Putting It All Together: Building Your Personal 2–4 Fund ETF Portfolio Plan

Capstone: assemble your personal plan (from inputs to a written policy)

This chapter is a build session. You will take the decisions you’ve already learned how to make and lock them into a simple, repeatable plan you can follow when markets are calm and when they are stressful. Your output is a one-page Portfolio Policy Document (PPD) you can save, print, and use as your decision filter.

What you are building

• A target allocation (percentages that sum to 100%).
• A 2-, 3-, or 4-fund structure that matches your preferences and account constraints.
• Specific fund choices (tickers or placeholders) selected using your criteria.
• Rebalancing rules you will follow mechanically.
• A contribution schedule that keeps the plan moving forward without constant decisions.
• A review cadence (what you check, and how often).

Step 1: Define your goal and horizon (in one sentence)

Write a single sentence that makes your portfolio’s job unambiguous. Keep it specific enough to guide decisions, but not so detailed that it becomes fragile.

Fill-in template

My goal is to fund [goal] in [year or time horizon], using a diversified ETF portfolio, accepting normal market volatility, and avoiding changes unless my life circumstances change.

Examples

• My goal is to build retirement assets over the next 25+ years, contributing monthly, and staying invested through market declines.
• My goal is to grow a house down payment over 7 years, contributing biweekly, with a moderate stock/bond mix.

Step 2: Choose your target allocation (percentages)

At this point you are not re-learning how to pick a stock/bond mix—you are committing to one. The practical task is to express it as clean percentages that you can implement and rebalance.

Make it implementable

• Use round numbers (e.g., 80/20 rather than 83/17) unless you have a strong reason.
• Decide whether “bonds” includes cash (some investors keep a small cash sleeve; if you do, define it explicitly).
• Decide whether you want international stocks and, if yes, what share of equities they represent.

Allocation worksheet (choose one path)

Path A: Stock/Bond only

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• Stocks: ____%
• Bonds: ____%

Path B: Stocks split into US/International

• US Stocks: ____%
• International Stocks: ____%
• Bonds: ____%

Path C: Add a second bond type (or inflation-protected bonds)

• US Stocks: ____%
• International Stocks: ____%
• Core Bonds: ____%
• Secondary Bonds (e.g., TIPS or short-term): ____%

Step 3: Pick the portfolio structure (2-, 3-, or 4-fund) that fits your constraints

You’re choosing a structure based on simplicity, account availability, and how much control you want. Use the smallest number of funds that still matches your allocation choices.

Decision guide

Practical constraint check (write yes/no)

• Do you have access to commission-free ETF trades (or low-cost mutual funds) in your account? Yes/No
• Will you be investing in multiple accounts (taxable + retirement)? Yes/No
• Do you need mutual funds instead of ETFs for automation? Yes/No
• Do you prefer fewer moving parts even if it’s slightly less precise? Yes/No

Your answers don’t change the investing principles; they influence whether you implement with 2, 3, or 4 funds and whether you use ETF tickers or mutual-fund equivalents.

Step 4: Choose candidate funds (tickers or placeholders) using your criteria

Now you translate each “slot” in your structure into a specific fund. You’ve already learned the screening criteria; here you apply them as a checklist and record your final picks.

Create your fund slots

• Equity slot(s): US total market (or large blend), international broad market (developed + emerging if desired), or a single global all-world fund.
• Bond slot(s): broad investment-grade core bonds; optional secondary sleeve (e.g., inflation-protected or short-term) if you chose 4-fund.

Fund selection checklist (record the result)

• Fund name and ticker: __________
• Index tracked / exposure matches the slot: Yes/No
• Expense ratio acceptable: Yes/No
• Liquidity/size acceptable (for ETFs): Yes/No
• Structure fits account (ETF vs mutual fund): Yes/No
• No unintended concentration (sector, single country, narrow factor) unless explicitly desired: Yes/No

Example mapping (use as a pattern, not a prescription)

If you prefer a 2-fund version, your table might be: [GLOBAL_STOCK_ETF] and [CORE_BOND_ETF]. If you prefer a 4-fund version, add a second bond line with a clear purpose.

Step 5: Write your rebalancing rules (so “future you” doesn’t improvise)

Your rebalancing rule should be specific enough that you can follow it without debate. Write it as an “if/then” instruction and include both a trigger and a method.

Choose your trigger

• Calendar-based: rebalance on a set schedule (e.g., once per year).
• Threshold-based: rebalance when an asset class drifts beyond a set band from target.
• Hybrid: check on a schedule, rebalance only if thresholds are breached.

Write the rule (fill-in)

I will check allocations on [cadence]. If any asset class is off target by more than [X] percentage points (or [Y]% relative), I will rebalance back to target using [new contributions first / tax-advantaged accounts first / specific method].

Example rule (hybrid)

I will review allocations quarterly. If stocks or bonds are off target by more than 5 percentage points, I will rebalance back to target. I will direct new contributions to the underweight fund first; if that is not enough, I will rebalance inside tax-advantaged accounts.

Step 6: Set a contribution schedule (and make it default)

This is where your plan becomes operational. The goal is to reduce decision frequency: contributions happen automatically, and your rebalancing rule tells you where the money goes.

Contribution schedule template

• Amount: $____
• Frequency: weekly / biweekly / monthly
• Where it lands first: cash sweep / settlement fund / directly into funds
• Allocation method for contributions: pro-rata to targets or to most underweight fund

Practical example (underweight-first)

On the 1st of each month, invest $500. I will buy whichever fund is most below its target percentage until the contribution is used. If all funds are close to target, I will buy pro-rata.

Step 7: Produce your one-page Portfolio Policy Document (final deliverable)

Copy, paste, and fill in the following. Keep it to one page. This is the document you follow when markets are noisy.

PORTFOLIO POLICY DOCUMENT (PPD) — SIMPLE 2–4 FUND ETF PLAN  (One Page)  Date: ________  Version: 1.0  Investor: ________  Account(s): ________  Goal & Horizon (one sentence): ________________________________________________  Risk posture (plain language): ________________________________________________  TARGET ALLOCATION (must sum to 100%)  - Stocks total: ____%     - Bonds total: ____%  (If splitting stocks)  - US Stocks: ____%  - International Stocks: ____%  (If 4-fund bonds)  - Core Bonds: ____%  - Secondary Bonds (purpose: __________): ____%  PORTFOLIO STRUCTURE (circle one): 2-fund / 3-fund / 4-fund  FUNDS (tickers or placeholders)  1) Stock fund (US or Global): Ticker ________  Target ____%  2) Stock fund (International, if used): Ticker ________  Target ____%  3) Bond fund (Core): Ticker ________  Target ____%  4) Bond fund (Secondary, if used): Ticker ________  Target ____%  PURCHASE / CONTRIBUTION PLAN  - Contribution amount: $____  Frequency: ____  Start date: ____  - Contribution routing rule: _________________________________________________  REBALANCING RULE  - Check cadence: __________________________________________ (e.g., quarterly)  - Trigger: _________________________________________________ (e.g., 5% bands)  - Action: __________________________________________________ (how to rebalance)  - Tax-aware note (if applicable): ____________________________________________  REVIEW CADENCE (what I will review)  - On schedule: contributions posted, fees/expense ratios unchanged materially, fund still tracks intended exposure, allocation vs target.  - I will ignore: headlines, short-term performance rankings, predictions.  CHANGE RULE (when I am allowed to change this plan)  - I may change targets only if: goal/horizon changes, major life event, or risk capacity changes.  - I will not change targets due to market movements alone.  SIGNATURE / COMMITMENT  - I commit to follow this document for at least ____ months before revising.  Signed: _______________________  Date: __________

Scenario test: simulate a market drop and follow your written rules

This exercise is designed to stress-test your plan and reinforce discipline. You will run a simple “what would I do?” simulation and answer using only your PPD.

Scenario setup

Assume you have a 3-fund portfolio with targets:

• US Stocks: 50%
• International Stocks: 30%
• Bonds: 20%

Assume markets move suddenly:

• Stocks (US and international) fall by 35%.
• Bonds rise by 5%.

Your job: estimate the new weights, check your trigger, and decide actions.

Step A: Estimate new weights (quick math)

Start with a hypothetical $100 portfolio:

• US Stocks: $50
• International Stocks: $30
• Bonds: $20

Apply the shock:

• US Stocks after -35%: $50 × 0.65 = $32.50
• International Stocks after -35%: $30 × 0.65 = $19.50
• Bonds after +5%: $20 × 1.05 = $21.00

New total = $32.50 + $19.50 + $21.00 = $73.00

New weights:

• US Stocks: $32.50 / $73.00 ≈ 44.5%
• International Stocks: $19.50 / $73.00 ≈ 26.7%
• Bonds: $21.00 / $73.00 ≈ 28.8%

Step B: Compare to your targets and check your trigger

Drift from target:

• US Stocks: target 50% → now ~44.5% (about -5.5 percentage points)
• International Stocks: target 30% → now ~26.7% (about -3.3 points)
• Bonds: target 20% → now ~28.8% (about +8.8 points)

Now apply your PPD trigger. For example, if your rule is “rebalance when any asset class is off by more than 5 percentage points,” then bonds (+8.8) and US stocks (-5.5) breach the trigger.

Step C: Decide actions strictly from your PPD

• If your PPD says “use contributions first”: direct new contributions to US and/or international stocks until the drift is reduced; only sell bonds if contributions are insufficient and your rule allows it.
• If your PPD says “rebalance immediately when thresholds are breached”: sell enough bonds and buy enough stocks to return to targets (preferably in tax-advantaged accounts if your PPD specifies that).
• If your PPD says “check quarterly” and this drop happened mid-quarter: you do nothing today other than continue scheduled contributions, because your rule says you only act at the check date.

Write your answers (fill in)

• Based on my PPD, today I will: ________________________________
• The next scheduled review date is: ________________________________
• If the portfolio remains off target at that review and the trigger is met, I will: ________________________________
• I will continue my contribution schedule of: ________________________________

Optional repeat: run the same scenario with a smaller drop (e.g., -15% stocks) and confirm whether your trigger would not fire. The goal is to see your rules produce consistent actions across different market environments.