Build Your Wealth: Step-by-Step Guide to Setting Up a Three-Fund Index Fund Portfolio
The three-fund index fund portfolio is one of the most celebrated strategies for long-term investors, popularized by the “Bogleheads” community after Vanguard founder Jack Bogle. It combines simplicity, maximum diversification, and extremely low cost, making it an ideal choice for beginners aiming to build wealth without complexity. The portfolio achieves global diversification by holding just three low-cost, broad-market index funds.
Step 1: Understand the Three Core Components
The three-fund portfolio is designed to provide exposure to the entire global stock and domestic bond markets, balancing growth potential with volatility mitigation.
| Component | Description | Investment Goal |
| 1. Domestic Stock Fund | Tracks the entire US (or your home country’s) stock market (e.g., the Total Stock Market Index). | Long-term growth and capital appreciation. |
| 2. International Stock Fund | Tracks the total stock market of developed and emerging countries outside the domestic market. | Global diversification to reduce country-specific risk. |
| 3. Domestic Bond Fund | Tracks the total |