Two Fund vs Three Fund Portfolio

I have previously produced videos discussing a very simple two-fund portfolio, which just contains global stocks and bonds. In this video, I explore the concept of a three-fund portfolio and explain why adding a touch more complexity to your portfolio could prove beneficial. Additionally, I take a look at the types of investments that could potentially serve as an effective third fund, and demonstrate their impact on risk and return.

What Else PensionCraft Offers:

I Use The Following Data Sources To Help Me Create My Videos
(Some of these links provide new users with a special offer and may also provide me with a small commission)

Timestamps
00:00 Introduction
00:29 Why Two Funds?
02:01 Why Add Three?
03:19 High Inflation
05:21 Third Fund Candidate
09:15 Allocations
13:29 Variations

Where Else You Can Find Me

Take A Look At Some Of My Other Videos & Playlists

DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

[jeffocks]

The best investment /economics talks on the web! Analytical, questioning and informed speculation

[russdavey]

Thanks for the video... It's nice to understand the reasons for bonds struggling after 2022.

[bornfree]

That was an excellent, well argued presentation of options available

[dimitristsagdis]

I do follow a 3-portfolio framework for a few years now, but I got their weights a bit 'wrong' for this period, so I wish this video was out 5 years ago :-)

[reflec]

Nice video, food for thought as always wanting to simplify my overly complex portofolios.. interested in examples of funds that match these criteria. Especially the "broad commodities", as its a pretty specialized sector and seems which often leads to actively managed funds

[mtc_]

Ramen, one the reasons I love your videos and podcasts is because you are a calm voice of reason, backed with data, during a very noisy time. The only place we differ is I believe BTC is less risky than sovereign debt over the next 50 years. I think many asset managers are going to have a rude awakening as they realize our money is broken. Would love to hear a deep dive from your more skeptical view.

[grahamf]

Helpful explanation, thanks. You haven’t mentioned the option of holding cash, so it would be interesting to hear your views on that.

[simong]

Thanks Ramin. Just an idea: you didn't mention rebalancing- to what extent does having more buckets/funds within a portfolio enhance returns through rebalancing opportunities? Part of the appeal of the standard stocks:bond portfolio (eg 60/40) is the rebalancing, which keeps the returns more respectable than some would expect. I would think that as long as each fund is mostly uncorrelated, there would be opportunities to buy lower and sell higher and benefit from the relative volatility. Assuming that's true, it would be interesting to see at what number of buckets the benefit of this starts to drop off. My guess would be around 4 or 5, based on the all-weather portfolio as I believe that rebalancing was an important part of that strategy.

[festerarl]

Great video. Broad commodities is the interesting one. It's a large allocation that worked well this time but I understand them less than bonds to be honest (pork bellies???). Need to study more!

[mattinterweb]

Good video. If your thesis is that equities could get crushed next year, perhaps the balance of your portfolio might be slightly different (especially when you can get 5% for holding cash for now). Depends how much you wish to manage your portfolio and time frame ofc.

[epicchess]

I click, I like, I watch, in that order. Like if you do the same when you watch the greatest finance and investing channel on YouTube.

[clarkeysam]

Nice video.

I'm 100% in stocks in my SIPP as I'm in my early-mid 30s so are unlikely to need the money for 20-35 years.

In my S&S ISA I've moved most of my money into money markets, due to needing the money in the short term (renovating my home).

[ivanbeacon]

Very useful, thanks Ramin. Some forcast a recession next year so would it be wise to hold money back & dca the money in every couple of months over a 12 month period?

[peterpayne]

Really useful advice! Greetings from rural Japan!

[MadderPrinciple]

I thought this was a fascinating video, firstly, nice to finally understand why stocks and bonds fell together. But it also got me thinking about why intuitively I have never been a fan of bond funds, as you end up over time with a mixture of the good, bad and the ugly. Single bonds seem clearer, as you know what you are getting, who cares about the NAV if you are holding to maturity anyway! That said, I do hold life strategy 80/20.🙃

[MD-udle]

Great video.
I think I’ll stick to a global index etf and just weather the storm.

[ganeshkmurthy]

What Vanguard fund do you recommend for the 3rd fund?

[joshwatts]

Would it be worthwhile having 2 global index funds of MSCI & FTSE? 50/50 split? If not which one is best ?

[Christian-ehiu]

Could you make a video about pros/cons for ETFs based in Ireland vs. Luxembourg? How do withholding tax with more, impact the performance of the ETF? Thanks for all your great content😀

[shocks]

Great content as usual, I confess I hadn't considered a broad commodity fund/ ETF. Any chance a future video might cover this off?