[Editor's Comment: Today we have a republished post from Physician on FIRE, a member of The White Coat Investor Network. This post is all about a good friend of mine, Battle of Bastogne Vet Taylor Larimore. He's in his mid-90s and provides a lifeline of wisdom in the foundering seas of what constitutes investment information these days. His book on the three fund portfolio will be out soon. Many of his reading selections are also found on my list of best financial books for doctors and I recommend everyone read at least one financial book a year. The original post ran here, but if you missed it the first time, it’s new to you! ]
I was browsing the Bogleheads forum recently, when an “old” post from 2014 was brought to the top of the page by a new comment. The thread was started by Taylor Larimore, revered Boglehead Emeritus. In the post, Mr. Larimore states, “Nearly everything I know about investing I learned from experience (the hard way) and reading books.”
He goes on to list the investing books he has read. Mr. Larimore has read more investing books than I have read Dr. Seuss, Eric Carle, and Little Golden Books combined. Color me impressed.
What’s even more impressive than the number of pages he has digested is the fact that after reading a veritable library of investing books, his investing philosophy is incredibly simple. He is a staunch believer in the decidedly uncomplicated Three Fund Portfolio.
Who is Taylor Larimore?
Mr. Larimore is a 93-year old gentleman who may be best known for co-authoring the two published Bogleheads books, The Bogleheads’ Guide to Investing and The Bogleheads’ Guide to Retirement Planning. He is very active on the forum, with 26,684 posts and counting.
In addition to being a prolific reader and writer, Mr. Larimore is also a military hero. He was a paratrooper in the 101st Airborne Division who fought in Bastogne, Belgium in World War II’s famed Battle of the Bulge. He later helped capture Berchestgarden, the home of Adolf Hitler’s mountain retreat, and eventually marched in the Victory Parade on New York City’s Fifth Avenue.
Professionally, he worked as an insurance underwriter, IRS revenue officer, and held positions in the Small Business Administration and Housing Finance Authority in south Florida. Living near the water, he is an accomplished sailor and has been named the American Sailing Association’s “Instructor of the Year.”
I gawked at the lengthy list of books he has read, and marveled at the fact that all that information could be distilled into such a simple recommendation. I knew I wanted to write about it, but I wasn’t about to copy and paste his extensive list without permission.
One of the wonderful things about a community like the Bogleheads is that everyone who frequents the site is easily accessible. I sent Mr. Larimore a message introducing myself. I told him I had an idea for a post and I’d love to borrow his list. He replied within a matter of hours.
Not only did he kindly agree to allow me to use his list of books for this post, he also visited this site, and gave me the following endorsement and the permission to publish it here.
“I found your website to be interesting, informative, and filled with solid investment advice. I especially enjoy reading your “Sunday Best” articles.” -Taylor Larimore
Thank you, kind sir!
What is the Three Fund Portfolio?
The three fund portfolio is a simple portfolio of three passive index mutual funds.
- a total US stock market fund
- a total international stock market fund
- a total bond fund
That’s it. Mr. Larimore has done the hard work, so you don’t have to. I’m not saying you shouldn’t read any of the books that he has read, or any that I might recommend, but you can do a lot worse than buying and holding three funds.
How do you set up a Three Fund Portfolio?
It’s simple but you do have a few decisions to make. You need to decide on a fund family or do your best to replicate the three fund portfolio based on the funds available in your retirement accounts. Vanguard is an obvious choice (although no longer the lowest cost), but the Bogleheads wiki gives you options to create a three fund portfolio with nine other fund families, using mutual funds or exchange traded funds (ETFs).You also need to decide on an asset allocation in terms of percentages. These will be based on your age, risk tolerance, and feelings towards international equities. Allocating one third of your portfolio to each of the three funds is one way, but you can set it up any way you want. For example, you could have 50% US total stock market, 30% total international stock market, and 20% total bond market, or any variation as long as the total is 100%.
What are some alternatives to the Three Fund Portfolio?
Some investors will add an asset class and set up a four fund portfolio. REIT (real estate investment trust) is a popular fourth asset class, and one that I hold in my portfolio.
There are a number of additional “lazy portfolios” detailed in the Bogleheads wiki, which are variations of the three fund portfolio, sharing the common theme of investing in passive index funds holding many stocks and bonds. Some hold two funds, others have as many as nine.
What books has Mr. Larimore read?
This list is a couple years old already, and he has undoubtedly read more in the interim. Nevertheless, he steadfastly stands by his recommendation for a three fund portfolio.
- The Affluent Investor, DeMuth
- The Affluent Investor, Rapport
- Against the Gods, Bernstein
- Ages of the Investor, Bernstein
- All About Asset Allocation, Ferri
- All About Index Funds, Ferri
- Only Guide to Alternative Investments You'll Ever Need, Swedroe & Kizer
- American Sucker, Denby
- Asset Allocation, Gibson
- Asset Allocation, Arnott & Fabozzi
- At the Crest of the Tidal Wave, Prechter
- Barron’s Guide to Investment Decisions, Sease
- Battle for the Soul of Capitalism, Bogle
- (Mis)Behavior of Markets, Mandelbrot & Hudson
- Beyond Stocks, Merrill
- Big Investment Lie, Edesess
- Billion Dollar Funds, Fosbeck
- Blackwell Guide to Wall Street, Blackwell
- Bogle on Mutual Funds, Bogle
- Bogleheads' Guide to Investing, Larimore, Lindauer, LeBoeuf
- Bogleheads' Guide to Retirement Planning, Larimore, Lindauer, Ferri, Dogu
- The Bond Book, Thau
- BusinessWeek Guide to Mutual Funds
- Can I Retire, Piper
- Capital Ideas: The Improbable Origins of Modern Wall Street, Bernstein
- Character Counts, Bogle
- Charles Schwab’s Guide to Financial Independence, Schwab
- Choosing an Investment Company, Seligman
- Clash of Cultures, Bogle
- Coffeehouse Investor, Schultheis
- Commonsense Guide to Mutual Funds, Rowland
- Common Sense Investing, VanNess
- Common Sense on Mutual Funds, Bogle
- Complete Idiots Guide to Investing, Koch, DeSalvo, Kennon
- Complete Idiot’s Guide to Retiring Early, Lee & Flewelling
- Contrary Investing for the '90s, Band
- Dun & Bradstreet Guide to Your Investments in 1999
- Devil Take the Hindmost, Chancello
- Devil's Financial Dictionary, Zweig
- Diversify, Perritt & Levine
- Discover the Wealth Within You, Edelman
- Donaghue Stratagies, Donaghue
- Don’t Count On It, Bogle
- Dow Jones-Irwin Guide to Mutual Funds, Rugg & Hale
- Dynamic Asset Allocation, Picerno
- Dynamic Stock Market Analysis, Carney
- Elements of Investing, Ellis & Malkiel
- Enough, Bogle
- Essential Dictionary of Investment & Finance
- Eight Steps to Seven Figures, Carlson
- Economic Time Bomb, Browne
- ETF Book, Ferri
- Everything You’ve Heard About Investing is Wrong, Gross
- Fidelity Guide to Mutual Funds, Rowlands
- Fifty Ways to Mutual Fund Profits, Levine
- First Time Investor, Chambers & Rogers
- Forecasting Financial Markets, Plummer
- Four Pillars of Investing, Bernstein
- Fund your Future, Stav & Buccieri
- Funding Your Future, ClementsGet Rich Slowly, Spitz
- Getting in on the Ground Floor, Leeb
- Great Mutual Fund Trap, Baer & Gensler
- Grow Rich Slowly, Underwood & Brown
- House that Bogle Built, Braham
- How a Second Grader Beats Wall Street, Roth
- How Mutual funds Work, Fredman & Wiles
- How to Buy Mutual Funds the Smart Way, Littauer
- How to Make Money with Mutual Funds, Markenstein
- How to Pick the Best No-Load Mutual Funds, Jacobs
- Hulbert Guide to Financial Newsletters, Hulbert
- The Incredible Shrinking Alpha, Swedroe & Berkin
- If you Can, Bernstein
- Index Fund Solution, Evans
- Index Funds, Hebner
- Index Mutual Funds, Maley
- Index Mutual Funds, Simon
- Index Your Way to Investment Success, Good & Hermansen
- Individual Investor’s Guide, AAII
- Individual Investor Revolution, Carlson
- Inflation Proofing Your Investments, Browne
- Informed Investor, Armstrong
- Intelligent Asset Allocator, Bernstein
- Intelligent Investor, Graham & Zweig
- Intelligent Portfolio, Jones
- Intermarket Technical Analysis, Murphy
- Investing During Retirement, Vanguard
- Investing For Dummies, Tyson
- Investing For a Lifetime, Merriman
- Investing For a Lifetime, Browne
- Investing in Uncertain Times, Nichols
- Investing Made Simple, Piper
- Investing Mistakes Even Smart Investors Make, Swedroe
- Investing Strategies For the 21st Century, Armstrong
- Investment Titans, Burton
- Investment Fables, Damodaran
- Investment Fundamentals, Gitman & Joehnk
- Investment Gurus, Tanous
- Investment Mistakes Even Smart Investors Make, Swedroe
- Investment Policy, Ellis
- Investments: An Introduction to Analysis & Management, Amling
- Investor’s Guide to Mutual Funds, Haslem
- Investor’s Guide to Fidelity Funds, Martin
- Investor’s Manifesto, Bernstein
- John Bogle and The Vanguard Experiment, Slater
- John Bogle on Investing, Bogle
- Jonathan Clements Money Guide 2015
- Keys to Investing in Mutual Funds, Brouwer
- Kurt Brouwer’s Guide to Mutual Funds, Brouwer
- Late Bloomer Millionaires, Schullo & Robertson
- Lazy Person’s Guide to Investing, Farrell
- Lew Altfest Answers Questions About Money, Altfest
- Lies Your Broker Tells Your, Slater
- Little Book of Common Sense Investing, Bogle
- Little Book of Main Street Money, Clements
- Little Book of Safe Money, Zweig
- Live It Up Without Outliving Your Money, Merriman
- Making It in the Market, Crawford
- Making Money, Ruff
- Making Money With Mutual Funds, Blitzman & Renburg
- Making the Most of Your Money, Quinn
- Man in the Arena, Rostad
- Managing a Portfolio of Mutual Funds, Rutherford
- Market Timing With No-Load Mutual Funds, Merriman
- Marshall Loeb’s Lifetime Financial Strategies, Loeb
- Mathematician Plays the Stock Market, Paulos
- Millionaire in You, LeBoef
- Misbehavior of Markets, Mandelbrot
- Modern Mutual Fund Families, Anderson & Ross
- Money Dynamics for the 1990s, Van Casper
- Money Game, Smith
- Money Mantras, Singletary
- Money Talks: Quotes on Money & Investing, Maggio
- Money Misery Madness, Weber
- Money Matters, Strassel
- Morningstar Guide to Mutual Funds, Benz, DiTeresa, & Kennel
- Mugged on Wall Street, Chase
- Multi-Fund Investing, Hirsh
- Mutual Fund Buyer’s Guide, Fosback
- Mutual Fund For Dummies, Tyson
- Mutual Fund Portfolio Planner, Dorf
- Mutual Fund Superstars, Donoghue
- Mutual Fund Switch Strategies, Hirsh
- Mutual Fund Wealthbuilder, Hirsh
- Mutual Fund Switch Strategies, Boroson
- Mutual Funds: How to Invest with the Pros, Brouwer
- Mutual Funds: Taking the Worry Out of Investing, Ross
- New Contrarian Investment Strategy, Dreman
- The New Finance, The Case against Efficient Markets, Haugen
- New Game on Wall Street, Sobel
- New Money Masters, Train
- New Mutual Fund Investment Advisor, Dorf
- New Strategies for Mutual Fund Investing, Rugg
- New York Times Mutual Fund Guide, Gould
- No Load Mutual fund Guide, Donoghue
- No Nonsense Finance, Moody
- No Loads, Kearis
- One Hundred Best Mutual Funds, Williamson
- Only Guide to Alternative Investments, Swedroe
- Only Guide For The Right Financial Plan, Swedroe
- Only Guide to a Winning Bond Strategy, Swedroe
- Only Guide to a Winning Investment Strategy, Swedroe
- Only Investment Guide You Will Ever Need, Tobias
- Only Other Investment Guide You Will Ever Need, Tobias
- Only Proven Road to Investment Success, Sengupta
- Only Retirement Guide You Will Ever Need, Petras
- Outperforming the Market, Merrill
- Permanent Portfolio, Browne & Rowland & Lawson
- Personal Finance for Dummies, Tyson
- Planning for Retirement, Hallman
- Planning Your Retirement, Porter
- Portfolio Selections, Markowitz
- Power of Passive Investing, Ferri
- Practicing Financial Planning, Mittra
- Probability of Fortune, Milevsky
- Protecting Your Wealth, Ferri
- Prudent Investor’s Guide to Beating the Market, Bowen & Reinhardt
- Prudent Investor’s Guide to Beating Wall Street, Bowen & Goldie
- Prudent Speculator, Frank
- Quest For Alpha, Swedroe
- Random Walk and Beyond, Johnson
- Random Walk Down Wall Street, Malkiel
- Random Walk Guide to Investing, Malkiel
- Rational Investing in Irrational Times, Swedroe
- Retire Secure! For Same-Sex Couples, Lange
- Retire in Style, Soltesz
- Retire Rich, Morse
- Retirement Challenge, Armstrong
- Road to Stock Market Success, Halpern
- Roadmap For Investing Success, Keck
- Safe Investing, Slatter
- Save Your Retirement, Armstrong & Brown
- Serious Money, Ferri
- The Simple Path to Wealth, Collins
- Smart and Simple Financial Strategies, Quinn
- Smart Money for the 90s, Money Magazine Editors
- Smartest 401(k) Book You’ll Ever Read, Solin
- Smartest Money Book You’ll Ever Read, Solin
- Smartest Portfolio You’ll Ever Own, Solin
- Stock Market Logic, Fosback
- Stock Trader's Almanac, Hirsch
- Stocks for the Long Run, Seigel
- Story of Investment Companies, Bullock
- Straight Talk About Mutual Funds, Vujovich
- Straight Talk on Investing, Brennan
- Strategic Investment Timing, Stoken
- Successful Investing, Babson
- Successful Investing In No-Load Mutual Funds, Pope
- Successful Investor Today, Swedroe
- Successful No-Load Fund Investing, Jacobs
- Surviving the coming Mutual Fund Crises, Christensen
- Tactical Asset Allocation, Dubois
- Take on the Street, Levitt
- Teenage Investor, Olse
- nThink, Act, Invest Like Warren Buffett, Swedroe
- Thirty-Minute Money Solutions, Benz
- Timing the Market, Weiss
- Triumph of the Optimists, Dimson
- Twenty-five Investment Classics, Gough
- Twenty-Five Myths You’ve Got to Avoid, Clements
- Ultimate Mutual Funds Guide, BorosonThe Unbeatable Market, Ros
- sUnconventional Success, Swensen
- Unveiling the Retirement Myth, Otar
- Vanguard Retirement Investment Guide, Vanguard
- Wall Street Gurus, Brimelow
- Wealth of Experience, Brennan & Clark
- Wealth without Risk, Givens
- We’re Not in Kansas Anymore, Updegrave
- What Wall Street Doesn’t Want You To Know, Swedroe
- What Works on Wall Street, Zweig
- Where are the Customer’s Yachts, Schwed
- White Coat Investor, Dahle
- Why Bother With Bonds? Rick Van Ness
- Why Smart People Make Big Money Mistakes, Belsky
- Winning in Mutual Funds, Schabacker
- Winning on Wall Street, Zweig
- Winning the Losers Game, Ellis
- Winning With Bonds, Van Ness
- Winning With Index Mutual Funds, Tweddel & Pierce
- Winning with Mutual Funds, Editors of Money Magazine
- Winning with the Market, Sease
- Winning with New IRA’s, Zweig
- Winning Portfolio, Farrell
- Wise Investing Made Simple, Swedroe
- Wise Investing Made Simpler, Swedroe
- Yes, You Can Achieve Financial Independence, Stowers
- Yes, You Can Time the Market, Stein & Demuth
- Yes, You Can Supercharge Your Portfolio, Stein & Demuth
- Your Money and Your Brain, Zweig
- Your Money or Your Life, Cavuto
- Your Money or Your Life, Dominguez
- You’re Fifty. Now What? Schwab
- You’ve Lost It. Now What? Clements
- You’re Retired, Now What? Yolles
It was a lot of work to link all those books. I can’t imagine how long it would take to read all those books. Based on the dates of some of them, I can say that the answer in Mr. Larimore’s case is several decades.
I may have many decades of retirement ahead of me, but right now, I don’t have the time to read dozens of books, let alone hundreds. I will gladly take the advice of a well-respected and well-read individual, and keep my portfolio simple.
Do I have a Three Fund Portfolio?
Not exactly. I have chosen to add REIT as an asset class for diversification, and my US stock allocation has a bit of a tilt to small and value stocks. Also, my funds are held in different account types, and holding identical funds in the taxable and tax-advantaged accounts could interfere with my ability to tax loss harvest without triggering a wash sale.
That being said, my portfolio is rather simple compared to most, and will likely become simpler when I graduate from my medical career and begin the early retirement phase of my life.
For further reading on the three fund portfolio, check these out:
- He Has Read Over 250 Investing Books. He Recommends These Three Funds.
- From 28 Funds to 3: Simplifying to a Three Fund Portfolio
- A Vanguard Three Fund Portfolio Just Got Cheaper!
- Investing in a Three Fund Portfolio Across Numerous Accounts. Get the Spreadsheet!
- The Bogleheads Guide to the Three Fund Portfolio
What’s your opinion of a three fund portfolio, or similar “lazy” portfolio? Do you like the simplicity, or do you see pitfalls? Let us know your thoughts below.
Thanks for the reminder. Some great advice never gets old. Physicians especially need to hear that more complicated and sophisticated doesn’t necessarily mean better in investing. The best part is that this system with great outcomes is simpler and cheaper than virtually any other option.
I don’t have Mr. Larimore’s brains, knowledge, energy, or courage but -for what it is worth- I have read a similar number of books and don’t disagree with what he recommends.
Two books not included, but right in line with portfolio simplicity are:
Level 3 Investing by James Cloonan
The Gone Fishin’ Portfolio by Alexander Green
I have instructed my wife to use these when I am gone
Thank you Mr. Larimore for your great service to our country. Without such sacrifice we would not have the luxury of investing.
Thanks for that post. Can you offer some thoughts on how much of an advantage or disadvantage, or even how much it might matter, to add a fourth fund either for diversification or to get the potential advantage of a “tilt”? Simplicity appeals to me, but I don’t want to disadvantage my portfolio to get it, nor do I want to bother with it unless there’s very good reason to think it will make a considerable difference. Much appreciated!
To tilt or not is a very individual decision. The hard core slice and dicers believe you may be leaving 1-2% a year on the table by not doing it. The total market believers feel that nothing is guaranteed but expenses. Don’t tilt more than you have faith it will pay off in the long run.
add reits em, and small cap
3 funds great as a core or for a lazy investor
really need to read 3-5 books to realize why indexing works
the books get repetitive
Mr. Larimore is impressive. I always enjoy heading his posts on the Bogleheads forum, concise and unfailingly polite.
I enjoy posts that reinforce what I am already doing so I can pat myself on the back. But much of the reason I invest in a straight 3 fund portfolio is probably from Mr. Larimore’s influence on the Boglehead’s website, as well as his influence on the investing books I have read. The final reason I invest this way is so my wife can easily understand our investments, could continue on, and will not succumb to financial predators should I die early.
That is a very good reason to keep it simple.
I do tilt towrds small calp value and have REITs in my accounts but it makes sense to keep it simpler so that hers does not suffer if she gets the job if CIO.
GREAT GREAT reason to keep your portfolio SIMPLE-most women do not have any interest in this subject
Or men, for that matter. I’m female, a physician, and married to a financial analyst. Also, I’m the one who manages our money/investments. I have a simple three-fund portfolio and it’s doing pretty well.
Isn’t that the truth.
That’s a weird statement. Is there any data to show that women are any less interested in this subject than men?
Taylor is an investing legend on Bogleheads. No doubt about it. I have read hundreds of his posts myself and benefit from his wise advice and wisdom.
I completely agree with his overall philosophy – a simplistic index based portfolio is all one needs.
My only point of difference (and that which prevents me from using just three funds) is that the equity funds he recommends are very large cap centric. I personally prefer more exposure to mid and small cap stocks. So I have assembled my own portfolio of index funds/etf’s where I put more weight on mid and small cap stocks (roughly along the lines of 50% LC, 25% MC and 25% SC). If I could have found one index fund for US stocks and one for International with this approximate weighting I would have done that.
Hey POF,
I strongly recommend using the Audible app. If you watched the Kentucky derby last weekend you should have seen their horse. If not, check out the app through Amazon. I have “read” more books in the past year than I previously had time for in 8 years. You should be able to knock out these 250 books in the next 5 years if you really push it 😉
My question is what do you think of this portfolio compared to Ray Dalio’s “All weather portfolio”. This is a little more difficult, but Dalio’s probably has a little less volatility.
Thanks
The All Weather potfilio is mostly treasury bonds with some gold, commodities, and 30% stocks with no international allocation. A very different concept.
I would expect lower volatility and lower returns over long time frames.
Best,
-PoF
A classic post.! I am not far enough along yet in investing to worry about diversification, but once I am, you can bet I will be invested in the three fund portfolio at Vanguard with low ERs. I love that Taylor listed the books he has read, with hyperlinks even!!!
a total US stock market fund
a total international stock market fund
a total bond fund
A winning strategy.
The links are PoF’s and are affiliate links. We usually change those when we post it on the WCI blog, but there were too many this time, so we let them slide.
talk to others most men manage the money
While I have a huge amount of respect for Mr Larimore, and have read many of his posts, and both his books, I feel like he (and Bogle and many Bogleheads) oversimplify.
And by oversimplifying, one loses return (historically) and also loses diversification.
If the audience is investing neophytes, then a 3 fund portfolio is an excellent discussion. If the audience has some level of investing knowledge, then a 3 fund portfolio is lacking.
I’m not sure about that Bob.
I’m pretty “sophisticated.” I have a finance MBA from a top-ranked B-school, 33 years of investment experience and have read hundreds of books. Still the very simple plans like the S&P 500 or total market ETF come out ahead in even the most rigorous analysis. Especially if you look at a long time frame, taxes, and expenses. Some heavy hitters in the investing world recommend simplicity and low cost (e.g. Jack Bogle, Warren Buffett, etc.).