Ultimate 3 ETF Portfolio: Simple Wealth Strategy (2024)

Ultimate 3 ETF Portfolio: Simple Wealth Strategy (2)

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Are you looking to invest in the stock market but feeling overwhelmed by the multitude of options available? Don’t worry, you’re not alone. With the rise of exchange-traded funds (ETFs), it can be challenging to decide which ones to include in your portfolio. However, fear not, as we have the perfect solution for you — the three ETF portfolio. By selecting the best three ETFs, you can build a well-diversified and profitable investment portfolio. In this blog post, we will discuss the winning trio that will help you build the ultimate three ETF portfolio. So, let’s dive in and discover the power of a well-crafted three ETF portfolio.

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Exchange Traded Funds (ETFs) have become increasingly popular among investors in recent years. But what exactly are they, and how do they work? Let’s break it down.

ETFs are investment funds that are traded on stock exchanges, just like individual stocks. They are designed to track the performance of a specific index, sector, commodity, or asset class. This means that when you invest in an ETF, you are essentially buying a basket of different assets that mirror the index it is tracking.

One of the key advantages of ETFs is their low expense ratio compared to mutual funds. This is because ETFs are passively managed, meaning they aim to replicate the performance of a specific index rather than actively selecting stocks. This approach also allows ETFs to offer greater transparency, as their holdings are disclosed on a daily basis.

There are various types of ETFs available, each with its own investment objective. For example, if you’re looking for broad exposure to the U.S. stock market, popular ETFs like SCHD, VOO, SPY, or VTI could be suitable options. These ETFs aim to track the performance of major U.S. stock indices such as the S&P 500 or the total U.S. stock market.

Ultimate 3 ETF Portfolio: Simple Wealth Strategy (3)

In summary, ETFs offer a convenient and cost-effective way to diversify your investment portfolio. Whether you’re looking for exposure to a specific sector or want to invest in the overall market, ETFs can allow you to achieve your investment goals.

Why is a three-ETF portfolio the way to go? Well, let me break it down for you. This strategy’s rationale is simplicity, diversification, and profitability.

Firstly, simplicity. As a beginner investor, you don’t want to get overwhelmed with too many investment options. By limiting yourself to just three ETFs, you can keep things straightforward and easy to manage. This allows you to focus on understanding the performance of each ETF and tracking its progress over time.

Secondly, diversification. Investing in just one or two ETFs might leave you vulnerable to the fluctuations of a particular market sector. However, by carefully selecting three different ETFs, you can achieve a well-diversified portfolio. For example, you could consider including the Schwab U.S. Dividend Equity ETF (SCHD), which focuses on high-quality dividend stocks, the Vanguard S&P 500 ETF (VOO) for broad exposure to the U.S. stock market, and the Vanguard Total Stock Market ETF (VTI) for a comprehensive representation of the entire U.S. equity market. This combination ensures exposure to different sectors and asset classes, reducing your risk and increasing your chances of long-term success.

Ultimate 3 ETF Portfolio: Simple Wealth Strategy (4)

Finally, profitability. Research has shown that diversification can lead to better investment returns over time. By investing in multiple ETFs, you can take advantage of the growth potential in different market sectors and boost your overall returns. Additionally, ETFs generally have lower expense ratios than mutual funds, allowing you to keep more of your profits.

So, by following the three-ETF portfolio strategy, you can simplify your investment journey, diversify your holdings, and increase your chances of long-term profitability. It’s a winning trio that can help you achieve your financial goals.

When selecting the three ETFs for your portfolio, it’s important to have a clear set of criteria in mind. Here are some key factors to consider when making your decision:

1. Investment Objective: Begin by determining your investment objective. Are you looking for broad market exposure, or do you have a specific sector in mind? Understanding your goals will help narrow down the ETF options.

2. Track Record: Look for ETFs with a strong track record of performance. Consider the fund’s historical returns and how it has fared during different market conditions. Keep an eye out for consistent growth and low volatility.

3. Expense Ratio: Compare the expense ratios of different ETFs. Lower expense ratios can have a significant impact on your overall returns over time. Look for ETFs with competitive expense ratios that align with your investment goals.

4. Liquidity: Consider the liquidity of the ETF. Higher trading volumes typically indicate better liquidity, which can help ensure that you can buy or sell shares at fair prices without any significant market impact.

5. Holdings and Diversification: Review the holdings of the ETF to ensure they align with your desired level of diversification. Look for ETFs that hold a mix of securities across different industries or asset classes.

6. Management Style: Determine whether you prefer an actively managed ETF or a passively managed one. Active management involves selecting stocks based on market research, while passive management aims to replicate the performance of an index.

By carefully evaluating these criteria, you can identify the three ETFs that best align with your investment goals and risk tolerance. Remember to conduct thorough research and seek professional advice if needed.

Now that you understand the benefits of a three-ETF portfolio and the criteria for selecting the right ETFs, let’s dive into an example of a solid three-ETF portfolio. Keep in mind that this example is just one of many possibilities, and you should tailor your portfolio to your specific investment goals and risk tolerance.

One option for a solid three-ETF portfolio could be to include the Schwab U.S. Dividend Equity ETF (SCHD), the Vanguard S&P 500 ETF (VOO), and the Invesco QQQ Trust (QQQ).

Ultimate 3 ETF Portfolio: Simple Wealth Strategy (5)

The SCHD ETF focuses on high-quality dividend stocks, which can provide stable income and potential long-term growth. The VOO ETF offers broad exposure to the U.S. stock market, tracking the performance of the S&P 500 index. This ETF allows you to benefit from the overall growth of the U.S. economy. The QQQ ETF, on the other hand, focuses on the top 100 non-financial companies listed on the Nasdaq Stock Market, providing exposure to the technology sector and other innovative industries.

By combining these three ETFs, you can achieve a well-diversified portfolio that includes dividend stocks, large-cap U.S. companies, and technology companies. This diversification helps mitigate risk and allows you to participate in various market sectors. Remember to conduct thorough research and consider your individual investment objectives before building your three-ETF portfolio.

Stay tuned for the next section, where we’ll discuss the importance of periodic review and rebalancing your ETF portfolio to ensure it remains aligned with your investment goals and market conditions.

Periodic review and rebalancing are essential steps to ensure that your three-ETF portfolio remains aligned with your investment goals and market conditions. As the market fluctuates, the weights of the different ETFs in your portfolio may shift, deviating from your original asset allocation. This can lead to unintended risks or missed opportunities.

Regularly reviewing your portfolio allows you to assess whether it is still meeting your investment objectives. You can evaluate the performance of each ETF and compare it to relevant benchmarks, such as the S&P 500 or the total stock market index. If any ETF consistently underperforms or no longer aligns with your goals, it may be time to consider replacing it with a more suitable option.

Rebalancing your portfolio involves adjusting the weights of your ETFs to restore your desired asset allocation. For example, if the technology sector has outperformed other sectors, the QQQ ETF in your portfolio may have become overweight. Rebalancing would involve selling some QQQ shares and redistributing the proceeds among the other ETFs to restore the original balance.

It’s important to note that rebalancing should not be done too frequently, as it can result in unnecessary trading costs and may not allow sufficient time for market trends to develop. A general rule of thumb is to review and rebalance your portfolio on an annual or semi-annual basis.

Remember, periodic review and rebalancing are crucial to maintaining a well-constructed three-ETF portfolio that remains aligned with your investment goals and takes advantage of changing market conditions. Keep an eye on your portfolio, stay informed, and be ready to make adjustments as needed to maximize your long-term returns.

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Disclaimer: This article is for entertainment purposes only. It is not financial advice; always do your own research.

Ultimate 3 ETF Portfolio: Simple Wealth Strategy (2024)


Ultimate 3 ETF Portfolio: Simple Wealth Strategy? ›

One option for a solid three-ETF portfolio could be to include the Schwab U.S. Dividend Equity ETF (SCHD), the Vanguard S&P 500 ETF (VOO), and the Invesco QQQ Trust (QQQ). The SCHD ETF focuses on high-quality dividend stocks, which can provide stable income and potential long-term growth.

What is the 3 ETF strategy? ›

A three-fund portfolio is a portfolio which uses only basic asset classes — usually a domestic stock "total market" index fund, an international stock "total market" index fund and a bond "total market" index fund.

Is the 3 fund portfolio good enough? ›

While the three-fund portfolio is great because it's simple to learn and easy to manage, it isn't without its disadvantages, as we discuss on our personal finance primer.

What is the 70/30 ETF strategy? ›

This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, fixed income asset classes with a target allocation of 70% equities and 30% fixed income. Target allocations can vary +/-5%.

What is the Lazy 3 fund portfolio? ›

Three-fund lazy portfolios

These usually consist of three equal parts of bonds (total bond market or TIPS), total US market and total international market.

How many ETFs should you have in your portfolio? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

What are the three best ETFs? ›

3 Top ETFs for a Diversified Stock Portfolio
  1. SPDR S&P 500 ETF Trust. The SPDR S&P 500 ETF Trust (SPY 0.66%) mirrors the S&P 500 Index, encompassing 500 of the largest U.S. corporations. ...
  2. Invesco QQQ Trust. ...
  3. iShares Russell 2000 ETF.
May 12, 2024

What is the average return of a three-fund portfolio? ›

As of May 17, 2024, the Bogleheads Three-fund Portfolio returned 7.40% Year-To-Date and 8.21% of annualized return in the last 10 years.

How often should I rebalance my 3 fund portfolio? ›

Investors can rebalance their portfolios whenever they want, depending on personal preferences. However, some investors rebalance their portfolios at set time points, whether monthly, quarterly, or annually.

What is the 3 portfolio rule? ›

A three-fund portfolio isn't complex. It just means choosing one representative fund to include in your portfolio from the domestic stock, international stock and bond categories. These funds can all belong to the same family or come from different mutual fund companies.

What is the 3 5 10 rule for ETF? ›

Specifically, a fund is prohibited from: acquiring more than 3% of a registered investment company's shares (the “3% Limit”); investing more than 5% of its assets in a single registered investment company (the “5% Limit”); or. investing more than 10% of its assets in registered investment companies (the “10% Limit”).

What is the 30 day rule on ETFs? ›

Q: How does the wash sale rule work? If you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale, you won't be able to take a loss for that security on your current-year tax return.

What is the rule of 40 in ETF? ›

What is the Rule of 40? The Rule of 40 states that, at scale, the combined value of revenue growth rate and profit margin should exceed 40% for healthy SaaS companies. The Rule of 40 – popularized by Brad Feld – states that an SaaS company's revenue growth rate plus profit margin should be equal to or exceed 40%.

What is the best 3 fund portfolio allocation? ›

Here are a few popular options: An 80/20 three-fund portfolio with 64% U.S. stocks, 16% international stocks, and 20% bonds. This option prioritizes growth and is good for investors with high risk tolerance. An equally weighted three-fund portfolio with 33% to 34% in each asset.

What is Dave Ramsey's investment portfolio? ›

Ramsey's recommendation is to invest 100% of your portfolio in stocks, with no allocation to bonds or other fixed-income investments. He believes that over the long term, stocks will outperform other asset classes, and that a well-diversified stock portfolio is the best way to build wealth.

What is the Bogle recommended portfolio? ›

Building a Solid Foundation: The Boring Money Account

The core of Bogles recommended portfolio is having a boring money account invested primarily in index funds. Bogle suggested putting at least 95% of investable assets into low-cost, diversified index funds.

What are the three types of ETFs? ›

Common types of ETFs available today
  • Equity ETFs. Equity ETFs track an index of equities. ...
  • Bond/Fixed Income ETFs. It's important to diversify your portfolio2. ...
  • Commodity ETFs3 ...
  • Currency ETFs. ...
  • Specialty ETFs. ...
  • Factor ETFs. ...
  • Sustainable ETFs.

What is the 3 way investment strategy? ›

A three-fund portfolio aims to diversify your portfolio across three asset classes: domestic stocks, international stocks, and domestic bonds. You can use a three-fund approach in most 401(k) accounts. Investors choose the allocation of funds that suit their goals.

What are 3x ETFs? ›

As with other leveraged ETFs, 3x ETFs track a wide variety of asset classes, such as stocks, bonds, and commodity futures. The difference is that 3x ETFs apply even greater leverage to try to gain three times the daily or monthly return of their respective underlying indexes.

What is an ETF strategy? ›

ETFs are low-cost investment vehicles that offer a wide range of choices, enabling investors to implement almost any kind of investment strategy, from a classic buy-and-hold strategy to hedging and thematic investing.

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