Boglehead 3 Funds Portfolio | Why I chose VT and VOO for my regular savings plan?

I have moved towards index investing since end 2019 because of work commitments that take up too much of my time. It has been a good choice so far, with both my Vanguard 500 Index Fund ETF (VOO) and Vanguard Total World Stock Index Fund ETF (VT) in the green, although my STI ETF and Tracker of Hang Seng Index which I bought for a short period is in the red.

I was really interested in entering the US market as I want to grow my capital and also have more exposure to the different markets. I came across the Bogle-head 3 funds portfolio and in that is a very simple investment strategy in which basic asset classes are used.

1. A domestic stock index fund: STI ETF or VOO
2. An international stock index fund
3. A bond index fund

In the case of Singapore, a domestic stock index fund can be SPDR Straits Times Index ETF (ES3) or Nikko AM Singapore STI ETF (G3B).

An international stock index like Vanguard Total World Stock Index Fund ETF (VT) but it is listed in the US stock market hence it has the 30% withholding tax on dividends which most people avoid and instead they go for London Stock Exchange (LSE) where there are ETFs listed that attempts to achieve a similar goal of VT but are domiciled in Ireland, which removes the estate tax concerns and reduces the dividend withholding tax rate to 15%.

A bond index fund like ABF Singapore Bond Index Fund (A35). And with that proportion, decide your asset allocation between the bonds and stocks. Following the asset allocation, you can rebalance once or twice a year by seeing if the stocks/bonds portion differs to your original asset allocation and buy/sell some of the stock or bonds.

Asset Allocation

1. Age in bonds so for example, I am 25 years old this year and so should have 25% in bonds.

When I was first exposed to the 3 fund portfolio, I liked how it was simple and so easy to implement. Definitely on my end, I wasn't really interested in STI ETF as I bought it at $3 plus and it was one of my first investment when I started the POSB Invest saver which I am no longer continuing with. Since then the growth hasn't been attractive though the 3% dividends is nice when it comes in. So I decided to explore an international stock index fund. I came across VT and look through the ETF details on the Vanguard website and got particularly interested.

VT

Some key points of VT:

• Invests in both foreign and U.S. stocks
• Has high potential for growth, but also high risk; share value may swing up and down more than U.S. or international stock funds
• Expense ratio of 0.08%
• Appropriate for long-term goals

More information in video. 

VOO

Vanguard S&P 500 ETF (VOO) tracks the performance of the Standard & Poor's 500 Index. It tracks the 500 largest US companies and is a gauge of overall U.S. stock return with an expense ratio of 0.03%.

More information in video.   

With all the information that I was presented with about VT, I found it to be something that I am willing to buy monthly and slowly only recently did I start adding VOO as well into my regular savings plan. I am currently not buying any bonds and so I am actually not building a 3 fund portfolio as my RSP amount is still rather small. I do understand that dividends are eaten up by the 30% withholding tax as it is a US stock, I am not so concern about it currently and I want to have a RSP that is automated.

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References:
https://investor.vanguard.com/etf/profile/VT
https://www.bogleheads.org/wiki/Three-fund_portfolio
https://investor.vanguard.com/etf/profile/VOO
https://www.firepathlion.com/the-bogleheads-3-fund-portfolio-for-singapore-firewalkers/