One of the easiest and most efficient ways to invest is setting up a 3 fund portfolio.
Whether you have a standard brokerage account or an employee sponsored 401(k), Fidelity offers a wide range of investment options in order to build a Fidelity 3 fund portfolio.
As a result, today we will be examining:
- What is a Lazy 3 Fund Portfolio?
- How to Set Up a Fidelity 3 Fund Portfolio
- Examples of Fidelity 3 Fund Portfolios
Let’s dive in.
What is a Lazy 3 Fund Portfolio?
A lazy 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 (that’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
The word ‘lazy’ comes from the fact that this is a ‘set it and forget it‘ investment strategy requiring little to no maintenance. For most investors, a 3 fund portfolio is good enough to reach their investment goals.
Furthermore, a 3 fund portfolio also offers a lot of awesome benefits:
- Portfolio Diversification
- Easier Allocation Adjustments & Re-balancing
- Simplified Asset Allocation
- Lower Risk
- Passive Method of Investing
With that being said, let’s take a look on how to actually set up a fidelity 3 fund portfolio.
How to Set Up a Fidelity 3 Fund Portfolio
If you are one of the 32 million participants who have a 401(k) through Fidelity, I’ve got good news: it’s extremely easy to set up a fidelity 3 fund portfolio.
The first and most important step is choosing which mutual funds/ETFs we want to use in order to build our fidelity 3 fund portfolio.
While not an exhaustive list, below are the most popular investment options along with some basic information and links to where you can read more about them:
Category | Name | Investment Type | Net Expense Ratio | Average Annual Return |
U.S Stocks | FZROX | Mutual Fund | 0.00% | +15.00% |
U.S Stocks | FSKAX | Mutual Fund | 0.015% | +8.74% |
U.S Stocks | FXAIX | Mutual Fund | 0.015% | +10.98% |
U.S Stocks | IVV | ETF | 0.03% | +7.32% |
U.S Stocks | ITOT | ETF | 0.03% | +9.94% |
U.S. Bonds | FXNAX | Mutual Fund | 0.025% | +5.47% |
U.S. Bonds | AGG | ETF | 0.04% | +3.51% |
International Stocks | FZILX | Mutual Fund | 0.00% | +5.39% |
International Stocks | FTIHX | Mutual Fund | 0.06% | +7.31% |
International Stocks | FSPSX | Mutual Fund | 0.035% | +5.09% |
International Stocks | FSGGX | Mutual Fund | 0.055% | 5.78% |
International Stocks | IEFA | ETF | 0.07% | +6.74% |
International Stocks | IXUS | ETF | 0.09% | +5.95% |
If you are new to investing and 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 Fidelity 3 Fund Portfolios
After making our investment choices, the next step is determining our individual asset allocations for our fidelity 3 fund portfolio.
Our asset allocations should be a direct reflection of our own individual risk tolerance.
Let’s take a look at a few examples.
Example 1 – Aggressive Fidelity 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 fidelity 3 fund portfolio would be something like:
- 70% FZROX
- 15% FXNAX
- 15% FZILX
Example 2 – A Moderate Fidelity 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 fidelity 3 fund portfolio would be something like:
- 50% FZROX
- 40% FXNAX
- 10% FZILX
Example 3 – A Conservative Fidelity 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 fidelity 3 fund portfolio would be something like:
- 15% FZROX
- 80% FXNAX
- 5% FZILX
Final Thoughts
Despite being developed by Vanguard’s Bogleheads community, we can easily replicate the simplicity and passiveness of this investing strategy into a fidelity 3 fund portfolio.
And it’s even better with Fidelity automatic investing 🙂
On the other hand, if you want to learn more about the most popular 3 fund portfolio options for Vanguard, I recommend checking out the investment list I created on how to set up a vanguard 3 fund portfolio.
Thank you for reading! 🙂
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