The Bogleheads' Guide to the Three-Fund Portfolio

CHAPTER THREE John Bogle Introduces Three Total Market Index Funds

Now that you know the story of how Jack Bogle and I first met and became such good friends, let’s press on to how the rubber meets the road for individual investors like you and me. We will go point by point, benefit by benefit, and make it as easy as one, two, three.

In 1976, Mr. Bogle introduced the world’s first retail index mutual fund (the Vanguard 500 Index Fund) containing 500 large U.S. Stocks.

He later determined that a single stock fund containing nearly all U.S. stocks, including large-caps, mid-caps and small-caps, would be an improvement over what was then available. He also recognized the need for a single, diversified, high-quality bond fund and the demand for international diversification. The result was his introduction of three low-cost, total market index funds:

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) and Admiral Shares (VTSAX), introduced in 1992, allow investors to own more than 3,500 U.S. company stocks at extremely low cost. Investor Shares ($3,000 minimum) have an expense ratio of 0.15%. Admiral Shares ($10,000 minimum) have an expense ratio of 0.04%. Putting this in dollars means that an investor can invest $10,000 at a cost of only $4 per year. Truly remarkable!

Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) and Admiral Shares (VBTLX), introduced in 1986, allow investors to own more than 8,000 very diversified, high-quality U.S. bonds. The expense ...