Do you have a clear investment portfolio strategy? If not, let us show you 10 investment portfolio strategies that might be better than what you currently have.

Just a caveat: there’s nothing scientific about this list. This is just our personal ranking based on what we’ve read and seen around me. Alright, with that said, let’s get right into it.

A Very Simple One-Fund Total Market Portfolio

We attribute this strategy to one of our favorite personal finance authors, JL Collins, who wrote The Simple Path to Wealth. He essentially argues that when you’re in your wealth accumulation phase, you only need one fund that represents the U.S. total stock market. That’s right, 100% of your money in one fund that represents close to 4,000 publicly traded companies in the United States.

Here are a few of our favorite specific total market funds:

• Vanguard Total Stock Market Index Fund (VTSAX)
• Fidelity Total Market Index Fund (FSKAX)
• Schwab Total Stock Market Index Fund (SWTSX)

What I love about this portfolio strategy is its simplicity. There’s literally only one choice you have to make—one fund—and you’re done.

Alright, so how has this one-fund strategy performed over the past 30 years? Let’s do some backtesting. From 1994 to 2024, the annualized return is slightly above 10%. That means if I had invested $10,000 and stuck with this one-fund total market strategy for 30 years, my $10,000 would have grown to over $200,000.

However, the ride would have been pretty rough. In my best year, I would have had an annual return of 36% in 1995. In my worst year, I would have lost 37% of my portfolio in 2008. That’s more than a third of my portfolio! If I had a million dollars in investments, I would have had to watch it lose 40% of its value, down to $600,000. That is pretty steep.

However, if you had the stomach to ride out all the ups and downs, you would have been well rewarded in the end. I’m a huge fan of simplicity. Most often, what we need aren’t better strategies but more action—and simplicity motivates action. So, I rank this one-fund strategy at the top of my list, especially if you’re in your wealth accumulation phase.

Start Adding Some Additional Funds

Let’s talk about Warren Buffett’s Two-Fund Portfolio Strategy. In his 2013 letter to Berkshire Hathaway shareholders, Warren Buffett laid out this two-fund 90/10 strategy.

Now, note that Warren Buffett and his business partner, Charlie Munger, made a career out of analyzing businesses and did quite well. However, he recognizes that most investors don’t have their skills and experience. But that doesn’t mean average investors can’t win in the market. By investing a good chunk of your money in a portfolio that represents a cross-section of businesses, you will do fairly well.

Very similar to JL Collins’ recommendation, but with one difference: Buffett recommends owning two funds instead of just one—90% in an S&P 500 Index Fund and 10% in a low-cost index fund that represents U.S. short-term government bonds.

For comparison’s sake, you can interchange the S&P 500 with the U.S. Total Market Index Fund, and you can interchange the short-term government bonds with the U.S. Total Bond Index Fund. The strategy is very similar to the one-fund total market strategy, except it mitigates risk by adding a bit of bonds to it.

Alright, let’s check out its performance over the past 30 years. From 1994 to 2024, the annualized return is slightly less than 10%—understandably less than the one-fund total market strategy because we have some bonds in the mix.

That means if I had invested $10,000 and stuck with this two-fund strategy, my $10,000 would have grown to close to $180,000. The ride is still pretty rough but slightly less volatile than the one-fund total market investment strategy.

In my best year, I would have had an annual return of 34% in 1995. In my worst year, I would have lost 33% of my portfolio in 2008—slightly less than the 37% decline with the one-fund strategy.

Again, there’s not that much difference between the one-fund total market strategy and this two-fund 90/10 Warren Buffett strategy, except the fact that you have a bit of bonds to smooth out your ride. But if that helps you sleep better at night, it’s worth considering.

This strategy could be for you. Alright, now that we’ve seen how adding bonds to our portfolio mitigates some volatility, how would it look if we dialed up our bond allocation?

Scott Burns’ Couch Potato Portfolio

Created by the famed newspaper columnist Scott Burns, who’s covered personal finance, investments, and economics for over 40 years, the Couch Potato Portfolio sets the bond allocation to 50%. So, you get 50% stocks and 50% bonds. If you can divide by two, you can understand and execute this portfolio, hence the name, The Lazy Couch Potato Portfolio.

The basic argument for the 50/50 allocation is, again, simplicity, but also the fact that when you have a good balance between stocks and bonds, you can get both returns and risk mitigation. It’s essentially a more conservative version of Warren Buffett’s 90/10 strategy—or, if you’re familiar with the traditional 60/40 portfolio, it’s a slightly more conservative version of that.

Let’s look at its performance over the past 30 years: From 1994 to 2024, the annualized return is slightly above 7.6%—about 2-3% less than the one-fund and 90/10 strategies, given we have a lot more bonds in the portfolio.

If you had invested $10,000 and stuck with this 50/50 strategy for 30 years, your $10,000 would have grown to a little less than $100,000—less than half compared to the aggressive one-fund strategy. However, your ride would have been much smoother.

In your best year, you would have had an annual return of 27% in 1995. But in your worst year, your portfolio would have only dropped by 16% in 2022—much better than the 40% loss with the one-fund strategy.

Bottom line: Your portfolio didn’t appreciate as much as it would have with a more aggressive strategy. However, you didn’t have to watch your portfolio lose value by more than a third. If you’re willing to trade returns for a smoother ride, this could be a good strategy for you.

For me personally, given that I’m in my wealth accumulation phase, this strategy does feel a bit conservative. However, that could just be me.

Expand the Number of Funds In Our Portfolio to Three

With the Bogleheads’ 3-Fund Strategy, we’re adding a bit more complexity. Bogleheads—for those of you who might not have heard of them—are self-proclaimed followers of Jack Bogle and his index fund philosophy. Simply put, they’re big investing nerds like me.

In addition to a U.S. total stock market fund and a total bond market fund, we’re going to add a bit of international flavor. A sample portfolio will look like the following:

• 70% in a U.S. total stock market index fund
• 10% in a U.S. total bond market index fund
• 20% in a total international stock index fund

Now, why add an international fund? The reason is that while the U.S. stock market represents a large chunk of the global equities market, it still represents no more than half. The global stock market as a whole is about $109 trillion, and the U.S. makes up about 43% of that.

When you invest only in U.S. companies, you’re missing out on returns from thousands of non-U.S. companies—like Nestlé from Switzerland, Samsung from South Korea, and TSMC from Taiwan. These are all amazing companies, but they’re not American. So, if you want to capture some of these companies in your portfolio, the Bogleheads’ 3-Fund Strategy could be a good option.

But let’s look at some numbers. From 1994 to 2024, the annualized return is slightly under 9%—better than the 50/50 Couch Potato but worse than the one-fund and 90/10 strategies. If you had invested $10,000, it would have grown to a little less than $140,000.

From a volatility perspective, in your best year, you would have had an annual return of 30% in 2003. In your worst year, your portfolio would have dropped by 34% in 2008.

The primary difference with this portfolio, as I mentioned earlier, is the addition of an international fund. While much of the international economies move in sync with the U.S. economy because we’re so intertwined, there are times and situations where they differ.

For example, in 2003, the international market as a whole outperformed the U.S. stock market by close to 10%. However, in 2011, it did worse than the U.S. stock market by 15%. It’s just hard to know when and how this is going to happen.

However, if you like the idea of having some international exposure, take a closer look at this strategy.

Dave Ramsey’s Four-Fund Strategy

If you’re a fan of Dave Ramsey, I’m sure you’ve heard of this one before. His strategy essentially divides a portfolio into four equal parts—four types of mutual funds.

1. 25% in Growth
2. 25% in Growth and Income
3. 25% in Aggressive Growth
4. 25% in International

The rationale behind this strategy is that by diversifying across these four categories of mutual funds, you’re protecting against market volatility while at the same time providing enough exposure for enhanced returns. It’s a balanced approach to retirement savings.

Now, to be transparent, while I love Dave Ramsey and his advice on debt and basic personal finance, I’m not a big fan of his investing advice. He advocates for picking funds that can outperform the S&P 500 using an investment professional, like a financial adviser, to help select funds. But this will likely lead to unnecessarily expensive funds in your portfolio.

Still, I love Dave Ramsey, so I wanted to include his portfolio in this exercise. For comparison’s sake, I picked equivalent index funds (not actively managed funds):

• Mid-Cap Index Fund to represent Growth
• S&P 500 Index Fund to represent Growth and Income
• Small-Cap Index Fund to represent Aggressive Growth
• Total International Stock Index Fund to represent International

Now, let’s look at how Dave Ramsey’s portfolio would have performed over the past 30 years. From 1994 to 2024, the annualized return is slightly over 9%—better than the Bogleheads’ and Couch Potato strategies but worse than the one-fund and 90/10 strategies.

If you had invested $10,000, it would have grown to a little more than $150,000. Not bad!

From a volatility perspective, this is where it gets interesting. In your best year, you would have had an annual return of 37% in 2003. In your worst year, your portfolio would have dropped by 40% in 2008—the biggest variance in returns for all the portfolios we’ve covered so far.

The primary reason for such volatility is that we have 50% in mid-cap and small-cap companies—smaller, startup-type companies that aren’t as stable as more mature companies.

The more important question is this: Would I recommend this strategy? If I had a choice, I honestly wouldn’t. The returns are lower than the one-fund total market strategy, you have higher volatility, and there’s more complexity with having to manage four funds versus just one.

But if you love Dave Ramsey and want to follow everything he recommends to a T, why not? It’s way better than not investing at all.

Sticking with Four Funds

Let’s talk about Bill Bernstein’s No-Brainer Portfolio. For those of you who don’t know him, Bill Bernstein is a very smart individual, and I don’t mean “I can do a multiplication table” smart. I mean genius smart.

Not only has he written countless books on financial theories and investing, but he’s also a board-certified neurologist—a doctor who studies brains. And if that wasn’t enough, he decided to get a PhD in chemistry. Yes, chemistry.

So, when he talks about money—or anything else, for that matter—you know it’s coming from someone who’s deeply analytical and thoughtful.

I listen. He has tons of portfolio ideas, but one of his simplest ones is the No-Brainer Portfolio. Similar to Dave Ramsey’s portfolio, he allocates a portfolio evenly across four different funds:

• 25% in Large-Cap Stocks
• 25% in Small-Cap Stocks
• 25% in International Stocks
• 25% in Short-Term Bonds

This is how the No-Brainer Portfolio would have performed over the past 30 years. From 1994 to 2024, the annualized return is slightly under 8%—only slightly better than the 50/50 Couch Potato strategy.

If you had invested $10,000, it would have grown to a little more than $100,000.

From a volatility perspective, in your best year, you would have had an annual return of 30% in 2003. In your worst year, your portfolio would have dropped by 28% in 2008. That’s pretty volatile for a portfolio that only performed slightly better than the 50/50 strategy.

As much as I admire Bill Bernstein and his big brain, I’m not sure if I’d choose this strategy over the simpler one-fund, 90/10 Warren Buffett, or even the three-fund Bogleheads’ strategy. It’s got greater complexity but not much juice for the additional work.

Alright, let’s start getting into some really complex portfolio types.

Ray Dalio’s All-Weather Portfolio

Ray Dalio is the CEO of Bridgewater Associates, one of the largest hedge funds in the world, with $150 billion in assets. Again, another super-smart individual who makes me look like Lloyd from Dumb and Dumber.

He wanted to design a portfolio that could withstand all kinds of economic environments—inflation, deflation, bull markets, bear markets—hence the name, All-Weather Portfolio.

To mitigate against different economic conditions, the portfolio has a good mix of different asset classes:

• 30% in Domestic Stocks
• 40% in Long-Term Bonds
• 15% in Intermediate Bonds
• 7.5% in Commodities
• 7.5% in Gold

Looks pretty fancy, right? Especially with all that gold glitter.

Well, let’s take a look at how the All-Weather Portfolio would have performed over the past 30 years. From 1994 to 2024, the annualized return is 7.5%—actually the worst of all the portfolios we’ve covered so far, slightly worse than the 50/50 Couch Potato.

If you had invested $10,000, it would have grown to slightly more than $90,000.

From a volatility perspective, in your best year, you would have had an annual return of 27% in 1995. In your worst year, your portfolio would have dropped by 21% in 2022.

The 2008 financial crisis didn’t impact it too much. However, 2022 hit it pretty hard when the Federal Reserve started raising interest rates aggressively to curb inflation.

Now, I know Ray Dalio is a ridiculously smart guy, but I’m not sure if this is something I would personally recommend. There are a lot of moving pieces, and despite what the fund is trying to do—mitigate for all kinds of economic conditions—no one has a magic ball to know what the future holds.

David Swensen’s Yale Endowment Portfolio

David Swensen is best known for having been the Chief Investment Officer at Yale, where he led their endowment for more than three decades. During his tenure, he grew the university’s endowment from $1 billion in 1985 to $31 billion in 2020, making Yale one of the wealthiest schools in the U.S.

Now, the actual Yale endowment is hard to replicate because he used somewhat exotic products only available to institutional investors, like private equity, hedge funds, and venture capital. However, if we were to create a portfolio accessible to peasants like us, it would look like the following:

• 30% in Domestic Stocks
• 15% in International Stocks
• 5% in Emerging Markets
• 30% in Intermediate Bonds
• 20% in REITs

Let’s look at how the Yale Endowment Portfolio would have performed over the past 30 years. From 1994 to 2024, the annualized return is slightly above 8%.

If you had invested $10,000, it would have grown to slightly more than $100,000.

From a volatility perspective, in your best year, you would have had an annual return of 26% in 2003. In your worst year, your portfolio would have dropped by 24% in 2008.

To me, the key difference with this portfolio compared to the many others we’ve covered so far is its 20% in REITs. Real estate is a great asset class, but it has lagged behind the stock market over the past several decades and is also quite volatile.

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Bill Schultheis’ Coffeehouse Portfolio

Alright, let’s get even crazier with the number of funds we own: Bill Schultheis’ Coffeehouse Portfolio.

Introducing Bill Schultheis’ Coffeehouse Portfolio, a strategy Bill Schultheis—a Wall Street veteran and financial adviser—talks about in his popular book, The Coffeehouse Investor. While the strategy maintains the traditional 60% stocks and 40% bonds, it subdivides the stocks into several targeted funds:

• 10% in large-cap
• 10% in large-cap value
• 10% in small-cap
• 10% in small-cap value
• 10% in international stocks
• 10% in REITs
• 40% in total bonds

How has the Coffeehouse Portfolio performed over the past 30 years? Let’s take a look. From 1994 to 2024, the annualized return is slightly above 7.5%—a little better than Ray Dalio’s All Weather Portfolio but worse than the 50/50 Couch Potato Portfolio. If you had invested $10,000, it would have grown to a little more than $94,000.

From a volatility perspective, at your best, you would have had an annual return of 24% in 2003. At your worst, your portfolio would have dropped by 20% in 2008. Not that much better than the simpler 50/50 Couch Potato strategy.

So, what’s the verdict? While I’m a big fan of Bill Schultheis, I feel this is a bit over-engineered. The actual makeup is pretty similar to the 50/50 Couch Potato and the Bogleheads’ 3-Fund Strategy but more complex with no better returns. So, if I had to choose, I’d go with a simpler option.

Paul Merriman’s Ultimate Buy and Hold Portfolio

Paul Merriman is a nationally recognized authority on mutual funds, index investing, and asset allocation, and he’s authored multiple books on these topics. The main premise behind Paul’s strategy here is to seek ultimate diversification across different countries, company sizes, and valuations. To do that, it recommends 10 equity asset funds and 3 bond funds, that’s right, 13 funds in total.

The breakdown is as follows:

• 6% large-cap blend
• 6% large-cap value
• 6% small-cap blend
• 6% small-cap value
• 6% international large-cap blend
• 6% international large-cap value
• 6% international small-cap blend
• 6% international small-cap value
• 6% emerging markets
• 6% REITs
  And for bonds:
• 20% intermediate bonds
• 8% short-term TIPS (Treasury Inflation-Protected Securities)
• 12% short-term bonds

Alright, so what do we get with all this complexity? Let’s take a look at how the Buy and Hold Portfolio performed over the past 30 years. From 1994 to 2024, the annualized return is 7%—actually the worst of all the portfolios we’ve covered so far. If you had invested $10,000, it would have grown to slightly over $75,000.

From a volatility perspective, at your best year, you would have had an annual return of 25% in 2003. At your worst year, your portfolio would have dropped by 19% in 2008. Despite all the different funds, it’s not any smoother than most of the other portfolios we’ve covered so far.

So, what’s the main takeaway here? It’s that more funds don’t make your portfolio any better. Now, Mr. Paul Merriman is a smart man, and I’m a big fan of his work. Plus, I’m sure there’s a good rationale behind the strategy. There are market conditions where his strategy will outperform all the others we’ve covered so far. However, the thing is, none of us know when that will be because none of us has a magic ball to see the future.

Alright, I covered a lot in this article, so let me summarize a few key takeaways as you think about designing your own portfolio:

1. You want greater returns over the long run? Increase your equity exposure. Of all the portfolios we’ve covered so far, the one with the greatest equity exposure—the Total Market Fund—had the highest annual average return over a 30-year window.
2. You want less volatility? Increase your bond allocation. Bonds aren’t sexy—they don’t have the high returns like the stock market—but they also don’t have all the dips. So, if you can’t stomach the idea of seeing your portfolio drop by 20%, 30%, or even 40% in one year, increase your bond allocation.
4. You want additional diversification beyond the U.S. stock market and bonds? Consider adding some international stocks, REITs, and even commodities. We don’t know if they’ll perform better than the U.S. stock market in the next 30 years, but having some additional diversification doesn’t hurt.
6. But understand that more funds do not make your portfolio better. Understand why you’re adding a new fund to your portfolio. As you saw in Paul Merriman’s Ultimate Buy and Hold Portfolio strategy, having 13 different funds didn’t make the portfolio any better than one with fewer funds.
8. Strive for simplicity. While it might be cool to have a portfolio that slices the equity market into large-cap, small-cap, mid-cap, value, and even micro small-cap, for me, just having one total market fund that includes all these classes does the job. And at the end of the day, that’s all that matters.

Use everything I’ve covered as a resource and find a portfolio design that works for you. Then, move on with your life. We invest to live, not live to invest.