The ETF version of the classic three-fund portfolio: which fund fills each sleeve and what it costs, sample mixes by time horizon, how to spread it across a 401(k), Roth IRA and taxable account, how to rebalance, and how a 60/20/20 mix did in 2008, 2020 and 2022.
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Any broad, low-cost index ETF that covers the whole sleeve works; in practice most people use one fund family. If you want low cost and wide coverage, the Vanguard set (VTI, VXUS, BND) and the iShares set (ITOT, IXUS, AGG) are close substitutes, though their indexes differ in how many small companies and which countries they include. Schwab’s lineup needs four funds, because its main international ETF covers developed markets only.
Scope: US investors using ETFs in brokerage accounts and IRAs. Not covered: picking a stock/bond mix for you, factor tilts, and 401(k) menus (plans usually offer index mutual funds instead; use the closest match for each sleeve). The concept and its 2017–2025 record are in our three-fund portfolio guide.
| Sleeve | ETF | Index (per issuer) | Expense ratio | Holdings |
|---|---|---|---|---|
| US stocks | VTI | Morningstar US Total Market | 0.03% | 3,519 |
| US stocks | ITOT | S&P Total Market Index | 0.03% | 2,442 |
| US stocks | SCHB | Dow Jones U.S. Broad Stock Market | 0.03% | 2,390 |
| International | VXUS | FTSE Global All Cap ex US | 0.05% | 8,901 |
| International | IXUS | MSCI ACWI ex USA IMI | 0.07% | 4,580 |
| US bonds | BND | Bloomberg U.S. Aggregate Float Adjusted | 0.03% | 11,434 bonds |
| US bonds | AGG | Bloomberg US Aggregate | 0.03% | 13,445 bonds |
Expense ratios, index names and holdings from the issuers’ pages and fact sheets (Sep 30–Oct 23, 2026). VTI’s index was renamed from CRSP to Morningstar in July 2026 with no change in method. BND’s average duration was 5.7 years, so a one-point rise in rates would cut its price by roughly 5.7%.
Very little either way: the difference between the cheapest and the dearest full set is about $35 a year on $500,000. Weighted cost = sum of (weight × expense ratio), shown for a 60/20/20 mix:
| Set (60 / 20 / 20) | Weighted expense ratio | Cost a year on $500,000 |
|---|---|---|
| Vanguard: VTI / VXUS / BND | 0.6×0.03 + 0.2×0.05 + 0.2×0.03 = 0.034% | $170 |
| iShares: ITOT / IXUS / AGG | 0.018 + 0.014 + 0.006 = 0.038% | $190 |
| Schwab: SCHB / SCHF 16% + SCHE 4% / SCHZ | 0.018 + 0.0048 + 0.0024 + 0.006 = 0.031% | $156 |
| One world fund + bonds: VT 80% / BND 20% | 0.048 + 0.006 = 0.054% | $270 |
Schwab’s developed (SCHF, 0.03%) and emerging (SCHE, 0.06%) split is an illustrative 80/20; you pick the ratio, which also means one more fund to rebalance. The two-fund route is weighed in VT vs VTI + VXUS, and the bond choice in BND vs AGG. Cost differences this small rarely justify selling an appreciated fund to switch families in a taxable account (see tax-efficient ETFs).
The stock/bond split should follow how soon you need the money, not the fund brand. As a reference point, the mixes below follow the shape of Vanguard’s published target-date glide path (stock-heavy early, shifting toward bonds from about 40; the stages are set out in the retirement ETF hub). Vanguard’s research also found that 30%–40% of stocks abroad gave more than 95% of the benefit of full global diversification. The mixes below keep a third of stocks international.
| Years until you spend most of it | US total market | International | US bonds |
|---|---|---|---|
| 25+ years | 60% | 30% | 10% |
| About 10 years | 47% | 23% | 30% |
| At retirement | 33% | 17% | 50% |
| Well into retirement (70s) | 20% | 10% | 70% |
Hypothetical illustrations based on the Vanguard glide path, not advice for everyone your age. Income needs, pensions, Social Security and how you reacted to past crashes can justify very different numbers. Asset allocation by age goes deeper.
It fell less than the S&P 500 in all three crises, by a lot in 2008 and only slightly in 2022. Exent market data, daily total returns with distributions reinvested; the mix columns are our calculation from the fund figures:
| Period | 60/20/20 mix | S&P 500 (SPY) | VTI | International | BND |
|---|---|---|---|---|---|
| 2008, calendar year | −29.50% | −36.81% | −36.97% | −43.45% (VEU) | +6.86% |
| Oct 9, 2007–Mar 9, 2009, peak to trough | −43.96% | −55.20% | −55.45% | −61.54% (VEU) | −9.31% |
| 2020, calendar year | +16.30% | +18.37% | +21.03% | +10.69% (VXUS) | +7.71% |
| Feb 19–Mar 23, 2020, peak to trough | −27.96% | −33.70% | −35.00% | −33.35% (VXUS) | −8.67% |
| 2022, calendar year | −17.51% | −18.17% | −19.51% | −16.09% (VXUS) | −12.95% |
| Calendar 2022, peak to trough | −23.72% | −24.50% | −25.36% | −28.43% (VXUS) | −15.94% |
How it was built: calendar-year mix = 0.6 × VTI + 0.2 × international + 0.2 × BND, reset each January; for 2008 that is 0.6 × (−36.97) + 0.2 × (−43.45) + 0.2 × 6.86 = −29.50%. Peak-to-trough figures hold the starting mix without rebalancing and measure the largest daily fall inside each window (in 2022, January 3 to December 30). VXUS only launched in January 2011, so 2008 uses VEU (Vanguard’s all-world ex-US fund without small caps) as the stand-in. We have no ETF data before 2007 for this mix, so earlier crises are not shown.
The lesson is about bonds. In 2008 and 2020 BND held up while stocks fell. In 2022 rising rates pushed stocks and bonds down together, and the mix saved less than one point versus the S&P 500. In 2020 it also lagged the rebound. Past crises are not a forecast of the next one.
Hypothetical illustration. A couple has $600,000: $300,000 in a traditional 401(k), $90,000 in a Roth IRA and $210,000 in a taxable account. Their target is 55% US stocks ($330,000), 20% international ($120,000) and 25% bonds ($150,000). They place taxable bonds in the 401(k) first, as Vanguard’s asset-location research suggests, and fill taxable with broad stock ETFs that pay small, mostly qualified dividends.
| Account | US stocks | International | Bonds | Total |
|---|---|---|---|---|
| Traditional 401(k) | $150,000 (plan’s total-market or S&P 500 index fund) | — | $150,000 (plan’s bond index fund) | $300,000 |
| Roth IRA | $90,000 VTI | — | — | $90,000 |
| Taxable | $90,000 VTI | $120,000 VXUS | — | $210,000 |
| Total | $330,000 (55%) | $120,000 (20%) | $150,000 (25%) | $600,000 |
The sleeves no longer sit one per account, so track the mix across all three. The 401(k) is the place to rebalance: it holds both stocks and bonds, and trades inside it are not taxed. New money and dividends can go to whichever sleeve is low. The Roth-specific choices are covered in best ETFs for a Roth IRA.
Pick one rule you will actually follow. Vanguard’s research found that rebalancing neither too often (monthly or quarterly) nor too rarely (every two years) works best, and that an annual rebalance is optimal for many investors. A drift band, such as acting when a sleeve is 5 percentage points off target, reacts to big moves between annual checks. Vanguard’s December 2024 paper showed why: in March 2020 a 60/40 portfolio could have drifted up to 7 points with monthly rebalancing and 10 with quarterly, but about 2 with a daily-monitored band.
Worked example (our calculation from the same data). $400,000 at 60/20/20 on Dec 31, 2019 had fallen to $297,551 by Mar 23, 2020, with weights of 55.2% VTI, 17.8% VXUS and 27.0% BND. Under a 5-point band, bonds (7 points over) trigger a rebalance:
| Sleeve | Value on Mar 23, 2020 | Target value | Trade |
|---|---|---|---|
| VTI | $164,151 (55.2%) | $178,531 (60%) | Buy $14,380 |
| VXUS | $52,944 (17.8%) | $59,510 (20%) | Buy $6,566 |
| BND | $80,456 (27.0%) | $59,510 (20%) | Sell $20,946 |
A calendar-only investor would have waited until December 31, 2020, when the weights were 62.4% / 19.0% / 18.5%, all inside the band. Neither rule needs a forecast; the band simply reacts to drift. In a taxable account, rebalance with new cash and dividends first, as Vanguard suggests, to avoid realizing gains. More detail: how to rebalance and rebalancing bands.
It is a strong default, but these situations argue for something else:
Limitations of this page: the history covers three crises with ETF data from 2007 on, the cost figures ignore trading spreads, and the mixes are illustrations. Check whether funds you already own overlap with how many ETFs is too many.
A three-fund portfolio asks one thing of you: keep rebalancing when it feels wrong, as in March 2020. Exent is our product: Market intel explains the day’s market risk and macro news, so a drawdown comes with context instead of only headlines. It does not pick your ETFs, tell you when to trade or guarantee better results.
Both are cheap. At 60/20/20 the Vanguard set (VTI, VXUS, BND) costs about 0.034% a year and a Schwab set (SCHB, SCHF plus SCHE, SCHZ) about 0.031%, a difference of roughly $15 a year on $500,000. Schwab needs four funds because SCHF excludes emerging markets.
Common choices are VTI or ITOT for US stocks, VXUS or IXUS for international stocks and BND or AGG for bonds, all costing 0.03%–0.07% a year. Within a sleeve the funds behave similarly, so the stock/bond mix usually matters more than the brand.
No. Hold each sleeve once across the household: bonds usually in the 401(k), stock ETFs in taxable and Roth accounts, as in the worked example; track the mix in total.
Yes. VT holds US and international stocks in one fund for 0.06% a year, so VT plus BND is a two-fund version. You give up control of the US/international split and pay slightly more: about $270 a year on $500,000 at 80/20 vs $170 for the three-fund Vanguard set at 60/20/20.
A 60/20/20 mix (using VEU for international, since VXUS launched in 2011) lost 29.50% in calendar 2008 vs 36.81% for the S&P 500 (SPY), because BND gained 6.86% (Exent market data; mix is an Exent calculation).
Vanguard says an annual rebalance is optimal for many investors. Many add a drift band, for example acting when a sleeve is 5 percentage points off target, and rebalance inside tax-advantaged accounts to avoid taxable gains.
Vanguard’s research found that 30%–40% of the stock portion abroad captured more than 95% of the benefit of full global diversification; in a 60/20/20 mix international is 25% of stocks. Lower shares are a deliberate home bias.
Market intel provides a Risk ON / Neutral / Risk OFF reading from four pillars, cross-asset analysis, an events calendar and regular written notes. Context for reviewing a plan, not a crash forecast.
Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.