How to Split VTI, VXUS and BND in a Three-Fund Portfolio

SmartAsset describes it as "an investment portfolio that's built around three funds," usually index funds: one for domestic stocks, one for international stocks and one for bonds. Its explainer shows VTI, VXUS and BND as the Vanguard ETF versions of those three roles. The idea is a simple structure, not a product.

Here is what Vanguard's fund pages say about the three ETFs, as of the dates shown:

An expense ratio of 0.03% means $3 a year on every $10,000 invested (0.0003 x $10,000). At 0.05%, it's $5. Fees and index names can change, so check each fund's page for current figures.

It's really two decisions.

1. Stocks versus bonds. This one sets most of your risk. The SEC says the best allocation depends on your time horizon and your risk tolerance, and that it changes over your life. Vanguard frames it the same way: if your goals or circumstances change, you can set a new target.

2. U.S. versus international within stocks. Here reasonable people differ. Some reference points:

Vanguard calls the global stock market's capitalization "a general guide" for its target-date series. SmartAsset says you have to decide how much of the stock part goes to U.S. versus international stocks. The three rows run from 12.5% to about 40%, which is why this is a judgment call. None of them is advice for your situation.

• U.S. stocks
• International stocks
• Bonds
• Other

Vanguard Target Retirement 2045 (09/30/2026)

U.S. stocks 48.79% · International stocks 32.8% · Bonds 17.41% · Other 1%

SmartAsset mutual fund example

U.S. stocks 60% · International stocks 20% · Bonds 20%

SmartAsset ETF example

U.S. stocks 70% · International stocks 10% · Bonds 20%

Is the international fund worth it when U.S. stocks have done better?

It depends on what you believe about the future. The number everyone cites is real. Over the 10 years through 2024, $100 invested in U.S. stocks grew to $334 (about 13% a year), against $160 for non-U.S. stocks (about 5% a year), according to Vanguard. Vanguard's argument is that chasing the recent winner is a risk of its own. Since Vanguard sells these funds, take that as the institution's view. Past performance doesn't predict the next ten years.

A simple routine:

1. Write the targets down. Three numbers that add up to 100%.
2. Pick a band and a schedule. Vanguard's example rebalances when a holding is 5 percentage points or more off target, and Fidelity gives the same 5-point example for a threshold approach. The SEC mentions every six or 12 months and notes that rebalancing works best when done relatively infrequently.
3. Send each contribution where it's needed. The SEC and FINRA describe adjusting your allocations so more of your contributions flow to under-weighted categories until the mix is back on target.
4. Redirect dividends the same way. Vanguard suggests moving dividends and interest to the underweight asset classes. They're taxable even if reinvested, so where they go doesn't change the tax owed on the dividend.
5. Revisit the target itself when your goals or time horizon change.

Rebalancing comes down to two paths: sell and buy, or use new money, whether in one lump or through regular contributions. Contributions are the default and usually the cheaper route. Selling can still make sense if one fund has grown far past its target, your view has changed, or you need cash.

Worked example: a $2,000 contribution (illustrative)

Every number in this example is invented, including the target split and the share prices. The target is deliberately round and arbitrary. It isn't copied from any fund or reference point above, and it isn't a suggestion. The share prices are made-up round numbers, not market quotes.

Target (arbitrary): 50% VTI, 20% VXUS, 30% BND. That's 70% stocks and 30% bonds.

Current holdings (made up): VTI $33,000, VXUS $9,000, BND $18,000. Total $60,000, so 55%, 15% and 30%.

VTI is 5 points over its target and VXUS is 5 points under, which meets a 5-point trigger like the one in Fidelity's example.

Step 1. Add the contribution to find the target dollars. New total: $60,000 + $2,000 = $62,000.

• VTI target: 50% x $62,000 = $31,000
• VXUS target: 20% x $62,000 = $12,400
• BND target: 30% x $62,000 = $18,600

Step 2. Find each fund's shortfall.

• VTI: $31,000 - $33,000 = below zero, so it needs nothing.
• VXUS: $12,400 - $9,000 = $3,400
• BND: $18,600 - $18,000 = $600
• Total shortfall: $4,000, which is more than the $2,000 you have.

Step 3. Split the $2,000 in proportion to the shortfalls (one simple way to do it).

• VXUS: $2,000 x $3,400 / $4,000 = $1,700
• BND: $2,000 x $600 / $4,000 = $300

Step 4. Convert to whole shares (a broker that offers fractional shares could buy the exact dollars). Assume invented prices of $60 for VXUS and $70 for BND.

• VXUS: $1,700 / $60 = 28.33, so 28 shares = $1,680
• BND: $300 / $70 = 4.29, so 4 shares = $280
• Spent: $1,960. Left over: $40, which carries to the next contribution.

Result. VTI $33,000 (53.3%), VXUS $10,680 (17.2%), BND $18,280 (29.5%), total $61,960. The mix moved from 55/15/30 toward 50/20/30 without selling anything. VTI is still above its target, so the next contributions keep going to the other two until it comes back.

Now

VTI (U.S. stocks)target 50%

55,0%

VXUS (international stocks)target 20%

15,0%

BND (bonds)target 30%

30,0%

0%20%40%60%80%100%

TodayTarget

After the $2,000 contribution

VTI (U.S. stocks)target 50%

53,3%

VXUS (international stocks)target 20%

17,2%+ $1,680

BND (bonds)target 30%

29,5%+ $280

0%20%40%60%80%100%

In a taxable account, steering contributions avoids realizing gains, which is why the approach is called tax-friendly. The details are in Rebalancing without selling: the tax-friendly way. Inside an IRA, gains generally aren't taxed until you take a distribution. For 2026, the employee limit for a 401(k) is $24,500 and for an IRA it's $7,500. Your 401(k) menu decides which funds you can hold, so the same three-role structure may use different funds there.

A contribution calculator such as Allocta applies the same target-value idea: you enter the amount, and it returns how much to buy of each holding, buy-only.