The best approach for investing is through the three-fund portfolio. It essentially proves that investing is not meant to be complicated. Through this advantageous and simple investing approach, you can earn paybacks. You can hire a professional financial advisor or choose a DIY model. On the other hand, the three-fund portfolio is the most popular investing approach.
The 3-Fund Portfolio
This portfolio is often mimicked as “the lazy portfolio” as it only requires three assets to build the portfolio. These assets are usually based on funds that incorporate a low-cost index. The subclasses that make this portfolio up are U.S. Stocks, international stocks, and U.S. Bonds.
Benefits Of The 3 Fund Portfolio
The three-fund portfolio is a very simplified portfolio and essentially a great investing strategy. Let’s get into the benefits of this portfolio.
Diversified Portfolio
The three-fund portfolio allows you to create a diversified portfolio without potential confusion. With this strategy, you don’t have to spend time and energy choosing from hundreds of stocks, as you’ll only focus on choosing three funds. This strategy helps to combat the significant risk of not being diversified enough or being over-diversified.
Asset Allocation Made Simple
Your investing strategy plays a huge part when it comes to the allocation of assets. However, the asset allocation depends on your risk tolerance, long-term goals, and age. Additionally, the three-fund strategy makes asset allocation simpler as it only depends on international stocks, bonds, and U.S. Stocks.
Least Expensive
A three-fund portfolio bears minimum costs as it cuts down on various costs by incorporating an effective tax strategy, low turnover, and low expense ratios. The expenses, which seem like a small percentage to us, pile up to be huge in your returns. Moreover, three funds are the most in-expensive funds available in the market as options today.
Who Would Benefit The Most
A three-fund portfolio strategy is an excellent approach for investors who are new to investing or do not want to pour in significant efforts to pull a successful investment strategy together.
Lastly, the three-fund strategy can be a simple and effective tool to build wealth in the longer term. However, ensure that you conduct your thorough research and plan on this strategy before investing in it.