Hello, YieldAlley readers! In this issue:
Introduction to the Bogleheads 3 Fund Portfolio
Markets Retreat as Manufacturing Weakens and Trade Uncertainty Weighs on Investor Sentiment
CIT Bank Offers $300 Bonus
And more!
NEWS
Standout Stories
✈️ U.S. airline stocks tumbled to their lowest levels since late 2024 (CNBC)
₿ Companies kept adding bitcoin to their piles, but now investors are starting to get worried (Sherwood)
💸 What It Looks Like to Run Out of Money (White Coat Investor)
🤖 Americans visited ChatGPT a record 610 million times in February (Sherwood)
📉 What Happens in a Recession? (A Wealth of Common Sense)
MARKET THOUGHTS
Markets Retreat as Manufacturing Weakens and Trade Uncertainty Weighs on Investor Sentiment
ECONOMY
Manufacturing activity expanded slightly in February with an ISM manufacturing PMI reading of 50.3% (readings above 50% indicate expansion, while below 50% signal contraction), down 0.6 percentage points from January, with the new orders component falling sharply into contraction territory at 48.6% from 55.1%. Meanwhile, the services sector showed stronger growth with the ISM services PMI increasing to 53.5%, marking eight consecutive months of expansion, and services employment rising to 53.9%, the highest since December 2021. The February jobs report showed the economy added 151,000 jobs, slightly below expectations but ahead of January's 125,000, with healthcare, financial activities, and transportation sectors seeing the largest gains, while the unemployment rate ticked up slightly to 4.1% from 4.0%. The Federal Reserve's Beige Book indicated "modest growth and rising prices" across most districts, with significant uncertainty regarding potential impacts of new trade policies, leading Fed Chair Powell to signal a cautious approach to monetary policy.
STOCKS
U.S. stocks experienced their worst week since early September for major indexes, with the S&P 500 declining by 184.30 points to 5,770.20 (-1.89% YTD), the Nasdaq Composite falling 651.06 points to 18,196.22 (-5.77% YTD), and smaller indices also struggling significantly with the S&P MidCap 400 dropping to 2,987.09 (-4.29% YTD) and the Russell 2000 falling to 2,075.48 (-6.94% YTD). The Dow Jones Industrial Average fared somewhat better but still declined 1,039.19 points to 42,801.72, though it remains slightly positive for the year at 0.61% YTD. Market sentiment was heavily impacted by ongoing uncertainty around trade policy, particularly concerning President Trump's previously announced tariffs on Canadian, Mexican, and Chinese imports, with various exemptions and delays announced throughout the week creating a challenging environment for investors to navigate.
FIXED INCOME
Treasury markets showed volatility tied to economic data releases, with bonds initially rallying following the February jobs report but largely reversing course later in the day. Municipal bonds posted negative returns heading into Friday, with T. Rowe Price traders noting that interest rate volatility and swings in Treasury and equity markets weighed on activity, leaving many investors in a "wait-and-see" mode. The high yield bond market maintained a cautious tone as investors focused on trade policy headlines, while the energy segment experienced weakness after OPEC announced supply increases starting in April. Overall fixed income market sentiment reflected the broader economic uncertainty, with investors carefully weighing inflation concerns against potential economic impacts of changing trade policies.
INCOME BUILDING
Introduction to the Bogleheads 3 Fund Portfolio
The Bogleheads 3 Fund Portfolio represents a masterclass in investment simplicity that has gained widespread popularity among investors of all experience levels. This approach embodies the wisdom of Jack Bogle, founder of Vanguard and pioneer of index investing, who famously proclaimed that "simplicity is the master key to financial success."
The Philosophy Behind the Portfolio
At its core, the Bogleheads approach rejects the notion that successful investing requires complex strategies, market timing, or stock picking. Instead, it embraces broad market ownership through just three carefully selected index funds that together provide exposure to thousands of securities across different asset classes:
Total U.S. Stock Market Index Fund - Captures the entire U.S. equity market from large established companies to small emerging businesses.
Total International Stock Market Index Fund - Provides ownership in companies throughout developed and emerging markets worldwide, recognizing that the U.S. represents less than half of the global investment opportunity.
Total U.S. Bond Market Index Fund - Delivers stability through exposure to government and corporate bonds, offering crucial counterbalance during stock market declines.
This straightforward combination offers exceptional diversification with minimal complexity, embodying Bogle's principle of "buying the whole haystack" rather than searching for the elusive needle.
Who Benefits from This Approach?
The Bogleheads 3 Fund Portfolio serves a remarkably wide range of investors:
Retirement-focused investors benefit from the balanced approach that combines growth potential with reasonable risk protection as retirement approaches.
Time-constrained professionals appreciate the minimal maintenance required, allowing more focus on career and personal priorities.
Investors disillusioned with active management find relief in a strategy that captures market returns without the consistent underperformance that plagues most active funds.
Beginning investors gain confidence from the portfolio's straightforward approach that avoids the complexity and potential pitfalls of more sophisticated strategies.
Putting This Into Practice
Implementing the Bogleheads 3 Fund Portfolio requires selecting appropriate funds and determining your personal asset allocation:
1. Selecting Your Funds
While Vanguard offers the original funds that align with Bogle's philosophy, equivalent options exist at other major brokerages:
Vanguard Options:
U.S. Total Market: VTI (ETF) or VTSAX (Mutual Fund)
International Total Market: VXUS (ETF) or VTIAX (Mutual Fund)
Total Bond Market: BND (ETF) or VBTLX (Mutual Fund)
Fidelity Options:
U.S. Total Market: FSKAX (Mutual Fund) or ITOT (ETF)
International Total Market: FTIHX (Mutual Fund) or IXUS (ETF)
Total Bond Market: FXNAX (Mutual Fund) or AGG (ETF)
Schwab Options:
U.S. Total Market: SWTSX (Mutual Fund) or SCHB (ETF)
International Total Market: SWISX (Mutual Fund) or SCHF (ETF)
Total Bond Market: SWAGX (Mutual Fund) or SCHZ (ETF)
When selecting funds, consider:
Expense ratios: Lower is better. Even small differences compound significantly over time.
Tracking error: How closely the fund follows its benchmark index.
Fund size and liquidity: Larger funds typically have lower tracking error and better liquidity.
Tax efficiency: ETFs are generally more tax-efficient than mutual funds for taxable accounts.
Minimum investment requirements: Some mutual funds require minimum investments.
2. Determining Your Allocation
While the classic 60% U.S. stocks, 20% international stocks, and 20% bonds allocation provides a solid starting point, several factors should influence your personal allocation:
Age and Time Horizon: The [age-20] rule of thumb for bond allocation (e.g., a 40-year-old would hold 20% in bonds) works well for many investors. Those with longer time horizons before needing to access their investments can generally afford to hold more equities.
Risk Tolerance: Consider your behavioral response to market declines. During the 2008-2009 financial crisis, many investors with ostensibly appropriate allocations still panicked and sold at market lows. The best allocation is one you can maintain during market turmoil. Consider taking a risk tolerance questionnaire to assess your comfort with volatility.
Financial Stability: Your overall financial picture matters. Those with stable jobs, emergency funds, and minimal debt can generally afford to take more investment risk than those facing career uncertainty or high debt loads.
Existing Assets: Consider your entire financial picture. If you have a pension or significant real estate holdings, these may influence how you allocate your portfolio.
U.S. vs. International Split: While a 75/25 split between U.S. and international stocks (within your stock allocation) is common, opinions vary. Jack Bogle himself suggested keeping international exposure to 20% maximum, while Vanguard research suggests 30-40% of equity holdings in international stocks for optimal diversification.
Bond Quality Considerations: The standard total bond market fund includes both government and corporate bonds. Some investors prefer treasury-only bond funds for their superior performance during stock market crashes, though they typically offer lower yields during normal market conditions.
Historical Performance
The historical performance of the Bogleheads 3 Fund Portfolio demonstrates why this approach has earned such a devoted following. While past performance doesn't guarantee future results, the data tells a compelling story.
A traditional 60/20/20 allocation (60% U.S. stocks, 20% international stocks, 20% bonds) has delivered returns that have outpaced inflation while experiencing significantly less volatility than an all-equity portfolio. During the 2008 financial crisis, for example, this balanced approach declined substantially less than all-equity portfolios, helping investors maintain conviction during market turmoil.
More recently, during the 2020 pandemic market crash, the bond component once again demonstrated its value as a portfolio stabilizer. While U.S. stocks fell approximately 35% from peak to trough, a 60/20/20 portfolio declined substantially less, allowing investors to either maintain their positions or rebalance into equities at attractive prices.
Over longer time horizons, a Bogleheads 3 Fund Portfolio with a 60/20/20 allocation has historically delivered annualized returns in the 7-9% range, though actual results vary based on specific time periods and exact allocations. Importantly, these returns have been achieved with approximately 30-40% less volatility than an all-equity portfolio.
Unlike more complex approaches that investors often abandon during market stress, the simplicity and transparency of the Bogleheads 3 Fund Portfolio makes it easier to maintain discipline through market cycles, which is ultimately the key determinant of long-term investment success.
INCOME BUILDING
Cash Rates
Government Money Market Funds (7-Day Yields)
SNVXX (Schwab Government Money Fund - Investor Shares): 4.09%
SPAXX (Fidelity Government Money Market Fund): 4.00%
TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 4.18%
VMFXX (Federal Money Market Fund): 4.26%
Brokered CD Rates (6-Month Rate)
Charles Schwab: 4.35%
E*Trade: 4.30%
Fidelity: 4.30%
Merrill Edge and Merrill Lynch: —
Vanguard: 4.30%
ETFs (30-Day Yields)
SGOV (iShares 0-3 Month Treasury Bond ETF): 4.21%
BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 4.13%
USFR (WisdomTree Floating Rate Treasury Fund): 4.22%
TFLO (iShares Treasury Floating Rate Bond ETF): 4.22%
BONUSES AND DEALS
CIT Bank Offers $300 Bonus for New Deposits to Platinum Savings Accounts
CIT Bank has introduced a limited-time bonus offer of up to $300 for its Platinum Savings account, available to both new and existing customers. The promotion provides either $225 or $300 depending on deposit amount, on top of the already competitive 4.30% APY (as of 2/27/25) for balances of $5,000 or more.
Key Terms:
Up to $300 bonus for new deposits
Available to both new and existing customers
New customers must use promo code PS2025
$225 bonus for deposits of $25,000-$49,999
$300 bonus for deposits of $50,000+
Funding must occur within 30 days of enrollment
No minimum holding period required after the 30-day mark
Bonus paid within 60 days after the funding period
No monthly fees, minimum balance fees, or inactivity fees
The promotion structure is straightforward: new customers need to open an account with at least $100 using promo code PS2025 through the special offer link, while existing customers (as of 2/26/25) must enroll via the "Start savings now" button. Deposits must come from outside CIT Bank, and you'll receive multiple confirmations during enrollment.
What makes this offer particularly attractive is the lack of a minimum holding period beyond the initial 30-day funding window. You simply need to have the qualifying deposit amount when they check at the 30-day mark, and your account must remain open until the bonus payment (up to 60 days later).
For a 30-day holding period, the effective APY works out to approximately 15.1% for the $25,000 tier (10.8% bonus + 4.30% interest) and 11.5% for the $50,000 tier (7.2% bonus + 4.30% interest).
This limited-time offer may end at any time once CIT Bank meets its goals, making it worth considering quickly if you have funds available to maximize the promotional rate.
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