Formulate a Financial Plan

Know Your Net Worth

Manage & Minimize Debt

Accumulate Assets

Budget to Live Within Your Means

Understand Investing Basics

Plan for Retirement

Insure People & Property

Deal with Financial Advisors

Review Your Employment Contract

Make Plans for Your Estate

Make Good Decisions


Passive investing is a mechanical process which does not require fancy math or rocket science. Advisors can access more sophisticated asset allocation algorithms than we can, yielding recommended allocations across dozens of asset classes, but the bottom line, after considering inherent calculation imprecision, is that we can do quite well by sticking with fairly simple allocations. An extreme version of this is presented by adherents of John Bogle, the legendary founder of Vanguard Inc., and passive investing pioneer.

Bogle’s followers often refer to themselves as Bogleheads, and many of them believe in the concept of a three-fund portfolio consisting of:

  1. A US Equity fund,
  2. A US bond fund, and
  3. An international equity fund 

Each fund invests in thousands of securities, giving the passive investor broad exposure to multiple industries and geographies.

Under this approach your only decision as an investor is how much of your nest egg to put into each of the three funds. Subsequently, all you do is monitor and rebalance.

You can use Mutual Funds or ETFs, as follows:

Three-Fund Portfolio Using Vanguard Mutual Funds 

  1. Vanguard Total Stock Market Index (VTSAX)
  2. Vanguard Total International Stock Index (VTIAX)
  3. Vanguard Total Bond Market Index (VBTLX)

Three-Fund Portfolio Using Vanguard ETFs

  1. Vanguard Total Stock Market ETF (VTI)
  2. Vanguard Total International Stock ETF (VXUS)
  3. Vanguard Total Bond Market ETF (BND)

You don't have to use Vanguard funds, but these tend to be convenient and it's hard to beat their very low fees.

For more details read the Highly Diversified ETFs & the 3-Fund Portfolio section in e-Book 3: Investing Basics for Doctors.