Three-Fund
The whole US stock market, the whole international stock market and the US bond market, in three index funds.
The three-fund structure popularized by Taylor Larimore and the Bogleheads. The weights are this site's reference mix. No canonical weights exist. The stock split (40% abroad) is Vanguard LifeStrategy 60/40's; Larimore suggests 20%.
Before the numbers. A hypothetical backtest, not a forecast: Jun 30, 2000 to Oct 9, 2026 (26.2 years), the window every published portfolio shares. Rebalanced once a year at 10 basis points a trade. The bar is the three-fund at the same stock share, 60%.
Funds younger than the window are extended by older series, each junction validated (how): BND by VBMFX before 2007-04-10; VTI by VTSMX before 2001-06-15; VXUS by VGTSX before 2011-01-28.
What it holds
| Asset class, and the fund this backtest holds it through | Weight | Fund fee |
|---|---|---|
| US total bond market BND · Vanguard Total Bond Market |
40% | 0.03% |
| US total stock market VTI · Vanguard Total Stock Market |
36% | 0.03% |
| International stocks (total) VXUS · Vanguard Total International Stock |
24% | 0.05% |
| Together | 100% | 0.03% |
The funds are the ones this backtest uses for each asset class, not a list to buy: any fund tracking the same asset class holds the same thing.
Its record against the three-fund at 60% stocks
| Statistic | Three-Fund | Three-fund at 60% stocks |
|---|---|---|
| Value per $10,000 | $51,136 | $51,136 |
| Total return | 411.36% | 411.36% |
| Annual return (CAGR) | 6.41% | 6.41% |
| Standard deviation | 9.57% | 9.57% |
| Max drawdown | -35.82% | -35.82% |
| Worst calendar year | -21.15% | -21.15% |
| Longest time underwater | 831 days | 831 days |
| Ulcer Index | 8.03% | 8.03% |
| Sharpe ratio | 0.50 | 0.50 |
| Sortino ratio | 0.73 | 0.73 |
| Ulcer Performance Index | 0.57 | 0.57 |
The crises
| Deepest decline from a prior peak | Three-Fund | Three-fund at 60% stocks |
|---|---|---|
| 2000–02 | -23.8% | -23.8% |
| 2008 | -35.8% | -35.8% |
| 2020 | -21.3% | -21.3% |
| 2022 | -22.4% | -22.4% |
2000–02 is measured from June 2000, the window's start, after the March peak; 2008 from October 2007 to June 2009; 2020 from February to April; 2022 through 2023.
Calendar years
The first and last years are partial.
The trade-off
Taylor Larimore and the Bogleheads made the structure popular: own the markets whole, at the lowest cost, and choose only the split. They fix no weights. The ones here are this site’s reference mix, 60% in stocks with two-fifths of them abroad, the split Vanguard’s LifeStrategy 60/40 fund holds in its stocks. The fund keeps 12% in international bonds as well; the reference holds all its bonds in the US market, which gives it history back to 1992.
It is the bar on every other page: no tilts, no gold, no REITs held on their own. Over this window, two-fifths abroad weighed on it, because US stocks returned well ahead of international ones; the versions below hold less abroad. It returned 6.41% a year with a worst decline of -35.8%.
Common versions
The three-fund has no fixed weights. These are other people's versions, beside the one this site uses as its bar, over the same window, unranked.
| Version | Weights | Return a year | Worst decline | Sharpe |
|---|---|---|---|---|
| This site's reference Vanguard LifeStrategy 60/40's split: two-fifths of stocks abroad |
VTI 36%, VXUS 24%, BND 40% | 6.41% | -35.8% | 0.50 |
| Taylor Larimore's suggestion A fifth of stocks abroad (Bogleheads forum, 2016) |
VTI 48%, VXUS 12%, BND 40% | 6.76% | -34.8% | 0.54 |
| Bogleheads wiki example The wiki's worked example |
VTI 42%, VXUS 18%, BND 40% | 6.58% | -35.3% | 0.52 |
| Portfolio Charts' Three-Fund 80% stocks, a fifth of them abroad |
VTI 64%, VXUS 16%, BND 20% | 7.52% | -46.1% | 0.50 |