Author Topic: Thoughts on 3 fund portfolio (60/20/20)  (Read 1293 times)

bmjohnson35

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Thoughts on 3 fund portfolio (60/20/20)
« on: February 19, 2021, 03:18:39 PM »

I have used a 80% stock 20% bond ratio for some time now(both index type funds).  I also keep cash reserves to use during market downturns. 

I'm thinking about switching to a 60% US stocks, 20% International Stocks and 20% bonds.  Any thoughts from the group on this allocation?

NorCal

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #1 on: February 19, 2021, 04:46:07 PM »
Diversification is the only free lunch in investing.  This will only be an improvement  to your performance on a risk adjusted basis. 

This is similar to my portfolio (50% domestic, 20% international, 20% bonds, 10% alternatives).

The only other thing to consider is how you want to allocate within those categories.  I like splitting my domestic stocks between a broad market fund (SCHB) and a small cap fund (SCHA).  I also split my international between developed and emerging funds.  But just because it works for me doesn't mean it's for everyone.

bmjohnson35

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #2 on: February 19, 2021, 09:46:00 PM »
Diversification is the only free lunch in investing.  This will only be an improvement  to your performance on a risk adjusted basis. 

This is similar to my portfolio (50% domestic, 20% international, 20% bonds, 10% alternatives).

The only other thing to consider is how you want to allocate within those categories.  I like splitting my domestic stocks between a broad market fund (SCHB) and a small cap fund (SCHA).  I also split my international between developed and emerging funds.  But just because it works for me doesn't mean it's for everyone.

80/20 has been good to me, but a bit more diversification makes sense to me as well. I suppose it's still technically 80/20, but with added international stock diversity.  Unfortunately, my retirement account has limited options. 

nirodha

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #3 on: February 19, 2021, 10:31:23 PM »
Have you seen this site? You can model the behavior of different portfolios:

https://portfoliocharts.com/portfolio/three-fund-portfolio/

Move the allocations up and down, see what it does. I'd be comfortable with your proposed change.

bmjohnson35

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #4 on: February 20, 2021, 08:24:48 AM »
Have you seen this site? You can model the behavior of different portfolios:

https://portfoliocharts.com/portfolio/three-fund-portfolio/

Move the allocations up and down, see what it does. I'd be comfortable with your proposed change.

Thanks.  I will check that out today.


ysette9

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #5 on: February 21, 2021, 12:42:38 PM »
Personally I like a 60/40 split between US and international since that is close to the market cap weights of the markets. I think it might be more like 55/45, but close enough. I do that split in my bonds and my stocks using total X index funds.

That said, there are lots of right answers. This seems reasonable so if you like it and can stick with it through thick and thin, then go for it.

cool7hand

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #6 on: February 22, 2021, 05:30:42 AM »
We've been using the All Seasons Portfolio for years. https://portfoliocharts.com/portfolio/all-seasons-portfolio/


Much Fishing to Do

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #7 on: February 24, 2021, 06:38:36 AM »
If your stocks are current 100% US (like VTI, SPY) then this is further diversifying, if its currently mixed (like VT) this this would actually be less diversification (e.g. 80% VT / 20% bond is close to 50% us stock, 30%international, 20% bond).  I'm currently 50% US stock, 20% international, 17% cash and 13 bond, but I do plan to spend down at least half of that cash the first few years of my upcoming RE.




bmjohnson35

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Re: Thoughts on 3 fund portfolio (60/20/20)
« Reply #8 on: February 27, 2021, 12:16:40 PM »

Thanks to everyone who has responded.  I have made a few moves and have ended up at 53% US stock index, 25% US bond index, 13% Int stock index and 9% cash.  The cash allocation will likely go down with some upcoming situations on the horizon.