Bogleheads Three-Fund Portfolio: the Risk X-Ray
The Bogleheads' answer to complexity: own everything, pay nearly nothing, rebalance occasionally. Three funds cover the world's stocks and the US bond market. The version analyzed here is the moderate 40/20/40 split. What the analysis adds to the familiar pitch is a precise decomposition: how much the international sleeve actually diversifies away from US equity, and what share of the portfolio's movement is simply the US market.
Taylor Larimore and the Bogleheads community (formalized in The Bogleheads' Guide to the Three-Fund Portfolio, 2018)
Analysis as of Friday 2026-08-28 · recomputed weekly from daily market data · methodology
What the Bogleheads Three-Fund Portfolio holds
The published allocation: Total US stock market, total international stock market, total US bond market; weights vary by investor, 40/20/40 shown here.
| Fund | Measured role | Weight | Expense ratio |
|---|---|---|---|
| VTI Vanguard Total Stock Market ETF | risk engine | 40% | 0.03% |
| VEA Vanguard FTSE Developed Markets ETF | risk driver | 15% | 0.03% |
| VWO Vanguard FTSE Emerging Markets ETF | risk driver | 5% | 0.06% |
| BND Vanguard Total Bond Market ETF | shock absorber | 40% | – |
The international sleeve is implemented as VEA (developed) plus VWO (emerging) in a 3-to-1 split, matching the composition of a total-international fund, which PairBook does not cover as a single ETF.
Where the risk actually sits
Measured through the covariance matrix, VTI dominates the risk budget at 61.1% of total risk for 40.0% of capital; at the other end, VWO accounts for only 6.7%.
| Fund | Share of risk | Risk | Capital | Beta | Role |
|---|---|---|---|---|---|
| VTI | 61.1% | 40.0% | 1.01 | risk engine 40% of the capital but 61% of the risk | |
| VEA | 22.0% | 15.0% | 0.79 | risk driver | |
| BND | 10.2% | 40.0% | 0.06 | shock absorber | |
| VWO | 6.7% | 5.0% | 0.75 | risk driver |
How the pieces move together
VTI + VEA + VWO move as one block (average correlation 0.77): together they are 60.0% of the capital and 89.8% of the risk.
| Holding | VTI | VEA | VWO | BND |
|---|---|---|---|---|
| VTI 40% | 1.00 | |||
| VEA 15% | 0.77 | 1.00 | ||
| VWO 5% | 0.71 | 0.83 | 1.00 | |
| BND 40% | 0.20 | 0.26 | 0.21 | 1.00 |
Pearson correlation of weekly returns · 156-week common window ending 2026-08-28 · pairbook.io
The worst it would have been
Over the analysis window, this mix would have fallen at worst -7.9% (from the week of 2025-02-21 to 2025-04-11), shallower than the S&P 500's -16.9% over the same weeks, and it has since recovered that peak.
Worst weeks of the mix: -4.9% (week ending 2025-04-11), -2.6% (week ending 2026-03-13), -2.2% (week ending 2023-10-27).
FAQ
Does international really diversify a US portfolio?
Less than the allocation suggests: developed-market equity correlates strongly with US equity, as the matrix above measures. The bond sleeve, not the international sleeve, does most of the risk reduction in this design.
Which weights should the three funds have?
The community treats the split as a personal risk dial rather than doctrine. This page analyzes 40/20/40; the 80/20 growth variant has its own page with the same analysis for comparison.
Run this analysis on your own portfolio
The same X-ray, risk contributions, correlation blocks, ETF overlap, runs on any mix of 4,700+ US stocks and ETFs: paste your holdings into the free portfolio X-ray, or ask an AI assistant with the PairBook MCP server.
