Allocation Lab

Core Four Portfolio (Rick Ferri)

Created by Rick Ferri

A four-fund index portfolio that adds a real estate sleeve to the classic Bogleheads mix.

Current Allocation

US Total Market48%
Total International24%
US Total Bond Market20%
REITs8%

How This Strategy Maps to ETFs

Asset ClassWeightETF
US Total Market48%VTI
Total International24%VXUS
US Total Bond Market20%BND
REITs8%VNQ

Performance: 29.8-Year Backtest

Data for REITs starts 1996. Simulation covers 29.8 years.

Core Four Portfolio (Rick Ferri)
── Actual ETF data   ╌╌ Proxy index data

$10,000 initial investment → $69,022

Annual Returns

1996–2011

'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11
-2+16+13+130-2-11+6+6+6+5-3-33+33+20+2

2012–2026

'12'13'14'15'16'17'18'19'20'21'22'23'24'25'26
+13+13+11-4+15+20-3+15+14+12-8+10+17+17+9

Key Metrics

CAGR+8.83%
Max Drawdown-44.3%
Volatility12.7%
Sharpe Ratio0.58
Sortino Ratio0.86
Best / Worst Year2009 / 2008

What is it?

The Core Four is a four-fund index portfolio designed by financial advisor and author Rick Ferri. It extends the logic of the Three-Fund Portfolio by carving out a dedicated real estate sleeve, weighting the four funds at 48% US total market, 24% international stocks, 20% total bond market, and 8% REITs.

The philosophy

Ferri, like the Bogleheads community, is a strong advocate of low-cost, broadly diversified index investing over active management or stock-picking. His refinement was the observation that real estate investment trusts behave differently enough from the broader stock market — driven by property values and rental income rather than general corporate earnings — that a dedicated allocation earns its place as a fourth core holding rather than being left as an unintentional side effect of a total-market fund's small built-in REIT weighting.

How it works

The 48% US total market sleeve is the single largest holding, capturing the full breadth of the domestic stock market by capitalization. International stocks (24%) diversify growth exposure globally, maintaining a roughly 2-to-1 domestic-to-international equity tilt. The 20% bond sleeve provides the portfolio's stability and drawdown protection. The 8% REIT allocation adds a modest, deliberate real estate tilt on top of what a total-market fund already provides, for investors who want more real estate exposure than a plain three-fund approach delivers.

Who is it for?

This strategy is aimed at investors who like the Three-Fund Portfolio's index-fund simplicity but specifically want a dedicated real estate allocation, and who are comfortable with a growth-tilted 80% equity/20% bond split — more aggressive than a standard 60/40. It suits longer time horizons where the higher equity weighting has more time to recover from drawdowns.

Key strengths & trade-offs

Its strength is broad, low-cost diversification across domestic equity, international equity, bonds, and real estate, capturing an additional distinct return stream (REITs) that a three-fund portfolio only partially includes. Its trade-off is a relatively high 80% equity weighting, meaning it will experience deeper drawdowns during global stock bear markets than more conservative allocations on this site, and REITs themselves can be highly sensitive to interest rate changes, adding a layer of rate risk beyond the bond sleeve.

Historical performance in context

With roughly 80% in equities, the Core Four behaved much like the broad stock market in crises — falling steeply in 2008, when its REIT sleeve dropped alongside stocks, then compounding strongly through the long bull market that followed. Its dedicated real estate allocation added return in REIT-friendly years but also extra interest-rate sensitivity, which hurt in 2022 as both bonds and REITs fell. Over full cycles its growth tilt has rewarded patient, long-horizon investors.

Common variations

The equity/bond ratio is easily adjusted for risk tolerance; more conservative investors raise the 20% bond sleeve. Dropping the REIT allocation returns it to a Three-Fund Portfolio, while raising international brings it closer to endowment-style mixes. Some investors implement the REIT slice with VNQ and keep it small to limit duration risk.

Risk Level

aggressive

Rebalancing

annual

Number of Assets

4

Best For

Long time horizons, higher risk tolerance

Before using this allocation

  • • Match the strategy's drawdown history to the amount of loss you could tolerate without abandoning the plan.
  • • Check whether its stock, bond, international, and inflation-sensitive sleeves address the risks that matter for your time horizon.
  • • Compare the same historical period and rebalancing rule against alternatives before changing a target allocation.

Related reading

Try This Strategy in the Simulator →

Or see the growth of $10,000 in the Core Four Portfolio (Rick Ferri) over the past 30 years.

Hypothetical historical performance based on backtested data. Past performance does not guarantee future results. This site is for educational purposes only and does not constitute investment advice. Full disclaimer