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Planning for Retirement? Simplify, Simplify … to Just 3 Funds

This is a useful exercise in finding an easier way to invest

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Assuming 60% for broad U.S. coverage, and 30% for bonds, we’ve got 10% left to allocate. I’m not a big fan of international exposure simply because — in all honesty — I don’t really feel comfortable assessing country risk, and to this point in time economic “recovery” in Europe feels a long time coming.

But since I can’t make a case to add any additional exposure to U.S. markets, I like the Vanguard MSCI Europe ETF (VGK). The fund is invested in the biggest of the big in Europe, including Nestle (NSRGY), Shell (RDS.A) and HSBC (HSBC), with the average market cap in the ETF at $41 billion. Stock exposure is broken down into 34% in the U.K. and 65% “developed” Europe, with the remainder in the U.S. and Latin America.

Here’s where it gets a bit dicey: VGK’s five-year return is a paltry 1.64%. But take heart: It’s trending upward over its more recent periods — 8.72% over the last 3 years, a very healthy 25% over the past year, and a solid 11% year to date. Another nice feature: fees run a slim 0.12%.

Compared to the model’s VGTSX, it’s all good — expenses are 0.22%, with returns coming in at 1.46% over five years, 5.85% over three years, and 16.71% in the past year.

Heck, maybe I’m wrong about international exposure — this one looks pretty good.

So there we have it: a three-fund portfolio for retirement. What do you think? Have at it and let’s have your thoughts.

Marc Bastow is an Assistant Editor at As of this writing, he was long AAPL, XOM, JNJ and MSFT.

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