This post will walk you through how to build a Bogleheads 3 Fund Portfolio using Fidelity index mutual funds.
Interested in more Lazy Portfolios? See the full list here.
Disclosure: Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.
Contents
Introduction – Bogleheads 3 Fund Portfolio
If you’ve arrived here, hopefully the Bogleheads 3 Fund Portfolio needs no introduction. I’ve got more details on it in a separate post here. The late John Bogle was considered the “father of index investing” and espoused the benefits of low cost indexing over more expensive active management or stock picking that are very likely to underperform the market.
The 3 Fund Portfolio is a lazy portfolio that allows investors to save big on both time and fees with its simplicity using 3 broadly diversified index funds: a total U.S. stock market fund, a total international stock market fund, and a total U.S. bond market fund. With this portfolio there’s no need to constantly monitor holdings or do any trading other than maybe rebalancing once annually.
Fidelity is at the forefront of the race to zero for fees on index funds, especially with their line of ZERO funds. They have a proven track record as a reliable broker.
Now let’s go through the exact steps to build a 3 Fund Portfolio at Fidelity
How To Build a Fidelity 3 Fund Portfolio
So first we want to choose funds to use.
For U.S. stocks, we want a fund that captures the total U.S. stock market. At Fidelity we can do that with FSKAX, the Fidelity Total Market Index Fund, or if you prefer one of Fidelity’s ZERO fund with zero fees, FZROX. Just remember those ZERO funds cannot be bought or transferred outside of Fidelity.
U.S. stocks don’t consistently outperform every other country in the world, so we want to add the international stock market as well. We can do that with FSGGX, the Fidelity Global ex US Index Fund. The comparable ZERO fund here would be FZILX.
Bonds tend to be uncorrelated to stocks and offer a diversification benefit to the portfolio. Most Bogleheads prefer to use the total U.S. bond market. Fidelity’s total U.S. bond market fund is FXNAX.
The next step is to choose your asset allocation. This is going to be based on your personal goals, time horizon, and risk tolerance. Only you can decide those things, but a reasonable one-size-fits-most allocation would be 80% stocks and 20% bonds. U.S. stocks comprise a little more than half of the global stock market, so putting it all together, our hypothetical Fidelity 3 fund portfolio might look like this:
50% U.S. stocks with FSKAX or FZROX
30% International stocks with FSGGX or FZILX
20% U.S. bonds with FXNAX
Remember to periodically rebalance your portfolio as allocations shift; annually is fine.
What does your Fidelity 3 fund portfolio look like? Let me know in the comments.
Don’t want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.
Disclosures: None.
Interested in more Lazy Portfolios? See the full list here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
Don't want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.
Leave a Reply