If I had been investing in the 3 fund approach for a few months now. Only 9,000 in total. Is it worth me switching to a target date fund for my brokerage account?
If you are happy with how the process of the 3-fund portfolio and it’s not too much hassle buy three separate funds and not too work to rebalance, then a 3-fund portfolio is excellent. If you like the idea of the all in one fund that takes care of the details automatically, makes auto-investing easier and takes care of rebalancing, then sure, go for it! With only $9K (most or all of this is in a tax advantaged account I imagine?) there would be little or no tax consequence, so it’s probably a good time to set it up the way you want it!
But both are excellent. Putting lots more money in is what will matter the most 
No. They are in my taxable brokerage account. I am contributing up to match on my 401k, maxed out my Roth IRA contribution, unfortunately don’t have access to hsa. I wanted to keep investing so thought a taxable brokerage was where to invest next? Or are index funds not great for taxable brokerage accounts?
If you are going to go with a 3 fund approach WITH a target date fund… ( so 4 total) what would your ratio be for each fund
I would never do that… it doesn’t really make sense. You could go with a 3-fund portfolio OR with a target date index fund. Either of them alone offer a fully diverse, near optimal investing strategy. Doing both of them doesn’t offer more diversity, rather it’s just doubling up on the same thing and adding complexity with no benefit.
My favorite analogy is ice cream. Let’s say you’re buying ice cream for a big event and there’s only 3 possible flavors: chocolate, vanilla and strawberry. You could just buy a bunch of each and be covered. Or you could say, “Hey, I don’t want to get the ratios wrong, so I’m just going to buy all neapolitan”.
Buying the flavors individually is a 3 fund portfolio. Dumping all your money into a target date index fund is neapolitan. You could buy all four like you suggest, but you’re just gonna get more chocolate, vanilla and strawberry. So I’d just pick one of the two strategies and go for it.
4 Likes