What is the Core Four portfolio?

Rick Ferri's four-fund mix — 48% total US stock, 24% total international, 8% REITs, 20% total bond — rebalanced yearly.

Is the Core Four a good portfolio?

Yes, for most long-term investors: it is broadly diversified, low-cost, and easy to run. Its gap is the lack of inflation hedges like commodities or gold.

How is Core Four different from the three-fund portfolio?

It is the three-fund (US, international, bonds) with a real-estate slice added for extra diversification.

Does Rick Ferri's Core Four portfolio work?

By Jeffrey Lin · Published 2026-08-24 · Updated 2026-08-24

The Core Four, from advisor and author Rick Ferri, is a simple four-fund portfolio: total US stock market, total international stock market, US real estate (REITs), and total US bond market. It adds a real-estate slice to the classic three-fund idea, aiming for a bit more diversification without much added complexity.

From Jun 1996 to Jul 2026, a yearly-rebalanced Core Four portfolio returned 8.4% per year with a maximum drawdown of -44.4% — versus 10.2% and -50.8% for S&P 500 (SPY) alone. It gave up some return for materially lower risk, producing a higher Sharpe ratio (0.71 vs 0.71). $10,000 grew to $112,416 (vs $188,208 in the S&P 500).

What's in it: the allocation

VTI48%
VXUS24%
VNQ8%
BND20%

Growth of $10,000

Growth of a $10,000 investment, Jun 1996–Jul 2026. The Core Four line rises more slowly than the S&P 500 but with visibly shallower dips — the trade-off the strategy is designed to make.

What an investor actually experiences: drawdowns

Decline from the prior peak — the "underwater" curve.

A drawdown is the stretch of time when your account is worth less than it was, with no way to know when it will recover. Core Four's worst decline was a severe -44.4% — almost as deep as the S&P 500's own -50.8%. How long the pain lasted matters just as much: it spent as long as 41 months (about 3.4 years) below a prior high, versus 74 months (6.2 years) for the S&P 500.

A fall of -44.4% is the kind that tests conviction. If you needed this money for a house, a child's tuition, or retirement during such a slump, you could be forced to sell near the bottom — which is why money you will need within a few years usually belongs somewhere less exposed than this.

Results

Statistic	S&P 500 (SPY)	Core Four
CAGR	10.2%	8.4%
Annualized volatility	15.3%	12.3%
Sharpe ratio	0.71	0.71
Sortino ratio	1.09	1.07
Max drawdown	-50.8%	-44.4%
Longest drawdown (months)	74	41
Growth of $10,000	$188,208	$112,416

Here is what those figures mean for a real saver. CAGR is the smoothed annual growth rate: at 8.4% a year, Core Four turned $10,000 into $112,416 over about 30 years, versus $188,208 for the S&P 500. Volatility (12.3% vs 15.3%) is how much the ride bounces from year to year. The Sharpe and Sortino ratios measure return earned per unit of risk (higher is better). And the maximum drawdown — the deepest peak-to-trough fall — is the number that decides whether you can actually stay invested.

Over this particular window the diversification roughly broke even: Core Four earned about the same risk-adjusted return as the S&P 500 (Sharpe 0.71 vs 0.71) while trailing on raw growth. Its case rests on protecting against risks — a prolonged US-stock slump, an inflation shock — that this stretch did not deliver.

Figures are computed from monthly adjusted closing prices over Jun 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 — the core growth holding.
VXUS — Vanguard Total International Stock ETF: Every non-US stock, developed and emerging.
VNQ — Vanguard Real Estate ETF: US real-estate investment trusts (REITs) — property income that behaves a bit differently from stocks.
BND — Vanguard Total Bond Market ETF: A broad basket of investment-grade US bonds — the main stabilizer.

Backtest parameters

Allocation: 48% VTI / 24% VXUS / 8% VNQ / 20% BND
Benchmark: S&P 500 (SPY)
Data: Monthly adjusted closing prices (dividends reinvested)
Period: Jun 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

Simple, global, and cheap: Four low-cost funds capture US and international stocks, real estate, and bonds — broad diversification that is trivial to maintain.
A real-estate diversifier: The 8% REIT slice adds an income-producing asset that doesn't move in perfect lockstep with the broad stock market.

Disadvantages and risks

Still mostly stocks: At 80% stocks, it falls hard in bear markets; the 20% bond slice softens but does not prevent large losses.
International and REIT tilts have lagged: Both non-US stocks and REITs trailed US large-caps for much of the past 15 years, so the portfolio underperformed a plain S&P 500 fund over that stretch.

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.

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Frequently asked questions

What is the Core Four portfolio?: Rick Ferri's four-fund mix — 48% total US stock, 24% total international, 8% REITs, 20% total bond — rebalanced yearly.
Is the Core Four a good portfolio?: Yes, for most long-term investors: it is broadly diversified, low-cost, and easy to run. Its gap is the lack of inflation hedges like commodities or gold.
How is Core Four different from the three-fund portfolio?: It is the three-fund (US, international, bonds) with a real-estate slice added for extra diversification.

References

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.