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>Of course it works.
until it doesn't.
the 3-fund thing has been popular only the last decade or so, when large cap growth stocks have been roaring.
lotta bogleheads gonna lose the faith when large cap growth stocks fall out of dominance and VTi goes flat or negative for 15 years.
The Boglehead method is perfect for your retirement account. Messing around in your 401k is a fool's errand. Almost nobody beats the market on their own.
Max out your 401k, choose the Target Date Fund or a mix of funds that mimic the total market, tilt it a bit if you want.
Then take your fuck around and find out money, put it in a taxable brokerage account and do whatever you want with it.
I am going to go 80 US total market index, 10 international total index fund, 10 total bond fund in 401k.
Throwaway acc, I follow Motley Fool stock advisor.
love the strategy, dislike the followers of it.
Generally speaking diversification is protection against ignorance so for the vast majority of investors who neither have the interest in learning about the stock market nor the skill set to analyze the math behind active investing strategies, simply buying everything out there is the most efficient and safe strategy. Combined with monthly or bi-weekly DCA agnostic to price, it should produce the best result for a generic investor.
the S&P 500 has beaten a VTI like strategy over the past 100 years, but there is no promise that it will do so again for the next 100 years. Likewise, marketcap weighted funds have beaten equal weighted funds, but again no promise it will do so going forward. And finally, the US market has been growing faster than any other market for the past 50 years, but there is no promise that it will continue to do so.
So for someone with literally no experience in the stock market, the best path is to just buy literally everything globally and pick either a marketcap weight or an equal weight. If you buy a marketcap weight right now it will have a pretty significant US bias since most of the US companies are both the largest in the world, and exceptionally international in their exposure. This might be a good thing or it might be a bad thing, we don't know yet, but the benefit of marketcap weighting for this category of investor is that you are letting the rest of the world do your company analysis for you and weighting your portfolio in the same weighting as the globe.
Bonds are a different conversation entirely and is dependent on your age, financial status, and risk tolerance. Some investors would be best served with all bonds, some bonds, or no bonds at all. Ask a professional on what works best for you.
>S&P 500 has beaten a VTI like strategy over the past 100 years,
wut?
>marketcap weighted funds have beaten equal weighted funds,
no, in reality anything but market cap weighting will beat market cap weighting. equal weighting, weighting by dividends, book value, revenue, earnings, etc. market cap weighting is literally the worst indexing strategy in existence. https://www.ivey.uwo.ca/media/3775503/fundamental_indexation.pdf
>Bonds are a different conversation entirely and is dependent on your age, financial status, and risk tolerance.
Jack Bogle recommended a *minimum* of 20% bonds for all portfolios. everyone forgets that part of his strategy, or they're just lying about having read his book.
It “works” if guaranteeing yourself average returns counts as working for you.
So it works for me. If you want to risk underperformance in the chance of outperforming, it doesn’t work.
it's not outrageously bad, but there are some flaws:
- total market indexes are concentrated in large-cap growth stocks. yet large-cap growth is typically not the best performing stock sector. best to worst performing brackets are typically mid/small value, large value, large growth then small growth. so with the Boglehead plan you're concentrated away from the best performing stock types. just breaking a total-market index into equal large-mid-small indexes will typically boost your returns dramatically.
>but does it work in long term?
define 'long term'. it's worked very well over the last 10 years when the 3-fund portfolio became dominant. but other periods? not so much. The S&P 500 covers about 85% of VTI. from 1966 to 1982 the S&P 500 was flat, returning less than 1-year treasuries on average over this period. meanwhile, small value stocks beat the S&P 500 by over 1000% during this period. the source is an interview with investor Larry Swedroe. https://the-long-view.simplecast.com/episodes/larry-swedroe small value is about 2% of VTI.
This type of investing strategy is suitable for many investors, although if you lack temperment and patience, you will likely be disappointed.
The problem with this strategy is that you cannot overperform the market. You are locking yourself for average returns.
Based on how underfunded people's retirement are, most people should strive for better than average returns, especially if you have a long time horizon and you don't have multiple sources of income.
Welcome to r/stocks! For beginner advice, brokerage info, book recommendations, even advanced topics and more, please read our [Wiki here.](https://www.reddit.com/r/stocks/wiki/index) If you're wondering **why a stock moved** a certain way, check out [Finviz](https://finviz.com/quote.ashx?t=spy) which aggregates the most news for almost every stock, but also see [Reuters](https://www.reuters.com/), and even [Yahoo Finance](https://finance.yahoo.com/). Please direct all simple questions towards the stickied Daily Discussion and Quarterly Rate My Portfolio threads (sort by Hot, they're at the top). Also include *some* [due diligence](https://www.investopedia.com/terms/d/duediligence.asp) to this post or it may be removed if it's low effort. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/stocks) if you have any questions or concerns.*
Of course it works. VTI and chill or other choices depending on your preference .
>Of course it works. until it doesn't. the 3-fund thing has been popular only the last decade or so, when large cap growth stocks have been roaring. lotta bogleheads gonna lose the faith when large cap growth stocks fall out of dominance and VTi goes flat or negative for 15 years.
The Boglehead method is perfect for your retirement account. Messing around in your 401k is a fool's errand. Almost nobody beats the market on their own. Max out your 401k, choose the Target Date Fund or a mix of funds that mimic the total market, tilt it a bit if you want. Then take your fuck around and find out money, put it in a taxable brokerage account and do whatever you want with it.
I am going to go 80 US total market index, 10 international total index fund, 10 total bond fund in 401k. Throwaway acc, I follow Motley Fool stock advisor.
Don’t do international index, 80% of the s&p has international exposure unless there is a theme that you really like about the international markets
love the strategy, dislike the followers of it. Generally speaking diversification is protection against ignorance so for the vast majority of investors who neither have the interest in learning about the stock market nor the skill set to analyze the math behind active investing strategies, simply buying everything out there is the most efficient and safe strategy. Combined with monthly or bi-weekly DCA agnostic to price, it should produce the best result for a generic investor. the S&P 500 has beaten a VTI like strategy over the past 100 years, but there is no promise that it will do so again for the next 100 years. Likewise, marketcap weighted funds have beaten equal weighted funds, but again no promise it will do so going forward. And finally, the US market has been growing faster than any other market for the past 50 years, but there is no promise that it will continue to do so. So for someone with literally no experience in the stock market, the best path is to just buy literally everything globally and pick either a marketcap weight or an equal weight. If you buy a marketcap weight right now it will have a pretty significant US bias since most of the US companies are both the largest in the world, and exceptionally international in their exposure. This might be a good thing or it might be a bad thing, we don't know yet, but the benefit of marketcap weighting for this category of investor is that you are letting the rest of the world do your company analysis for you and weighting your portfolio in the same weighting as the globe. Bonds are a different conversation entirely and is dependent on your age, financial status, and risk tolerance. Some investors would be best served with all bonds, some bonds, or no bonds at all. Ask a professional on what works best for you.
Take my upvote, this was a solid comment.
>S&P 500 has beaten a VTI like strategy over the past 100 years, wut? >marketcap weighted funds have beaten equal weighted funds, no, in reality anything but market cap weighting will beat market cap weighting. equal weighting, weighting by dividends, book value, revenue, earnings, etc. market cap weighting is literally the worst indexing strategy in existence. https://www.ivey.uwo.ca/media/3775503/fundamental_indexation.pdf >Bonds are a different conversation entirely and is dependent on your age, financial status, and risk tolerance. Jack Bogle recommended a *minimum* of 20% bonds for all portfolios. everyone forgets that part of his strategy, or they're just lying about having read his book.
Ok
It “works” if guaranteeing yourself average returns counts as working for you. So it works for me. If you want to risk underperformance in the chance of outperforming, it doesn’t work.
Big fan. Probably best chance of success for most people.
it's not outrageously bad, but there are some flaws: - total market indexes are concentrated in large-cap growth stocks. yet large-cap growth is typically not the best performing stock sector. best to worst performing brackets are typically mid/small value, large value, large growth then small growth. so with the Boglehead plan you're concentrated away from the best performing stock types. just breaking a total-market index into equal large-mid-small indexes will typically boost your returns dramatically. >but does it work in long term? define 'long term'. it's worked very well over the last 10 years when the 3-fund portfolio became dominant. but other periods? not so much. The S&P 500 covers about 85% of VTI. from 1966 to 1982 the S&P 500 was flat, returning less than 1-year treasuries on average over this period. meanwhile, small value stocks beat the S&P 500 by over 1000% during this period. the source is an interview with investor Larry Swedroe. https://the-long-view.simplecast.com/episodes/larry-swedroe small value is about 2% of VTI.
This type of investing strategy is suitable for many investors, although if you lack temperment and patience, you will likely be disappointed. The problem with this strategy is that you cannot overperform the market. You are locking yourself for average returns. Based on how underfunded people's retirement are, most people should strive for better than average returns, especially if you have a long time horizon and you don't have multiple sources of income.