I’ve written a lot about the three-fund portfolio. I’ve explained how you can implement this simple, diversified portfolio whether you have your money at Vanguard, Fidelity, and Schwab.
While regular readers of this blog or the Bogleheads forum may take index investing for granted, many investors still try to pick individual stocks or buy actively-managed mutual funds. Even index investors who are aware of the three-fund portfolio try to super-charge their returns by tilting their portfolios to small cap or value stocks, or by adding index funds to cover additional asset classes, such as commodities or REITs.
These investors need a concise, clearly-written book that covers both the benefits of the three-fund portfolio as well as the step-by-step process of implementing the portfolio.
Taylor Larimore, a World War II veteran who, at age 94, has more stock market experience than all of us, successfully achieves these goals with the third book in the Bogleheads book series, The Bogleheads’ Guide To The Three-Fund Portfolio.
[Disclosure: Taylor Larimore graciously mailed me a free copy of the book to review. I am also a member and participant on the Bogleheads forum, and have featured questions from the forum frequently on my blog. I also personally use the three-fund portfolio for my own investments (which I guess is more of an endorsement for the strategy than a disclosure).]
The Three-Fund Portfolio
The inspiration for the book comes from this Bogleheads thread that began in 2012 by the book’s author, Taylor Larimore. It is one of the most popular threads in the entire Bogleheads forum, with nearly 2200 replies.
Mr. Larimore begins the book by sharing his own history with investing. Similar to many, many other investors, he shares the litany of investing mistakes he made that eventually lead him to an index fund portfolio. He shares how he hired an expensive financial advisor, traded individual stocks, and unsuccessfully tried to time the market. Eventually, he stumbled upon index fund investing and the three-fund portfolio.
Of note, Mr. Larimore is donating all proceeds from book sales to the John C. Bogle Center For Financial Literacy. He has already achieved all of his financial goals by investing in a three-fund portfolio, and his goal with this book is to enable current and future generations of investors to do the same.
As Mr. Larimore has already achieved his financial goals with a three-fund portfolio, the goal of this book is to enable current and future generations of investors to do the same. Click To TweetThe book then explains twenty advantages of a three-fund portfolio. Some are specific to the three-fund portfolio (maximum diversification, low maintenance, simplicity) while others are applicable to index investing in general (low cost, no individual stock risk).
The book concludes with a step-by-step implementation of the three-fund portfolio.
My Review
The book is short and sweet, coming in at just 112 pages. It certainly is shorter than the previous two Bogleheads books on retirement planning (400 pages) and investing (336 pages). I believe this brevity is intentional. There were many opportunities for Mr. Larimore to flesh out various concepts, but he deliberately choose to keep each section as brief as possible. This book could easily be used as a “starter” book to introduce new investors to the benefits of index fund investing and the three-fund portfolio, with the reader then moving on to The Bogleheads Guide To Investing for a more comprehensive guide to investing.
Throughout the book, there are endorsements of the three-fund portfolio strategy from Bogleheads readers. This serves to provide new investors with encouragement and validation that the three-fund portfolio is successfully being used by many other investors. The three-fund portfolio doesn’t have paid salespeople or expensive advertising, but it has the endorsement of thousands of investors around the world, including myself.
The three-fund portfolio doesn't have paid salespeople or expensive advertising, but it has the endorsement of thousands of investors around the world, including myself. Click To TweetHe also intersperses quotes throughout the book from world-famous investors (e.g. John Bogle, Warren Buffett, etc.) as well as prominent investing columnists (Christine Benz from Morningstar, Jonathan Clements formerly of the Wall Street Journal) to validate his arguments.
While the book is obviously Vanguard-centric, Mr. Larimore certainly mentions that the three-fund portfolio can be done at other institutions such as Fidelity or Schwab.
Conclusion
This book is perfect for the busy professional or novice investor who wants to get started with do-it-yourself investing using the three-fund portfolio. Experienced investors or regular Bogleheads readers who are already well-versed in the benefits of index fund investing and the simplicity of the three-fund portfolio will likely already be familiar with most of the content in this book. However, it may convince even experienced investors to simplify their more complicated index-fund portfolio to a three-fund portfolio.
What do you think? Have you read The Bogleheads’ Guide To The Three-Fund Portfolio?
I’m a big fan of the bogleheads as they helped me out a ton early in my financial turnaround.
I have the other two books you mentioned (actually just finished a post on the investing one recently and in my schedule to publish) and find them quite helpful
If you have read the other 2 books and have been exposed to the 3 fund method does this book add any more value?
I have not read that book, but know a bit about the 3 fund portfolios just from web research mainly on bogleheads sebpage and reddit boglehead blogs. I do own a copy of “the Little Book of Investing” by John Bogle which is also sound advice for long term investers. The best quite I like in the book is “dont search for the needle in the haystack..buy the haystack” in other words a low cost index fund that tracks the market.
Bogle also says that the majority of investers would do well to invest in SP500 orTotal stock market index fund and invest in total bond market index fund. He also says though it might not be the best, the # of strategies that are worse are infinite.” chasing past results is one of the stupidest things an invester can do..todays stars will become tomorrows meteors..
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