The Bogleheads three-fund portfolio, by the numbers
There is a long-running argument on the Bogleheads forum that most investors overcomplicate everything — and that you can own essentially the entire investable world with just three index funds: total US stocks, total international stocks, and total US bonds. It is diversification and low cost pushed to their logical conclusion, and it has a devoted following precisely because it is so hard to get wrong.
What's in it: the allocation
- VTI34%
- VXUS33%
- BND33%
Growth of $10,000
What an investor actually experiences: drawdowns
The three-fund portfolio still falls hard in a crash — its worst decline was -37.2%, driven by its roughly two-thirds stock weight. That is milder than the S&P 500's -50.8%, and it recovered in 46 months versus a punishing 74 for the S&P over this longer period, but a -37% loss is still deep enough to test anyone's nerve.
If you had money committed to a home purchase or tuition during one of those slumps, more than a third of it could have been gone on paper. The bond third softens the blow, but this is fundamentally a growth portfolio: money you will need within a few years does not belong here.
Results
| Statistic | S&P 500 (SPY) | Bogleheads 3-Fund |
|---|---|---|
| CAGR | 10.3% | 7.3% |
| Annualized volatility | 15.3% | 10.6% |
| Sharpe ratio | 0.72 | 0.72 |
| Sortino ratio | 1.10 | 1.08 |
| Max drawdown | -50.8% | -37.2% |
| Longest drawdown (months) | 74 | 46 |
| Growth of $10,000 | $192,480 | $84,381 |
Over this 30-year window the three-fund grew at 7.3% a year, turning $10,000 into $84,380. That badly trails the S&P 500's $192,480 — largely because international stocks lagged US stocks for much of the period.
On a risk-adjusted basis it was essentially a tie: a Sharpe ratio of 0.72, identical to the S&P's, and a Sortino of 1.08 versus 1.10. In other words, the global diversification did not add return over this particular stretch — but it did lower the worst-case loss (-37% versus -51%), and its whole rationale is protection against a future in which US stocks, unlike the recent past, do not lead.
Figures are computed from monthly adjusted closing prices over May 1996–Jul 2026. Drawdowns are measured at month-end and so understate intra-month extremes.
Methodology
The two instruments
- VTI — Vanguard Total Stock Market ETF
- Every US stock, large and small, in one fund — the domestic growth engine.
- VXUS — Vanguard Total International Stock ETF
- Stocks from the rest of the world, developed and emerging — diversification away from betting solely on the US.
- BND — Vanguard Total Bond Market ETF
- A broad basket of investment-grade US bonds that steadies the portfolio when stocks fall.
Backtest parameters
- Allocation
- 34% VTI / 33% VXUS / 33% BND
- Benchmark
- S&P 500 (SPY)
- Data
- Monthly adjusted closing prices (dividends reinvested)
- Period
- May 1996 – Jul 2026 (history before an ETF's inception is extended with its older index/mutual-fund equivalent)
- Rebalance
- Yearly, at month-end
- Transaction costs
- None modelled
Advantages
- Total diversification, three tickers
- Owning thousands of stocks and bonds worldwide in three funds removes single-company and single-country risk while staying trivially simple to manage.
- Very low cost
- These index funds charge a tiny fraction of what active funds do. Over decades, low fees compound into a large advantage that most investors underrate.
- Easy to stick with
- Simplicity is a feature: fewer moving parts means fewer chances to tinker at the wrong moment, and staying the course is what actually delivers returns.
Disadvantages and risks
- Only stocks and bonds
- Like a 60/40, the three-fund leaves out real assets such as gold and commodities, so it offers little protection when stocks and bonds fall together in an inflation shock — as they did in 2022.
- Full exposure to stock-market crashes
- With roughly two-thirds in stocks, the portfolio still falls hard in a bear market; the bond third softens but does not prevent large declines.
- International drag has tested investors
- International stocks have trailed US stocks for much of the past 15 years, leading many investors to doubt the global slice — though it is exactly what protects against a US-only downturn.
Try it yourself
Every number on this page is reproduced by MarketHeist's free portfolio tool — change the weights, tickers, or rebalancing and watch the result update.
Open the Bogleheads 3-Fund portfolio in the live tool →Frequently asked questions
- What funds make up the Bogleheads three-fund portfolio?
- A portfolio of three low-cost index funds — total US stock market, total international stock market, and total US bond market — held in simple proportions and rebalanced periodically. A common split is roughly one-third each.
- Is the 3-fund portfolio good enough?
- For most long-term investors, yes: it captures the returns of global stocks and bonds at rock-bottom cost with almost no maintenance. Its main gap is the lack of inflation hedges like gold or commodities.
- What is the best ratio for a 3-fund portfolio?
- It depends on your time horizon and tolerance for losses. Younger investors often hold more stocks (e.g., 80/20 stocks-to-bonds); those near retirement hold more bonds. The split shown here is a balanced roughly one-third each.
References
- Three-fund portfolio — Bogleheads wiki
- Taylor Larimore, The Bogleheads' Guide to the Three-Fund Portfolio
Educational analysis of historical data, not investment advice. Past performance does not guarantee future results. Backtested results are hypothetical and computed from the MarketHeist portfolio engine on the parameters above.