The simple path to wealth — A portfolio to build generational wealth

Seven years ago, I wrote my first Medium article: The Essentials of Investing (Part 1: Retirement) which explains why we invest and how to think about retirement when you're starting on your investing journey. It was based on a presentation that a former Googler wrote and shared with our employee resource group. At the end of that article, I said I’d write a Part 2 on what type of portfolio to invest in but I never did haha... Now 7 years later, I’m ready because I want to help start my kid off with good investing advice when he grows up :)

The pragmatic truth is that the simplest path to wealth is not sexy or exciting but it is still how the majority of people have successfully built generational wealth for themselves over the course of their life, and that is to invest in a Low-Cost Total Stock Market Index Funds or ETFs at an early age, continuously buy it throughout your life, and never sell until you are ready to take partial withdrawals. I did the same thing in 2015, and I am still a fan and holder of one flavor of this investing style, called the Three-fund portfolio:

The Three-fund portfolio

A three-fund portfolio is a portfolio which uses only basic asset classes — usually a domestic stock “total market” index fund, an international stock “total market” index fund and a bond “total market” index fund. It is often recommended for and by Bogleheads attracted by “the majesty of simplicity” (Bogle’s phrase), and for those who want finer control and better tax-efficiency than they would get in an all-in-one fund like a target retirement fund. — Bogleheads Wiki

This is the allocation I generally recommend for most people starting out:

Learn more:

How to build it using Vanguard funds

From Vanguard’s list of “core funds,” the funds that are best for a three-fund portfolio are:

  • Vanguard Total Stock Market Index Fund (VTSAX)
  • Vanguard Total International Stock Index Fund (VTIAX)
  • Vanguard Total Bond Market Fund (VBTLX)

So, a “three-fund portfolio” might consist of 42% Total Stock Market Index, 18% Total International Stock Index, and 40% Total Bond Market fund. Depending on how young or old you are, you’d change the allocation of bonds or equities to your risk tolerance.

And that’s it :)

Of course, if you wanted to use mutual funds other than Vanguard, you can. Almost every single money management company offers a version of these funds and that’s because it works and has been tried and true over the years.

Learn more:

Investing in this way over the course of your life will return your investment many times over. In a world of tremendous distraction, there’s a lot of people trying to get you to buy things which increases the risk of those investments and potential money losers. The best part about is that The Three-Fund Portfolio is one that you do not need to think too much about it and let it grow over time. I plan to put this advice in my will/trust one day :) That’s how confident I am in its staying power.

To read more of my personal finance articles, check out the Dan Pham Personal Finance Articles Index and follow me :)

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.




San Francisco, CA, Planet Earth. Asian American working in Tech. I’m trying my best! Currently: Technical Program Management @ Slack

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Dan Pham

Dan Pham

San Francisco, CA, Planet Earth. Asian American working in Tech. I’m trying my best! Currently: Technical Program Management @ Slack

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