? Bogle was also famously against international stocks. His AA was known to be roughly 50/50 US stocks / bonds.

[@jackgoldman1]

@@OptimizedPortfolio kzbin.info/www/bejne/aaatk3uIetKIqZY at 57:15 he recommends 5% in gold. Title is In Pursuit of the Perfect Portfolio, by MIT Laboratory for Finance. Could not agree more about gold. Gold is not investing. Gold is MONEY. IOUs are debt. Bitcoin is digits and pixels. All very different horses. Stocks are part ownership in businesses. All have their place.

[@jackgoldman1]

@@OptimizedPortfolio Did you check it out? In search of the perfect portfolio? 5% gold was the recommendation.

[@pwnish3r]

You people always talk about how active managers underperform the market 90% of the time, and then you go into explaining a strategy that underperforms the market 90% of the time.

[@OptimizedPortfolio]

Depends on how you define "the market." Moreover, 100% stocks is rarely suitable for most people's true risk tolerance, and of course asset allocation is highly personal anyway. For someone who needs 80/20, their benchmark IS the portfolio discussed, as these are total market index funds i.e. "the market." That's sort of the whole point, which you seem to have missed. Thanks for watching.

[@pwnish3r]

@@OptimizedPortfolio I appreciate the quick response. Oh no, I get it. I don't know a whole lot about the 90% statistic, other than it gets thrown around a lot, but I assume they benchmark SP500, which my point is the irony in an apples to oranges comparison. I am a fan of the strategy and employ a similar one myself, but I go much deeper into the concept. I have a 14% allocation to alternatives, 3% PC, 2% BDCs, 1% junk bonds, 3% BTC, 1% mREITs, 2% MLPs, and 4% public equity REITs. This compliments my 12% investment grade bonds. Although I am an engineering major and never took a business class, I am comfortable doing this as I have read dozens of books in the concepts of portfolio theory. My goal is to diversify in a way to not crush my total returns, all while lowering my standard deviation. My point is that most people do not have the devotion that I and you have to learn about this stuff. You can hire an active manager to do the things that I have done and even personalize your profile to anything you want, and do it more efficiently than a simple 3 fund portfolio. How many laymen have heard about TIPS or Private Credit? So can the 1% active manager fee offset the total return from a 3 fund index portfolio? Usually not if you ask my opinion. Can they expand the efficient frontier of a 3 fund portfolio and make that 1% fee worth it? Almost certainly yes. Again it has to do with risk tolerance and personal style. Also, portfolio managers are experts in tax loss harvesting, which is impossible to benchmark. Did you know that there is no wash sale rule in the US right now for crypto? Something to think about.

[@pwnish3r]

@@OptimizedPortfolio My question for you is when are active funds prudent? I am strongly considering a 1% allocation to preferred shares for diversification reasons and I will be buying an actively managed fund. 1) Preferreds are complicated and I'd rather have pros handle it, 2) I feel like their risk level is low enough that I would like to boost my potential return by buying a ~25% leveraged fund, which is only going to be actively managed and 3) what even is a preferred index? Is it most heavily weighted by the companies issuing the most stock? Is that smart? I feel the same way about bonds. My largest bond holding outside of my 401K is in BOND actively managed by Pimco. I like that they can adjust duration when it is prudent unlike bond indexes that trade every day to keep the duration the exact same. Blackstone has $1tr in AUM and they charge probably something like 3.5% on average in management fees in all of their funds. Are their investors stupid?

[@OptimizedPortfolio]

Again, the S&P 500 is not always the benchmark. Active managers have their own benchmarks. They usually fail to beat them. Things like junk bonds, REITs, and MLPs usually make little sense to own. If your books have pointed you to those, you're probably reading the wrong books. TIPS are for retirees. These things are not "more efficient" than a simpler 3-fund portfolio with far lower fees. Again, that's sort of the whole point. Those assets do not raise the efficient frontier. They are largely subsumed by other assets. Swedroe and Kizer have written extensively on the topic of what diversifiers make logical sense. I'm the first to point out that many would be well suited with an advisor to help with the behavioral side, but certainly not to buy expensive, exotic things like MLPs and private credit.

[@OptimizedPortfolio]

I have a whole video on why preferred shares make little sense. As far as "active," something rules-based like Avantis is probably as far as I'd go personally.

[@dirtyred-ch7mk]

Thanks for the video. This will come in handy when I’m 80. In the meantime, I’ll continue investing in the s&p 500 and smoke your 3 fund portfolio for the next 50 years

[@OptimizedPortfolio]

You seem to have missed the message entirely, but thank you for making my point for me and for providing a quintessential, tangible example of what I'm talking about. People who make comments like yours are precisely the type of people who would likely benefit from a well-diversified portfolio and are the audience this video was intended for. Thanks for watching.

[@doomshallot4203]

can you please do a video on US bonds versus World bonds? I'm a world bond investor, but I'd like to hear the benefits/backdraws of US vs world. I'm still not convinced by an only US bond portfolio.

[@OptimizedPortfolio]

Thanks for the suggestion!

[@朱古力-e7z]

How 35%VT 35% AVGV 30% VGLT ??

[@OptimizedPortfolio]

Might be good if one has a long horizon and wants a pretty significant tilt toward Value stocks.

[@koufax174]

50% SCHD, 40% VOO, 10% QQQM age 60

[@stvartak7164]

No international stocks? No bonds?

[@OptimizedPortfolio]

Thanks for watching!

[@NanuqoftheNorth]

@@stvartak7164 Each person has unique goals and needs, but like koufax174 I have no bonds and less than 5% "international" holdings.

[@damienbates]

Yep! I love SCHD as an alternative to bonds in my portfolio. That’s because with my other income sources I don’t need my portfolio to support my every day living expenses.

[@jamesmorris913]

Good presentation..However, I'm still not convinced that international equities are necessary, or even desireable. Especially, since this was the conclusion of the ORIGINAL "Boglehead", Jack; HIMSELF. Not to mention..if you look at a twenty year chart of VTSMX (U.S) vs VGTSX (non-U.S.) the final cumulative annual averages are not even CLOSE. Foreign stocks, have quite simply; HORRIFICALLY underperfomed U.S. In fact, to such a degree (especially since about 2013) I have to wonder if foreign markets will EVER catch-up, in the remainder of my lifetime!

[@OptimizedPortfolio]

Thanks! So authority bias is not a substantive basis for an argument to begin with. Bogle's reasons for avoiding int'l were objectively terrible and basically amounted to "the French are lazy." Ironically, he would have had higher returns over his investing horizon had he invested globally. I'd encourage you to go watch my video on international diversification and hopefully I can convince you: kzbin.info/www/bejne/nJ7Li5VmnbR3hNE

[@martinlutherkingjr.5582]

12:45 What bonds beat the US stock market from 2000-2020? Rofl

[@OptimizedPortfolio]

Long treasuries. Total bond market. Take your pick. Not sure why you think that's a "rofl." You can easily backtest that claim yourself. If you're too lazy to do that and you don't want to take my word for it, here's the NYT on the subject: www.nytimes.com/2020/05/01/business/bonds-beat-stocks-over-20-years.html

[@martinlutherkingjr.5582]

@@OptimizedPortfolio TLT is up 16% since 2002. The data doesn’t go further back, what ticker are you referring to for bonds? Since January 2000, QQQ is up 400%. Does your calculation include taxes? What tax bracket?

[@OptimizedPortfolio]

@@martinlutherkingjr.5582 Nope again. First, I said 2000-2020, not 2002-2024. Specificity matters with this stuff. Secondly, TLT is up 137% since 2002 (going into 2024 YTD). Sounds like you may be looking at price return only? Not sure. 16% is wildly wrong. Lastly, QQQ is not the total US stock market. But even using QQQ is basically the exact same result for that period due to the harsher tech bubble crash it experienced in 2000 versus the broader market. Over the stated period, QQQ was up 280% while long bonds (e.g. VUSTX) were up 355%. I don't have time to go back and forth running backtests. Best of luck.

[@martinlutherkingjr.5582]

@@OptimizedPortfolio What resource are you using for your back testing?

[@OptimizedPortfolio]

​@@martinlutherkingjr.5582 Previously PortfolioVisualizer before they implemented the new 10-year limit on free plans. Now testfol.io the past week or so. Finominal might be a good alternative too. I'm still playing with a few to see what I want to go with going forward. The PV thing is very new. I might just end up doing a paid plan with them.

[@randomjoe1131]

Why 80/20 US - international vs using the actual weight which is closer to 60/40?

[@OptimizedPortfolio]

I explained that in the video.

[@jamesstpatrick8493]

Just look at the best. They refuse to buy an index fund

[@OptimizedPortfolio]

First, I'd ask who specifically you mean by "the best." Secondly, "the best" - if you mean those few consistently beating the market - are the exception that prove the rule. Lastly, Buffett himself suggests that most people buy index funds. So please elaborate.

[@ajaudehprincenwabuezestanl6063]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[@OptimizedPortfolio]

Indeed

[@ChochaHair]

This video isnt good for a beginner

[@OptimizedPortfolio]

Thanks for the feedback!

[@riverdogsavioroftheunivers978]

You survived

[@OptimizedPortfolio]

Always.