Three Funds, Done

The three-fund portfolio is one of investing's quiet power moves. It uses just three index funds: a U.S. stock fund, an international stock fund, and a bond fund. That is the entire strategy.

A three-fund portfolio can be built many ways. A younger investor with high risk tolerance might hold more stocks; someone needing stability may hold more bonds or cash. U.S. stocks, international stocks, and bonds are the building blocks, but the percentages should follow time horizon, risk tolerance, tax situation, job stability, and existing accounts. Treat sample allocations as examples to study, not prescriptions to copy.