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The Wisdom of Elders: Bogleheads Three Fund Portfolio

Picture of the tree of knowledge growing out a a book, a photo fro the Bogleheads three fund portfolio blog postLast Thursday, Taylor Larimore sent me a copy of his new book, “The Bogleheads Guide to the Three-fund Portfolio.”

Saturday morning, I read Larimore’s book. And that read prompts this short blog post.

I want to provide a quick book review and then make a couple of comments about Larimore’s body of work.

The Problem in a Nutshell

As you may know, the popular Bogleheads.org website promotes the idea that individuals can take a do-it-yourself approach to their investing using inexpensive broad market index funds.

This approach generates a pretty irrefutable benefit: If someone can use index funds and can do the work themselves, they should end up in way better shape because they save so much on investment costs.

To use an extreme example, someone with $1,000,000 of retirement savings might annually pay an investment manager $10,000 to $20,000 a year one way or another.

A Boglehead, in comparison, might pay $500 to $1000 a year. Gulp.

The question, of course, is how does an individual investor even do this.

It seems pretty complicated and risky to “do-it-yourself” with something as important as your retirement, right?

The Bogleheads Three Fund Portfolio Solution

And here’s where the “Bogleheads three-fund portfolio” comes in.

The three-fund portfolio says, “No, it actually isn’t that complicated. Just buy three cheap index funds. Allocate maybe 20% to an international stock fund. Allocate maybe another 40% to a total market bond fund. Then allocate that last 40% to a US total stock market fund.”

But though this work really isn’t that hard–hey we’re talking about your retirement savings.

Accordingly, Larimore’s book: He patiently explains in detail exactly why you want to do this. Then he carefully walks you through the steps of doing it yourself, sprinkling the pages with practical insights.

To describe Larimore’s book another way, it resembles William Strunk’s the Elements of Style. Or Margareta Magnusson’s Gentle Art of Swedish Death Cleaning. Like these other titles, The Bogleheads Guide to the Three Fund Portfolio supplies easy-to-use, focused, highly practical instructions.

That’s probably enough discussion of the book. But let me close with this suggestion: If you want help simplifying your retirement saving or if you need truly actionable advice on how to dial down your investment costs, reading Larimore’s short book would be an excellent first step.

And let me share two other comments related to the book.

The Wisdom of Elders

First, I am impressed by how much wisdom Taylor Larimore shares in his short book.

Note: Larimore’s first experiences with the stock market connect to the Crash of ’29–he was born in 1924. The crash impacted both on his small business owning family and then also his wealthy grandfather, an early Wall Street financial engineer.

And I guess the takeaway here for younger investors (like me and maybe you): He and other investment “elders” have much wisdom to share about the practical details of investing over decades. That wisdom flows in part from continuous learning and in part from experiencing first hand nearly every bull and bear market of the last century.

I don’t know if you need to do a better job of recognizing and tapping into this wisdom. But I  know I do.

A Role Model for the Second Half

A second comment: Taylor Larimore and others like him really provide a role model for any of us who get blessed with a long life.

One can think about one’s post-formal-employment years as a break from the grind of work. Or maybe as an escape from responsibility. But when folks do what Taylor and his fellow Boglehead founders have done at the Bogleheads.org website, gosh, what a legacy.

Thank you Taylor… both for the book and for your contributions to helping all of us do a better job investing.

Some Related Posts

Have you updated your investing for the impact of the new Sec. 199A “Qualified business income deduction?” If not, you may find this blog post useful: Sec. 199A Changes Investment Portfolio Construction. You might also benefit from this discussion: How the Sec. 199A qualified business income deduction changes saving for retirement.

Nervous about the stock market’s rich valuations? Or about whether you can really draw enough income from your portfolio? One of these blog posts might provide some actionable insight: Retirement Plan B: Why You Need One and Siamond’s Withdrawal Rate Math: Not a Pretty Picture.

 

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About Carol St. Amand

Carol St. Amand

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