A 3 fund investment portfolio: learn how to build one!

Learn how to build a three-fund investment portfolio and why it's the perfect option for beginners, who want to focus on their long term future.


A 3 fund investment portfolio could be a great strategy: check it out

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Source: Unsplash.

If you’re new to investing, you may be uncertain about how to construct a suitable portfolio. Consider a three-fund investment portfolio, which is uncomplicated yet efficient. With only three funds, you can diversify your investments and attain growth potential without assuming excessive risk.

The concept of a three-fund investment portfolio is to decrease risk and increase returns.

Are you contemplating investing in a fund? This blog post is perfect for you! We’ll go over three types of investment portfolios for fund investors. Continue reading to learn more!

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What is a 3 fund investment portfolio?

You might believe that having a substantial amount of money saved up is necessary to start investing. However, that is not always the case!

If you’re a novice investor, the 3 fund investment strategy is ideal for you. This portfolio includes equity funds, fixed income funds, and money market funds.

By investing in various funds, you spread your risk among diverse asset classes, reducing your losses if a particular investment falls in value. This approach aids you in achieving your financial objectives and preparing for retirement by focusing on stocks and bonds.

The 3 fund investment portfolio is incredibly simple to manage, and it saves you money on fees since there are only three different types of funds in this portfolio, reducing your expenses.

Learn how to balance a good 3 fund portfolio

Person looking at investment charts on paper
Source: Pexels.

The initial step is to determine the number of funds you intend to invest in. This is dependent on how diversified your financial objectives are, including:

  • If your financial goals are modest, it’s preferable to invest in a single type of fund.
  • If your goals are considerably diversified, select between two types of funds.
  • If your objectives are broad and extensive, opt for more than two types of funds.

When constructing your 3-fund investment portfolio, it is important to remember three key things:

Asset allocation involves investing your money in various types of investments to avoid losing all your money if one investment drops in value.

Diversification refers to investing in different companies, industries, and countries to minimize losses in case of a decline in one stock or country.

Risk tolerance is a measure of how much risk you are willing to accept before losing any capital gains.

By adhering to these three fundamental principles, your 3-fund investment portfolio should be secure and effective.

In addition, you should rebalance your portfolio at the start of the year or month to ensure that your balance between equity, fixed income, and money market mutual funds is appropriate and to prevent them from being too aggressive or sluggish in terms of returns.

Choose the best types of investments for your 3 fund portfolio

Mulher sentada com telefone na orelha e computador olhando gráficos de investimentos.
Choose the best investments for you. Source: Pexels.

If you’re a novice investor, you may be wondering how to construct a low-risk portfolio. A 3 fund investment portfolio, which includes a diversified mix of stocks, bonds, and cash, is an excellent place to start. This approach spreads your risk and increases your chances of long-term success.

When creating a three-fund portfolio, you must determine your asset allocation mix. If you’re young, allocate more money to stocks and other risky assets like real estate or commodities. As you age, shift your investments to safer vehicles such as bonds and cash equivalents like money market funds since you have more time to recover from any losses that may occur during a stock market downturn.

Your asset allocation should also reflect your investment goals. If you’re planning for retirement, you’ll want a higher percentage of your portfolio in stocks and other growth assets to increase your money’s potential for growth over time.

If you’re looking to buy a house or pay off student loans, your investments should have a greater weighting towards cash and bonds since they are less volatile than stocks.

Index funds, actively managed funds, and exchange-traded funds are the most prevalent types of mutual funds.

Concentrate on Broad-Market Index Funds

Numerous investors are opting for these funds as a means of streamlining their portfolios and reducing their risk. These funds provide investors with an uncomplicated and inexpensive method of gaining exposure to a diverse range of stocks or bonds.

Keep a low cost

Maximize your returns and minimize your expenses by investing in our collection of low-cost index funds! With careful selection and intelligent investing, you can decrease the amount of money you spend on management fees and enhance your chances of succeeding.


Maintain balance in your hard-earned money by periodically rebalancing your portfolio to ensure that you’re still on track for a secure future. It’s simpler than you think: sell some of those high-performing stocks and reinvest in more stable funds. This way, you can stay the course even when the market is volatile.

Therefore, selecting the appropriate types of investments for your 3 fund portfolio is a critical process that necessitates knowledge and comprehension of the various mutual funds.

Your age, risk tolerance, available cash, and time horizon largely determine this decision. You may be tempted to take on high risks to achieve higher returns, but it’s better to make rational decisions before taking any action. You can contact a financial advisor or investment consultant who will assist you throughout this process.

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