Sunday, November 26, 2006

Will a simple three-fund investment model work for you?

There is an interesting article on MarketWatch by Jonathan Burton entitled "Three mutual funds that end the guesswork - Simple, low-cost stock and bond portfolio has been high achiever." I suspect that some people would be quite happy with it, while others may be rather disappointed, but at least it is an approach that everybody can consider and then accept, reject, or adapt as meets their own investment situation. The essence of the approach is as follows:

... the formula is easy enough: One index fund to cover U.S. stocks, another for the international markets and a third for the U.S. bond market. Together, this trio has rivaled U.S. stock returns over one-, three- and five-year spans, and with more stable returns year to year than the broad market.

The one thing you have to be very careful about is projecting an impression about pass financial results out into the future. We went through an atypical bull market followed by an atypical bear market, and now there is little clarity about the nature of the stock and bond markets in the months and year ahead.

-- Jack Krupansky

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