The Wall St Journal ran a good piece last Saturday (Dec 2nd) titled “Limited Menu: Choose Only 3″. The summary of their argument is that rather than building a complex portfolio that is difficult to track and manage, most investors would be best off with a portfolio of just 3 mutual funds: a US stock fund, an international stock fund, and a US bond fund. Of course, these should all be index funds and the portfolio should be rebalanced annually to your target asset allocation.
The article quotes various investment advisors and academics who concur that this simple portfolio will beat the vast majority of stock-fund managers. Hard to believe, I know, but this has been proven time and again with decades of historical data.
John Bogle is quoted, and his comment is excellent;
“There may be better investment strategies, but the number of strategies that are worse is infinite.”
A great quote, and a great point!
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