Setting up a 3 fund portfolio is one of the simplest ways to start investing.
Whether you have a standard brokerage account or an employee sponsored 401(k), Charles Schwab offers a range of investment options in order to build a Charles Schwab 3 fund portfolio.
With that being said, today we’ll be looking at:
- How to set up a Charles Schwab 3 Fund Portfolio
- Examples of Charles Schwab 3 Fund Portfolios
- Should you set up a 3 Fund Portfolio with Charles Schwab, Fidelity or Vanguard?
Let’s dive in!
How to Set Up a Charles Schwab 3 Fund Portfolio
A 3 fund portfolio is an investing strategy where one’s portfolio is comprised of only 3 assets.
It doesn’t matter whether these assets are mutual funds or ETFs (it’s a personal preference), what matters most is that these 3 assets are invested into the following 3 broad asset classes:
- U.S. Stocks
- U.S. Bonds
- International Stocks
Below is a non-exhaustive list of some of the more popular investment options along with some basic information and links to where you can read more about them:
Category | Name | Invest. Type | Expense Ratio | Annualized Returns (Since Inception) |
---|---|---|---|---|
U.S. Stocks | SWPPX | Mutual Fund | 0.020% | +8.32% |
U.S. Stocks | SWTSX | Mutual Fund | 0.030% | +7.26% |
U.S. Stocks | SCHX | ETF | 0.030% | +13.09% |
U.S. Stocks | SCHB | ETF | 0.030% | +13.00% |
U.S. Bonds | SWAGX | Mutual Fund | 0.040% | +0.50% |
U.S. Bonds | SCHZ | ETF | 0.030% | +1.58% |
Int. Stocks | SWISX | Mutual Fund | 0.060% | +4.22% |
Int. Stocks | SCHF | ETF | 0.060% | +4.94% |
If you don’t know what to look for when comparing investment options, I’d recommend checking out how I evaluated the differences between VFWAX vs. VTIAX.
Examples of Charles Schwab 3 Fund Portfolios
Example 1 – Aggressive Charles Schwab 3 Fund Portfolio
An aggressive 3 fund portfolio attempts to maximize our returns at the expense of having increased risk and volatility.
While an aggressive portfolio may make more sense for younger investors (due to a greater investment horizon), this type of portfolio would be considered riskier for individuals closer to retirement.
An example of an aggressive Charles Schwab 3 fund portfolio would be something like:
- 70% SWPPX/SCHB
- 15% SWAGX/SCHZ
- 15% SWISX/SCHF
Example 2 – Moderate Charles Schwab 3 Fund Portfolio
A moderate 3 fund portfolio balances portfolio growth with our portfolio’s overall risk and volatility profile. Asset conservation becomes more important.
This type of portfolio would be a ‘middle of the road’ approach.
An example of a moderate Charles Schwab 3 fund portfolio would be something like:
- 50% SWPPX/SCHB
- 40% SWAGX/SCHZ
- 10% SWISX/SCHF
Example 3 – Conservative Charles Schwab 3 Fund Portfolio
A conservative 3 fund portfolio’s primary goal is focusing less on growth and more on preserving capital. This is usually accomplished via having the majority of assets allocated to U.S. Bonds.
As a result, this type of portfolio would be considered the least riskiest option relative to the other portfolio types we have discussed. This is an excellent option for those nearing retirement or those who don’t have a large appetite for risk and volatility.
An example of a conservative Charles Schwab 3 fund portfolio would be something like:
- 15% SWPPX/SCHB
- 80% SWAGX/SCHZ
- 5% SWISX/SCHF
Should I Set Up a 3 Fund Portfolio with Charles Schwab, Fidelity or Vanguard?
If given the option, should one set a 3 fund portfolio with Charles Schwab, Fidelity or Vanguard?
That answer ultimately depends on what funds that you want. Contrary to popular belief, one doesn’t have to set up a 3 fund portfolio with just one company’s set of funds.
As an example, we could create the following 3 fund portfolio:
- VTSAX (Vanguard – U.S. Stocks)
- FXNAX (Fidelity – U.S. Bonds)
- SWISX (Charles Schwab – International Stocks)
We can also create this 3 fund portfolio:
- SWPPX (Charles Schwab – U.S. Stocks)
- SWAGX (Charles Schwab – U.S. Bonds)
- VTIAX (Vanguard – International Stocks)
Additionally, all 3 funds don’t have to be in the same brokerage account. So if we only have access to Charles Schwab funds in our 401(k) but we have a Roth IRA through Vanguard, we can still create a 3 fund portfolio amongst our different investment accounts.
As a result, we can choose the investments that best align with our goals. Furthermore, we don’t have to settle for expensive funds that can eat into our returns.
Final Thoughts
The 3 fund portfolio is an attractive investing strategy due to it’s awesome benefits:
- Portfolio Diversification
- Easier Allocation Adjustments & Re-balancing
- Simplified Asset Allocation
- Lower Risk
- Passive Method of Investing
If you are interested in potentially including Vanguard or Fidelity Funds in a 3 fund portfolio, you can find all the relevant information (Fund, Fund Type, Expense Ratios, Average Returns) in the following articles:
Thank you for reading! 🙂
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Full Disclosure: Nothing on this site should ever be considered advice, research or an invitation to buy or sell securities, please see my ‘Terms & Conditions’ page for a full disclaimer.